Written evidence submitted by The FA

 

 

Inquiry into the sale of Wembley Stadium and the future of English football

 

 

Executive Summary

 

  1. The FA is a not-for profit organisation that invests any surplus it generates back into football.

 

  1. The FA has received an unsolicited, non-binding indication of interest (the loI) from Shahid Khan to acquire Wembley Stadium (excluding Club Wembley).

 

  1. The FA has owned Wembley Stadium since 1999, when it acquired it from Wembley plc (another private owner).  

 

  1. The FA Board believes it has a duty to consider the IoI and The FA is currently engaging with stakeholders to understand how a viable deal could potentially be structured.

 

  1. The FA has engaged Rothschild & Co. to advise on the IoI received, including valuation, a wider sale process (should one be pursued), tactics and engagement with potential buyers (including Mr Khan) and their respective advisers.

 

  1. The FA is considering a sale because it represents a transformative opportunity to accelerate significantly investment in English football’s key challenge – the poor state of community football facilities.

 

  1. The FA is not a forced seller - the current strategic plan would not be affected or funded by a sale; any funds generated would be additional money invested into community facilities for football in England and would not subsidise current work.

 

  1. The FA has proposed that, if a sale were to go ahead, The FA’s proceeds would be invested in facilities for community football and the money ring-fenced solely for that purpose.

 

  1. The funds originally committed by the Public Sector Funders for the stadium did not require repayment except in certain specific circumstances.  A sale of the stadium would result in repayment.  It is therefore an opportunity for public money to be returned and re-invested for wider community benefit. 

 

  1. The Public Sector Funders (being Sport England, the GLA and the DCMS), who provided funds for the stadium originally, would see their funding returned in full and The FA is discussing with them how their funds could then be reinvested into community facilities for football.

 

  1. In considering the IoI, any other offer The FA may receive and negotiating a proposed deal, The FA has clear objectives, being:

 

 

  1. This means that protections will be put in place in any sale to ensure that England and FA-owned events, along with other current fixtures, such as English Football League and Rugby Football League matches, can have a guaranteed home at Wembley.

 

  1. The relevant parts of the current contracts with the Public Sector Funders which protect the usage of Wembley Stadium are being reviewed by The FA and Public Sector Funders so that relevant protections currently afforded to the Public Sector Funders are replicated under a new owner and any subsequent owner.

 

  1. The FA is currently discussing how such a sale would work with stakeholders. Only if the relevant protections can be put in place and the right structures created to subsequently invest The FA’s proceeds in community facilities for football in England would a firm proposal be put to the FA Board for consideration.

 

  1. The FA must have consent from Public Sector Funders and formal approval from the Secretary of State for Digital, Culture, Media and Sport in order to sell the stadium.

 

Introduction

 

  1. The FA is a not-for-profit organisation and the National Governing Body of football in England. Our remit includes developing the game at community level including, for example, community clubs, coaching, refereeing and youth football; running the 24 England senior, developments and disability teams at St. George’s Park; women’s and girls’ football at all levels; and implementing and enforcing the rules and regulations of the game.

 

  1. The FA’s latest financial results demonstrate that the organisation generated turnover of £351.2m during 2016/17, with a record £127m invested back into every level of football.

 

  1. The full report of The FA’s financial results can be found here:

http://www.thefa.com/news/2018/mar/20/fa-financial-results-2016-17-210318.

 

  1. On 9 January 2018, The FA announced a range of substantial new strategic investments for English football which will be made from the 2018-19 season onwards.

 

  1. These investments will total around £180m per year going directly back into football, which is up from £127m in 2017, representing a 42% increase.

 

  1. In 2017, investments included £13m in coaching and participation; £17m to the County FAs for the delivery of community football; £4m in disability, equality and child protection; £20m investment in community football facilities; £5m for women's football development (taking our total spend in women's football to £13m); £36m in FA Competition prize funds; £18m of investments in other football organisations and £14m of various other investments.

 

  1. A sale of Wembley Stadium would give The FA a further opportunity to significantly invest in community football facilities, in addition to what was announced on 9 January 2018 (an increase from £22m to £31m pa), and as a result transform community football facilities across England.

 

 

 

 

Wembley Stadium

 

  1. Wembley Stadium is owned and run by Wembley National Stadium Limited (WNSL), a subsidiary of The Football Association. It should be noted that The FA (through WNSL) purchased the old Wembley Stadium from Wembley plc in 1999, taking ownership of the stadium into The FA’s hands for the first time.

