Wednesday 6th April, 2011last year, at the start of April
Is there any solution to Bradford City’s Valley Parade problem?
The Byline
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BfB understands that Bradford City are attempting to negotiate with Valley Parade landlord Gordon Gibb over the terms of the current rental agreement. It would be wholly inappropriate for us to publicly disclose any details of these talks – due their high sensitivity – other than to say that City’s Board is trying to find a compromise to this ever-present problem.
As the 2008-09 and 2009-10 financial accounts show, the current rental and running costs City must pay annually to use Valley Parade are hindering their ability to achieve success on the field. City’s overheads are covered by income not generated by the football, and the playing side is paid for by season ticket sales and gate receipts in general. With season ticket sales on track to be lower next season, it means the playing budget will be reduced for City’s next manager. However, the club’s existence is currently assured by other income streams.
That said, the Valley Parade situation remains a millstone around the club’s neck. The idea of moving to Odsal was floated two years ago, but now seems as unlikely as the council’s redevelopment of the Bradford Bulls’ home which was proposed at the time. City have attempted to talk to Gibb about buying back the stadium, but the former Chairman’s asking price is too high. A 25-year lease means City are left paying huge annual rental payments which are undermining efforts to revive our ailing fortunes.
So the Board – as Gibb’s people seem happy to disclose to other people – are looking to negotiate new rental terms that would be more favourable for City. At present City are paying £1.3 million per year in rent and running costs, and in January Mark Lawn told us that Gibb was earning a 15% annual return on his original investment.
Gibb has no reason to agree to reduced terms, but if the rent issue remained so difficult that it threatened the existence of Bradford City Football Club, he could suddenly be left with no annual return and a piece of land that would be difficult to sell in the current climate. So one must hope the club can convince him that it is in his interests to help them along the way, while still providing him with a healthy return.
One solution could be to broker a structured rental deal that can help both parties achieve their aims – City to climb up the leagues and Gibb to build his family’s pension fund. Lawn told BfB that: “This club needs to be in the Championship. In the Championship we survive and we survive well. That’s where we need to be. The overheads suddenly don’t become as bad because we need this type of stadium to survive.”
So one idea could be – and this is a BfB suggestion rather than necessarily a proposal on the negotiating table – that the rent is restructured for which division City are in. In League Two revenue is clearly more tight, and the size of rent becomes such an issue that it holds back the club. If the rent could be more favourable now, it would only enhance the Bantams’ ability to earn promotion to League One. Here the rent could be increased again, and then increased even further if and when City return to the Championship and benefit from far greater revenue. All the way along, rent would be manageable to the club.
For that to work, Gibb would have to accept the rent would be lower for now, plus an inherent risk that he would never receive the same level of return if City continue to bumble about on the field. For that reason, City would have to make the terms more favourable in the Championship (and, hey 20 years is a long time, so include Premier League terms too) than they are now, so that Gibb could potentially receive an even greater return on his investment.
All of which may seem unattractive to Gibb, but the alignment of two goals – City to climb to leagues and Gibb to make more money on his investment – would in many ways be more agreeable to all. Right now the two parties don’t get on well, and while that may not be such a problem for Gibb one would like to believe there remains some feeling for the club he once cared so passionately about.
Whatever the solution, we need to avoid looking at Gibb as the villain and beating him with a stick. The club badly needs his help and, as much as we might argue it is unfair he is getting richer because of us, if that objective was at least parallel with our objectives it would surely be the best compromise from a far from ideal situation.
We watch on with interest, as these talks are clearly vital to the club’s future.
The Byline
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I’m sure the majority of sensible fans don’t see Gibb as the villain. He is a business man and looking after his own interests. Rhodes was the man who agreed to these terms.
Great idea re the restructure depending on which division we are plying our trade, a win win for everyone concerned.
It is important to note that in his dealings with Valley Parade Gibb should not be dealing as a business man looking after his own interests and his required as the trustee of a pension fund to act within the best interest of the people within the pension fund. This comes with certain legal implications which define how Gibb can and cannot act and the amount of risk the trustees can be exposed to.
It also has to be noted that Bradford City the business (rather than Rhodes) sold Valley Parade to the Gibb Pension Fund and that to do that Gibb and Rhodes would have to have been in agreement.
When the original agreement was finalised; City were in a higher division and the economic climate was wholly different. Both parties need to look to the long term and their respective interests. It may be an uneasy relationship, but it should ‘symbiotic’!
The one issue I have with this story are the amounts quoted. We claim, “At present City are paying £1.3 million per year in rent and running costs, and in January Mark Lawn told us that Gibb was earning a 15% annual return on his original investment”.
Although technically, correct, renegotiating this with Gibb will NOT make much impact on those costs. I had a very long a frank conversation with David Baldwin some time back and he told me the following;
Cost of renting the ground approx £350k p/a.
Cost of renting the club shop/offices/car parks approx £350k p/a.
Costs of running the club (i.e. utilities/insurances etc) around £600k p/a.
