Training Facilities

[atrottel]

Daily Post reports on campaign to keep Everton in Liverpool with interview of Ann Adlington (http://icliverpool.icnetwork.co.uk/0400evertonfc/0100news/tm_headline=%2D%2D8216%2Dall-we-own-is-the-ground-and-its-name%2D-if-we-move-to-kirkby-we%2D%2D8217%2Dll-lose-both%2D%2D8217%2D%26method=full%26objectid=1891270 6%26siteid=50061-name_page.html).

But does anyone know what this bit means and, if it is true, in what sense?


Most of Everton’s assets have been sold off in recent years. Even the new training facilities at Finch farm have been sold off – that’s even before the building has been completed.

[Bruce Wayne]

It's quite a common policy for companies to use and is referred to as 'sale and lease back'. Basically the club will have sold the ground to a company that specialises in property and will have signed a lease for x number of years.

The advantages of sale/leaseback arrangements include that they free up capital from non-earning assets, thus improving the organization's financial situation. Sale/leaseback arrangements improve the organization's debt-to-equity ratio and reduce depreciation and interest costs. The business is also alleviated from the burden of managing the property.

[atrottel]

So essentially this would be like if I owned a house, I could sell it to someone, stay in it for my lifetime and then they would take it over when I die.

Gives me more money up front but I don't have anything to leave to my kids.

(All theoretical - I don't own a house or have kids!)

[Bruce Wayne]

That sort of thing yeah. It's not guaranteed that the club has sold all of the facility as it's common to sell parts of it. Without knowing any terms such an arrangement could have some of the following drawbacks:

-Any repurchase by the seller/lessee at the end of the lease term must be at the then-current fair market value, which normally is at a higher price than the selling price obtained at the initiation of the sale-and-leaseback transaction.

-The interest factor embedded in the lease rate usually will be somewhat higher than the interest rate of the seller/lessee's debt burden on the property.

-The seller's borrowing capacity may not be enhanced if credit rating agencies impute a debt service coverage factor to the lease payments.

It does however strengthen the clubs balance sheet and give cash to either pay down debts or strengthen in other areas.

[Axlswhk]

Bruce, you are like a walking encyclopedia. Is there anything you do not know? You made me feel I'm like a small kid who knows nothing!

[Chris]

Ask him how to play a a decent solo using D mixolydian mode and he will be stumped ;) But if it is numbers related Bruce is your man.

[Robert Jarvis]

What Bruce states is correct in situations where there may be cash flow problems. What one needs to ask is what happened to the proceeds of the sale.

The other side of the equation is that that Everton as a company and business has fewer assets but more liabilities which would make it less attratcive to any investor or takeover. The fact is that now the company only owns GP and the name Everton.

Personally I do not think it was a good move at all to have fewer assets it makes the business less valuable and arguably more difficult to obtain loans, ODs etc.

[monty]

What Bruce states is correct in situations where there may be cash flow problems. What one needs to ask is what happened to the proceeds of the sale.

The other side of the equation is that that Everton as a company and business has fewer assets but more liabilities which would make it less attratcive to any investor or takeover. The fact is that now the company only owns GP and the name Everton.

Personally I do not think it was a good move at all to have fewer assets it makes the business less valuable and arguably more difficult to obtain loans, ODs etc.

I agree with that Robert but only time will tell mate:)

[Bruce Wayne]

It depends really. Most supermarkets for instance use sale/leaseback because the property on the balance sheet is often undervalued. Sainsbury for instance is currently under bid pressure precisely because of this, with the suitor commenting that the company is more of a property concern with retailing as a sideline. As we don't know the terms of the deal it's difficult to say. As an additional note it's worth mentioning that a leaseback helps the tax liabilities of the club because you can assign all the lease costs against profits, unlike mortgage payments.

As for the attractiveness for potential suitors again that has two sides to it. Sure on the one hand having assets is desirable but having low levels of debt is equally desirable and sale/leaseback is an excellent way of achieving that, especially with property values quite as attractive as they are currently.

It would be interesting to see how much they recieved plus to what uses that money will be put.

[Bruce Wayne]

I think it's important not to assume things before any kind of facts are known. I havn't been able to find any information on the sale and leaseback of the training ground, much less any terms attached to any such deal.

It is however a very common move. Tesco for instance sold 50% stakes in 21 of its stores to British Land for £570 million and there is a lot of pressure on Sainsbury to do likewise.

[Robert Jarvis]

We are not in the same league as Tesco or Sainsburys, their drivers may well be very different from ours and the action taken decided accordingly. As I said earlier what were the proceeds used for. To acquire players perhaps or was it to service some debt or overdraft??

[Dylan]

Wow, I missed this thread due to not having my computer (it was enroute from Hawaii), but this pertains to a current thread, as linked here by Bruce.

God, I am glad we have knowledgeable chaps on this board who can give valuable insight to the masses!