Finch Farm Sold

[Dell Boy]

Not if it's LCC's pension fund which has bought it. Guaranteed income for more than 40 years. Current payments are something like £1.4m a year (so >10% annual return straight off), and those payments rise 2.5% a year (compounded and applied every 5 years).

The only really surprising thing is the price being so low. You'd expect an asset generating that kind of safe return to go for a higher amount...unless there's some doubt as to whether the tenant will continue to be able to pay it?

No mate the reason it was so cheap is that the buy-back clause kills it for most annuity investment funds who normally just want to lock away these deals. I assume it was/is still in place. With the chance the tenant could exercise that right to purchase every five years (from memory) it throws out the financing of the deal and means it has to be assessed as a simple five year only deal.

Big pension funds are not normally interested in that and those property companies that want deals with short timeframes all normally demand better returns that offered at Finch Farm - so it was a dodgy compromise at best.

Obviously Liverpool City Council thinks it has a strong hand with Everton or it just wouldn't have been signed off...........

 

[Dell Boy]

Absolutely baffling that we didn't buy it for that price. With the new sky monies and the long term savings it is stupid to not buy it.

Agreed - I cannot see the reason for the club not buying it back if cash is relatively abundant now (in cashflow terms - I know fundamentally we're still skint).

This doesn't make any sense.

 

[degsy]

Not if it's LCC's pension fund which has bought it. Guaranteed income for more than 40 years. Current payments are something like £1.4m a year (so >10% annual return straight off), and those payments rise 2.5% a year (compounded and applied every 5 years).

The only really surprising thing is the price being so low. You'd expect an asset generating that kind of safe return to go for a higher amount...unless there's some doubt as to whether the tenant will continue to be able to pay it?

exactamundo

 

[SingBlue]

No mate the reason it was so cheap is that the buy-back clause kills it for most annuity investment funds who normally just want to lock away these deals. I assume it was/is still in place. With the chance the tenant could exercise that right to purchase every five years (from memory) it throws out the financing of the deal and means it has to be assessed as a simple five year only deal.

Big pension funds are not normally interested in that and those property companies that want deals with short timeframes all normally demand better returns that offered at Finch Farm - so it was a dodgy compromise at best.

Obviously Liverpool City Council thinks it has a strong hand with Everton or it just wouldn't have been signed off...........

This is a good point. If I was in charge of an investment fund, I'd have bought it, as as long as BK et al are running the club, they'll never have the cash spare to take advantage of the right to purchase clause. Reckon LCC have it for at least 2 cycles.

 

[degsy]

Absolutely baffling that we didn't buy it for that price. With the new sky monies and the long term savings it is stupid to not buy it.

EFC= Asset stripping= we 'Could' buy it for 12.5M and there would be long term savings but you can't 'spend' a long term saving...right now

 

[Moomin]

Agreed - I cannot see the reason for the club not buying it back if cash is relatively abundant now (in cashflow terms - I know fundamentally we're still skint).

This doesn't make any sense.

Surely, we could have borrowed the money at a better rate to purchase Finch farm then carry on with the lease.

Another 5 years of 1.4 million = 7 million.

Maybe, if we get new owners, they might jib it off and build there own new training facilities. But, with LCC buying Finch Farm now, this will be hard to do.

 

[Dell Boy]

Surely, we could have borrowed the money at a better rate to purchase Finch farm then carry on with the lease.

Another 5 years of 1.4 million = 7 million.

.

I agree completely.

Either there's some memorandum of understanding between LCC and the club or this is a badly missed opportunity.

 

[Deloodid]

There was a great piece in the Echo,

http://www.liverpoolecho.co.uk/news/liverpool-news/liverpool-council-bosses-buy-everton-4292309

at the very bottom

@GazJonesEFC tweeted: “If it’s true LCC have bought Finch Farm then that’s totally morally wrong on so many levels!!!!”

But @tommye said: “Can’t see the problem myself. Can only benefit Everton long term. Why the issue over LCC buying the land?”

 

[pfim]

Quite a few things going on here.

Yes, the option to purchase every five years lessens the value for the investor.

The rate of return quoted in the original brochure was 7-11%. Certainly that changes with the price though those numbers seemed a bit optimistic to begin with, so we'll stick with those. That is about the same rate that Everton would pay on debt to re-purchase the facility, if not more. And I don't know about real estate in the UK, but commercial mortgages are only given for 3-10 year terms in the states. Perhaps someone could help me with that, but the cash to service the debt of a 10 year mortgage would be much greater than the lease payment. That would put a 750,000-1,250,000 (at least) crimp in our cash flow per annum.

There's no mention about CAPEX and who is responsible. The link to the sale agreement in the original story is broken.

This is the market price of the property. So really, if the cash flows were so strongly in favor of the owner of the property, the price would have been higher.

I remember the discussion here when the property was first put on the market for a premium and the board was lambasted for it. Well the price came back and it's well below asking (or the opt out fee on the lease).

Certainly, I think EFC would rather own the property than not, but the lease doesn't seem like the bad deal everyone makes it out to be.

 

[pfim]

There was a great piece in the Echo,

http://www.liverpoolecho.co.uk/news/liverpool-news/liverpool-council-bosses-buy-everton-4292309

at the very bottom

@GazJonesEFC tweeted: “If it’s true LCC have bought Finch Farm then that’s totally morally wrong on so many levels!!!!”

But @tommye said: “Can’t see the problem myself. Can only benefit Everton long term. Why the issue over LCC buying the land?”

Well, if Everton get to re-negotiate the terms of the lease, that is great news.

And if this is for some sort of pension fund as discussed previously, what's the difference between the LCC investing in Finch Farm or some other investment?

 

[Azza]

Here we go...


http://www.evertonfc.com/news/archive/2013/06/11/finch-farm-announcement

Everton retains a long-term lease on the site and the new rental arrangement secures a reduced annual rental cost to the Club and an attractive commercial return for the Council.

Would you believe... something semi-sensible on a business point of view for once!

 

[AaronTheBlue]

It cost 12 - 15m to build, and were renting it for a cost that'll eventually rise towards 30 odd million.. Makes sense?.. we should've just bought it.

 

[mightymoyes]

It cost 12 - 15m to build, and were renting it for a cost that'll eventually rise towards 30 odd million.. Makes sense?.. we should've just bought it.

i thought it was only about 2-3m to build.

 

[orly]

I feel the deal surrounding this could end up being investigated by a Private Eye edition in the near future. Looks a cracking deal for us, and an interesting use of private financing by the council - but Cllr Anderson's blue leanings could be considered a conflict of interest. Would love to know the ins and outs of this deal, imagine a freedom of information request would be needed.

 

[pfim]

It cost 12 - 15m to build, and were renting it for a cost that'll eventually rise towards 30 odd million.. Makes sense?.. we should've just bought it.

Time value of money.