 

  1. The old Wembley Stadium was closed in October 2000 and construction of Wembley Stadium was completed in 2007.

 

  1. For the construction completed in 2007, in total The FA spent £97m on acquiring the land. The total cost of building it was then £695m, but incorporated within this figure was £131m of capitalised financing costs (“rolled-up” interest on the loan taken out to build it), so the net build cost was £564m.

 

  1. Towards the costs of construction, £161m was contributed by three Public Sector Funders: Sport England, DCMS and the London Development Agency (of which the GLA is the successor). As part of these funding agreements, various safeguards were put in place with regards to the usage of the stadium. Their investment was as follows:

 

 

  1. The FA’s remaining debt (excluding the contributions from the Public Sector Funders described above and in relation to which security has been granted over the stadium and the shares in WNSL) will be paid off by 2024. This repayment schedule will not change as a result of whether the stadium is sold or not. Accordingly it is not proposed that any funds from any prospective sale would be used to pay off this debt.

  1. The stadium also funds Wembley National Stadium Trust (WNST) through donations of 1% of its gross annual takings. This was a stipulation from the Private Sector Funders in the original funding agreement which could be continued going forward.

 

The lol received by The FA

 

  1. The Jacksonville Jaguars, the NFL franchise owned by Mr Khan, are existing tenants of Wembley Stadium for regular season NFL matches and have played there since 2013.

 

  1. During that time informal conversations have taken place between the two parties about the Jaguars’ desire, in the long term, to play more games in London, and at Wembley in particular. In recent times, this conversation has become more serious to the extent that a formal and credible IoI has been made by Mr Khan to buy the stadium outright (excluding Club Wembley). This IoI was not solicited on our part.

 

  1. Valuing a national stadium is not straight-forward. As Wembley Stadium has a guaranteed usage as a sports venue, the land value does not fluctuate in the same way as the housing market. We have brought in Rothschild & Co., the investment bank, to advise us on a potential sale process and the current valuation. Ultimately, if we decide to proceed, we would envisage a full and open sale process is run to ensure value is maximised.

 

  1. The current IoI is not the first offer for the stadium we have received from Mr Khan, but it is the first one at a value that the management of The FA were prepared to present to The FA Board and Council.

 

  1. The IoI consists of an offer of £600m for the ownership of the stadium and for The FA to retain the majority of the Club Wembley rights (excluding the boxes) which are valued at £250 -300m.

 

  1. It should be noted that that this value is subject to due diligence by both The FA and the offeror.

 

  1. In considering any IoI or offer and negotiating a proposed deal we have clear objectives, being: ]

 

 

  1. If an offer were to be accepted, it is expected that it would be on the basis that The FA would pay a pre-agreed hire fee for the use of the stadium on an event-by-event basis.

 

  1. It is also expected that The FA would no longer be responsible for the significant capital expenditure costs of the stadium and The FA would retain the income from our FA-owned events, such as England national team games and The FA Cup and remain in full control of setting ticket prices for these events.

 

  1. Whilst Wembley in total generates a healthy profit, without the Club Wembley revenue and with the pre-requisite capex investment in the stadium, the part of the stadium business considered for sale would currently operate at a cash loss. This cash loss, in essence, is what The FA could sell resulting in an improved annual cash flow; in addition to the upfront proceeds realised from the sale itself. If The FA does not sell the stadium, the stadium is of course still profitable when Club Wembley is included.

 

  1. The business case of any potential purchaser to purchase Wembley will be reviewed. While the part of the stadium business The FA might sell would operate at a cash loss for The FA, a potential purchaser with access to content which The FA does not have (e.g. NFL and other fixtures or events) could have the ability to make a new cash positive business plan for the stadium that is potentially not feasible for The FA.

 

Protections for Wembley Stadium

 

  1. The FA’s expectation is that any sale of Wembley Stadium would be structured to ensure that relevant protections for the stadium, which exist under the current contracts between WNSL and the Public Sector Funders, would l remain in place. The FA is working with Public Sector Funders to develop a legal structure setting out these protections. Additional protections are also being considered to protect The FA’s long term objectives for the stadium.  These structures would, of course, need to be acceptable to any new owner. 