If we were to persuade Gibb to reduce HIS investment, from the quoted 15% down to just 5%, we would only save just over £115k p/a. From an overall outlay of £1.3m, that doesn’t make much of an impact does it?
Or to look at it another way, by these maths City would save £230k per year while they are in League Two (paying rent of £115k p/a). This money could be put to significant use, for example addressing the training facilities, youth development etc.
The money City are looking to save by negotiating the rent may not be the difference between surviving or going bust – up to now City have been able to meet these rent payments – but it could help to establish a much stronger infrastructure at the club which can trigger a rise up the leagues.
Yes Jason, you spotted my mistake. Obviously if a 15% return brings in approx £115k, then reducing down to 5% means the rental reduced from £350k to approx £115k, a reduction of just under £235k.
You are also correct in stating that a saving of £235k would have significant benefits. I still believe that, in the grand scheme of our outgoings, (approx £1.3m), it only represents an annual reduction of 18%, so hardly a massive change for us.
Agreed – and let us be positive about the fact that, on the surface at least, it appears the club is not in serious financial trouble. If Gibb says no to any reduction in rent the future of the club is not in jeopardy, it would seem. Let’s also be realistic that if City were asking Gibb for a larger deduction it would be not be likely to be accepted.
But this small amount could make a huge difference to City’s efforts to build a better infrastructure. How much would new training facilities cost to implement, and what impact could prioritising this have on the team? Right now the club has to make do with appallingly bad training facilities and at present it would seem there is little to no spare capital available to address this situation.
I have a question about the figures Wayne quotes.
Who owns the car parks/shops/offices at Valley Parade?
If it is Gibb’s pension fund it makes no difference to City, apart from a possible argument that the ground is worth much less than the rest.
But if Gibb’s pension fund does not own the commercial property, and the figures are even near correct, then it makes talking about the high rent at Valley Parade nonsensical, you cannot have a ground without car parks! And if the rent for them cannot be negotiated it makes Valley Parade as a venue even more economically stupid than it already is.
What rent are the Cougar’s paying for Lawkholme Lane? A half a million a year from City could fund development for both clubs, and with enough left over to make a staduim good enough for reserves and lower league first team fixtures at Horsfall, or Kingsway, Nethermoor Park, Dennyfield or any number of lower league sports clubs.
Bradford City sold Valley Parade in a re-financing scheme to their former chairman’s company in a £5m deal.
The ground is now be owned by the Trustees of the Flamingo Land Pension Fund, a group headed by Gordon Gibb.
As part of the agreement, London-based firm, Development Securities bought the offices, shop and car parks for £2.55m.
The Bantams then agreed to rent back the offices from Development Securities, and the ground itself from Flamingo Land Pension Fund, at a combined cost of approx £650k p/a.
Hope this answers your question Glyn.
Again it must be noted that Gordon Gibb (who was not the former chairman at the time) nor Flamingo Land purchased Valley Parade but rather that the Pension fund did and – post-Maxwell – the laws on what a Pension fund can and cannot do with the assets and income it has are different to other businesses.
That is Robert Maxwell, not Glyn.
Excellent article Jason with some interesting points.
Would it not be possible to renegotiate the loan and spread it over say 30-40 years? – much in the same way that you or I might do with a mortgage?
I realise this might incur a greater amount of interest owed on the loan but would it not make the annual running costs much lower and therefore free up funds for the team?
After all it is in everybody’s interest that BCFC will still be here in 30 odd year’s time.
I’m sure the Gibb family pension fund could sustain a smaller rent for this period.
Just out of interest, according to the Times rich list the Gibb family is collectively worth £75M !
Let’s hope that all parties concerned can come to some agreement which will ultimately benefit everyone.
The statement that appears each year in the BCFC Ltd accounts under going concern is “the company is reliant upon the chairmen and directors for its continued support. They have indicated their willingness to continue with their support for the foreseeable future”. That validates one of your key points, Jason, but it would also be true of most of the professional football clubs in the country. That isn’t to say it’s a satisfactory position.
By my reckoning having seen the accounts, without the £800,000 receipt for Delph the club would have had a net cash outflow of about £600,000, which is a more relevant measure than profit or loss. Some of that might possibly be interest paid on directors’ loans (although there isn’t evidence to confirm that), but mainly this will be operating cash outflows, which indicates that the club almost cannot break even with the current business model and continued League Two income levels. The reason for that is the high level of permanent fixed costs, of which rent and running costs of VP amount to the majority. The difference between City and a club like Macclesfield, who can apparently get by on crowds of 1,500 but at a similar standard of football, has to be that the latter has negligible fixed costs and can therefore spend almost all the meagre income on the playing side. The priority therefore has to be to attempt to negotiate a reduction in what is spent on the ground each year.
My suggestion would be to propose that part of the rent should be linked to the division that City are in – the higher the division the higher the rent that is paid. That way the Gibb pension fund can benefit from future success, but not have its investment endangered in lean times like these by constraining the club’s ability to compete.