West Ham United’s complex deal for the Olympic Stadium, the full details of which are laid bare for the first time today, could make the football club’s wealthy owners even richer than previously thought – at the expense of the taxpayer.
As the Hammers prepare to play their first match at the largely public-funded £700m venue this week, new analysis by City A.M. has revealed the extent to which billionaire David Sullivan and co-owner David Gold, who is worth an estimated £350m, are free to cash in on the deal.
Legacy chiefs, who negotiated the contract with West Ham, were sufficiently concerned that Sullivan and Gold might make a quick fortune by selling up soon after relocating to the iconic stadium that their lease contains provision to recoup a percentage of any sale price to the public purse.
But closer examination of the contract, which was the subject of a legal fight over attempts to suppress it, reveals that provision to be weaker than first reported – because debts can be offset against any sale. This means that Sullivan and Gold could bank a profit of around £31m without paying back a penny.
West Ham say 67-year-old Sullivan and 79-year-old Gold have no plans to sell, but their resolve could be tested as the club becomes more valuable than ever – thanks to their gleaming new home in a coveted location – and as foreign investors increasingly circle England’s top clubs.
The east London team’s 99-year lease to be the main users of the 60,000-seater stadium for just £2.5m a year – a shade over the average top-flight player’s salary – plus a one-off payment of £15m has been described as “winning the lottery” by Arsenal manager Arsene Wenger.
It could represent a personal windfall for their owners too, despite a clause requiring shareholders to repay a percentage to the public purse. That clause takes effect if the club is sold in a deal valuing it at £125m or more during the next 10 years.
The threshold would likely be met, with West Ham valued at around £200m last year. That figure looks conservative now, due to the stadium move and a new era of stable profitability among Premier League sides boosting their values across the division.
Crucially, however, West Ham’s contract with E20 Stadium LLP, a partnership between the London Legacy Development Corporation and Newham Council, states that the club’s debt – much of which is owed to the owners – is offset against the value of any sale.
And with debt of £91m in the most recent accounts, it effectively means the sale price would need to be far higher to trigger a taxpayer return.
The precise sums fluctuate depending on the club’s debt and when any hypothetical sale takes place, but are indicative of the owners’ strong position. Sullivan and Gold are also entitled to receive interest on their shareholder loans at a rate of between six and seven per cent, which is either paid in cash or added to the outstanding debt.
If it took place now, even a £215m sale would fail to earn the taxpayer a penny, based on the club’s most up-to-date available financial information. Sullivan and Gold, meanwhile, would stand to pocket at least £165m – a profit of around £31m on their investment – in that scenario.
A sale at a higher price would see some money trickle back to the public purse, but only a fraction of the take secured by long-time business associates Sullivan and Gold, who own 86.2 per cent of shares between them.
A £250m sale would bank the pair £193m – a profit of at least £59m. By contrast, just £2.8m would return to the taxpayer. That is around one per cent of the £272m cost of converting the Olympic Stadium into a football-ready, 60,000-seat arena following London 2012.
Were Sullivan and Gold to sell in a £300m deal, they would take £231m, representing a £97m profit. Less than £9m – £1.5m short of what the Hammers paid for star player Dimitri Payet last summer – would flow back to the taxpayer. From a £350m sale, Sullivan and Gold would take £265m – a profit of £131m – while the public purse would receive £19m.
A spokesperson for West Ham told City A.M.: “This is a moot point because the chairmen have no intention of selling.”
The London Legacy Development Corporation (LLDC) declined to comment.
Sullivan reiterated in December that he and Gold were not looking to sell, although he conceded that they might be tempted if a wealthy individual made them a huge offer.
“We have zero desire to sell the club unless the king of Saudi Arabia or the Sultan of Brunei come along. We’re not going to sell to an American or Chinese consortium,” he told Sky Sports.
“We might sell a minority shareholding to clear our debts, but in all probability our kids will take over from us. We love West Ham; we’re not going anywhere.”
Gold has argued that West Ham’s use of the stadium, which begins on Thursday when they play Slovenian side NK Domzale in a Europa League qualifying match, will prevent it from becoming a white elephant.
Full details of West Ham’s contract for the stadium were only published in April after the LLDC accepted defeat in its legal fight with a football supporters’ coalition to keep some of the details secret.
How it works: West Ham's Olympic Stadium contract
West Ham’s 99-year lease for the Olympic Stadium contains a clause stipulating that a percentage of the proceeds of any sale of the club should go back to the public purse.
In simplified terms, it means that any sale that values the club at £125m or more triggers a repayment of somewhere between 7.5 per cent and 30 per cent, with more punitive rates the higher the price tag and if the deal takes place before summer 2021. A sale after that would not trigger a repayment.
However, the percentage is applied not to the value of the deal but to an “adjusted consideration”, offset against the club’s debt. This means that if there are substantial debts to pay off first, the sale value would need to significantly exceed £125m before the repayment clause was activated and the taxpayer saw any return.
The club’s debt, owed in the main to David Sullivan and David Gold, stood at £91m when accounts were filed in November. Using that figure, if West Ham were sold today it would take an offer of more than £215m before any repayment was triggered.
The owners: David Sullivan
The club’s largest shareholder, with 51.1 per cent, made his first million in pornography, co-founded the Sunday Sport with David Gold and now boasts a £1bn fortune. The son of an RAF serviceman is originally from Cardiff but moved to London aged 12 and gained a degree in economics from Queen Mary University. Before buying their boyhood club, he and Gold owned Birmingham City for 26 years. His investment company Conegate owns prime London property and his motto, according to a 2009 interview, is: “What’s in it for me?”
The owners: David Gold
East-Ender Gold, who owns 35.1 per cent, has been in business with Sullivan for 30 years, at Sport Newspapers and Birmingham City before they took stakes in their beloved West Ham in 2010. He grew up yards from the club’s Upton Park stadium – their home until this summer’s move – and played for their youth team. Like Sullivan, early ventures included an adult magazine business; now Gold Group International owns the Ann Summers and Knickerbox chains, run by his daughters Jacqueline and Vanessa, and he is worth an estimated £350m.
Manchester City and the rising value of English clubs
Inheriting a state-funded venue on the cheap can help to transform a football club, as Manchester City have found.
They moved into the City of Manchester Stadium in 2003 on a 250-year lease in exchange for a £20m one-off fee, the keys to their former ground and annual rent of around £4m.
A shiny new home made City more attractive to investors, and they were sold to former Thai premier Thaksin Shinawatra four years later. Just 12 months on he sold to Sheikh Mansour of Abu Dhabi, whose vast wealth has turned the club into one of the richest in the world.
It’s not only their new home that could make West Ham a takeover target. Soaring revenue from TV contracts has spawned a new era of profitability for Premier League teams, and that has rekindled the interest of investors.