 

  1. At present the protections under the current contracts with the Public Sector Funders run to 2057 and it is expected that at a minimum this time period would be maintained and extended with any ownership transfer.
  2. It is expected that the agreements entered into in connection with any sale would cover a number of key elements (subject to negotiation with relevant parties). These could include:

 

 

  1. The only current fixtures which may move should the new owner of the stadium wish to accommodate more NFL games at Wembley are England’s Autumn internationals. Our fan surveying has demonstrated there is a strong desire to locate England matches “on the road” and we therefore believe this would be a positive outcome of any sale in this regard.

 

  1. The proposal that The FA is developing is that the right to play all other matches at Wembley would be protected, including:

 

 

Proceeds of any sale

 

  1. The FA is not a forced seller. It need not sell the stadium in order to pay off debt nor to deliver its current strategic plan.

 

  1. The FA is considering a sale because it represents a transformative opportunity to invest in English football’s key challenge – the poor state of community football facilities.

 

  1. The FA has decided that, should it accept an offer, all funds due to The FA will be ring-fenced specifically for investment in community facilities for football in England, over and above our current investment in facilities.

 

  1. The rest of The FA’s strategic plan, including its current commitments to community football facilities investment, will be delivered exactly as planned regardless of whether the stadium is sold or not.

 

  1. The FA fully recognises that the funds originally provided for the stadium by the Public Sector Funders should be returned if the stadium is sold.

 

  1. It should however be noted that the funds originally committed by the Public Sector Funders will not be returned to the Funders unless the stadium is sold, thereby making the prospect of a sale a significant opportunity to redeploy public funds which are otherwise tied up.

 

  1. The FA has therefore initiated discussions with the Public Sector Funders about what they would choose to do with these funds. We are working on proposals with all the Public Sector Funders for re-investment of these funds into community facilities. 

 

  1. The FA has recommended setting up a ring-fenced fund and that The FA’s proceeds would be used solely for community facilities for football and not accessible for any other purposes by The FA. This proposal is now being discussed with the Public Sector Funders and will be developed further.

 

  1. FA Investment in community facilities for football is currently distributed via The Football Foundation, which is also co-funded by the Premier League and the Department for Digital, Culture, Media and Sport (through its agency Sport England).

 

  1. The FA believes that the current delivery mechanism offered by the Football Foundation, with support from Sport England and the Department for Digital, Culture, Media and Sport, should provide the best means of distributing any of The FA’s proceeds from this prospective sale for investment in community facilities for football in accordance with the recently developed National Football Facilities Strategy.

 

  1. The current framework for investment in community facilities for football through the Football Foundation ensures that facilities are multi-functional and multi-use, so while the primary investment would be in football, there would be additional community and sport usage in the investment.

 

Why Facility Investment?

 

  1. With increasing cuts to Local Authority budgets, the burden of community football investment in England is increasingly falling upon football – be that the demand from the 21,000 grassroots clubs, 50 County FAs, 25,000 schools or 330 local authorities.

 

  1. Poor facilities have been the number one issue on The FA Grassroots Survey every year since it was introduced. The facts are quite clear and represent worrying reading:

 

      1. Only 1 in 3 grass pitches are of adequate quality
      2. 1 in 6 matches are called off due to poor pitch quality
      3. 33 of 50 County FAs are without their own 3G pitch for the facilitating of development work and staging of significant events
      4. 150,000 matches for 300,000 teams have been cancelled in the 17/18 season which is the equivalent of 5,000,000 playing opportunities having been impacted this year because of poor facilities
  1. England’s football facilities compare unfavourably to the top footballing nations, for example, we have half the number of 3G pitches that Germany has.

 

  1. However, we are not coming at this problem from a standing start; The FA and the Premier League have with Sport England and DCMS been facing this problem for some time. We have proven delivery mechanisms for delivering facilities for community football and, since 2000, have invested together some £615m. This investment has resulted in:

 

      1. 700 new and improved 3G pitches
      2. 3500 grass pitches improved
      3. 1000 new and improved changing rooms

 

  1. Recipients of this funding have included:

 

      1. 6400 grassroots clubs who play at FA / partner-funded facilities
      2. 15 County FA who have directly received FA / partner-funding for their own facilities
      3. 321 Local Authorities in England (out of total 329) who have received FA / partner funds

 

  1. In order to understand where next to invest, The FA and Local Authorities are currently creating new Local Football Facility Plans for every Local Authority mapping the needs of all parts of the game against an identified pitch supply across England.

 

  1. In the next 12 months we will know exactly the best places to invest in football on a supply and demand basis. This work will continue regardless of whether the sale goes through, but extra funds would allow us to accelerate our investment.  These plans will align with the new National Football Facilities Strategy which outlines a range of projects focused on different football and social outcomes.

 

  1. Our facility investment will cover all community facilities for football in England on a supply and demand basis including 3G, grass pitches, small sided, indoor, outdoor, County FA hub, pro-club community hub, Local Authority Parklife hubs, club sites and school mini-pitches.

 

  1. We are still working with the Public Sector Funders on what the new fund and delivery mechanism would look like, but it might be helpful to contextualise what future investment could mean for community facilities for football if the stadium were to be sold.

 

  1. From the £600m gross sale proceeds, The FA and its partners would significantly accelerate its investment into community football facilities to more than £100 million per year for the next 20 years. This would be transformative.

 

  1. The speed of the investment will be dependent on the capacity in the market to deliver projects, but also the willingness of central and local government to look favourably on planning issues which can often create delay.

 

  1. Should an offer be accepted and proceeds reinvested into community football facilities, it would allow The FA and its partners to meet the outcomes set out in the National Football Facilities Strategy over the next ten years.

 

  1. Every FA-affiliated club to have access to a 3G artificial pitch for training and potentially, matches.
  2. Accelerated improvements to the key grass pitch sites across England to reduce fixture cancellations and improve quality of experience for players.
  3. Talented players to benefit from more advanced training and competition.
  4. Increased numbers of players, coaches, referees, volunteers and administrators.
  5. A diverse football-based community that reflects the diversity of the nation.
  6. The same access applies to communities served by every Premier League club and other professional clubs.
  7. More opportunities for recreational and small-sided football to broaden football’s appeal to everyone.

 

  1. More detail on the issue of community football facility investment, the track record of previous investment, and the potential outcomes of accelerated investment are available from the Football Foundation.

 

Process and next steps

 

  1. The FA has begun discussions with key stakeholders as to whether a sale of the stadium is feasible and advantageous. These stakeholders include:

 

  1. Department for Digital, Culture, Media and Sport (DCMS)
  2. Sport England
  3. Greater London Authority (GLA)
  4. Brent London Borough Council
  5. English Football League (EFL)
  6. Premier League
  7. Football Foundation
  8. Football Supporters Federation (FSF)
  9. Wembley National Stadium Trust (WNST)

 

  1. Specifically, the stadium could not be sold without the consent of the Public Sector Funders and the Secretary of State for Digital, Culture, Media and Sport. 

 

  1. The FA has also begun seeking the opinion of a number of stakeholder groups in and around the English game - and will continue to do so. These include:

 

  1.   General Public
  2. General Public – sporting citizens (fans of sport)
  3.   Sport influencers on social media
  4. General social media commentary
  5. Within grassroots football
  6.    Affiliated League Officials
  7.   Affiliated Club Officials
  8. Grassroots Players

 

  1. The FA Board has agreed to consider the IoI and is exploring potential terms in order to allow the FA Board to understand better what the proposal might comprise.  The FA is equally open to considering approaches from any other person who can provide a credible and competitive proposal for ownership of the stadium. 

 

  1. If The FA decides that it would be viable to proceed to a sale process, the next stage would be for The FA to run a full and open sale process to seek additional offers for the stadium.  It would then carefully evaluate all credible and qualifying offers received, including the IoI from Mr Khan, before deciding how to proceed.

 

Conclusion

 

  1. The FA Board believes the IoI for Wembley National Stadium is from a bona fide offeror and that it is in the interests of all parties for it to be considered - as will all other credible proposals from other bona fide offerors.

 

  1. Any sale will have contracted conditions for the new owners agreed by The FA and the Public Sector Funders to meet The FA’s objectives that:

 

 

  1. The FA has proposed that all funds it receives from the sale of the stadium are ring-fenced for investment in community football facilities. The mechanism to deliver this is being agreed with Public Sector Funders.

 

  1. The FA is not a forced seller. Any funds generated by the sale of the stadium would be additional funding to community football facilities and would not be used for any other purpose.

 

  1. Only if The FA and all Public Sector Funders are comfortable with the protections on future use of the stadium and there is a mechanism agreed with the Public Sector Funders to reinvest funds into community facilities for football would a sale progress.

 

  1. We look forward to engaging a range of stakeholders regarding this issue, and specifically, providing oral evidence to the Select Committee on 18 July 2018.

 

 

July 2018