The John Merry Tapes: Part 3
SALFORD CITY REDS
The Background…
The new stadium for Salford City Reds rugby club has been shrouded in controversy and mystery since its inception, when a PR company was placing supportive letters in the Salford Advertiser about the move. For the Salford Star's history of the stadium see here and here and here.
Everything came to a head last year when Salford City Council jumped into bed with Peel Holdings to form a joint venture company, called The City of Salford Community Stadium Ltd. It was financed with a £22million loan to the company by Salford Council which in turn borrowed the money itself, despite Peel being one of the richest companies in the country.
Salford Council has also given land worth £6.7million towards the project, while the North West Development Agency (NWDA) has given a grant worth £4million for `land remediation'. And there's been hundreds of thousands of pounds of other Council funding for the club.
The project now consists of a `community stadium' with Salford Reds as the sole tenants, surrounded by lots of retail development. And, as the Reds kick off their final season at their current Willows ground in Weaste, the aim is to move into the new stadium in Barton for the 2011-12 season.
Meanwhile, controversy also surrounds the legacy at The Willows. Here, Salford Star editor, Stephen Kingston, questions Salford Council Leader John Merry on the whole mysterious subject…
Again, we've kept editing of the interview to a bare minimum.
"Our objective is to get them into the Super League…and also to make sure that they're viable tenants for the stadium as well, because if that club goes bust…" John Merry
Stephen Kingston (SK): I've asked Paul Walker [Salford Council's Director of Sustainable Regeneration and a board member of The City of Salford Community Stadium Ltd] about all this and he came back with a half arsed answer, so I questioned him some more and he didn't even reply… (*1)
John Merry (JM): Do I think that the stadium is going to make money? Yes I do…
SK: I didn't ask that, give us a minute… You've given them land worth £6.7m, a £22m loan, and NWDA has given them £4m for land remediation. I can't do maths but that's over £30million quid, yeah?
JM: Right.
SK: The £22million loan is unsupported borrowing, or prudential borrowing, but Salford is now up to its peak of unsupported borrowing – is it £100m?
JM: Something quite high
SK: …which the Government was saying on the telly the other night – `Oh councils can always use their unsupported borrowing to get their way out of the recession…'
JM: Yea
SK: Yet you've got no slack at all
JM: No – that's perfectly true but can I just explain on the unsupported borrowing, right, we're expecting the stadium company to reimburse us for that unsupported borrowing, so they will be paying…
`You're assuming people are going to go and watch them…'
SK: You're assuming people are going to go and watch them…
JM: The site includes the Peel site, and they've got an awful lot of land around it for the possibility of retail and the like. All of that, we think, will make enough income for the stadium to support itself and to provide a return to the city council.
SK: And if it doesn't? We're going through very dodgy times at the moment
JM: No I'm very confident that it does – we've done this before, remember we did the Quays on the basis
SK: What the Lowry Outlet Mall?
JM: No, not the Lowry Outlet Mall. What I'm talking about is the actual concept of the Quays in the first place was for the Council to buy the land and to re-develop it and make a profit on it, which we did.
SK: Yea but in terms of retail
JM: We've got significant levels of retail interests already involved. Now you can say about Peel all you like but they are actually good at managing retail and actually attracting new retail opportunities. And the whole point of the company is it will pay a good return to the Council on the money advanced to it. So I think we'll make money on the deal.
SK: So you don't think it's a gamble?
JM: No
SK: No?
JM: Well, when you say is it a gamble - only in the sense that it's right for the City Council to be working to provide a facility and to see if we can make a return on it. There's no such thing as a cast iron certainty with any of these deals but I think it's a pretty good bet.
SK: And the company itself?
JM: It's a joint venture company, not Salford Reds, and I'm a member of the board…
SK: Can you tell me then please who owns the other third of the shares? The Council seems to own 51% of the company and Peel 49% but then there's these `preferential shares' in the middle…
JM: Well the preferential shares as far as I know are not owned by a single investor, but I can get you the answer on that. I think it's basically a deal between us and Peel
SK: There's no third party?
JM: Not that I'm aware of.
SK: There was a covenant on the land wasn't there? (see here)
JM: Right, well again, I'll find out (*2) but there's never been anyone else attending board meetings apart from myself and Peel.
SK: And no-one else has got a stake in it?
JM: Not that I'm aware
SK: Well you must be aware of it, you're the chairman
JM: I know. I suspect that the preferential shares might actually be owned by one of us. OK let's find out… (*3)
THE WILLOWS
`I've got this report that talks about the Council's "possible acquisition of land at Willows Road/Kennedy Road"'…
SK: Ages ago I asked `Is the Council interested in buying the Willows?'…
JM: No we're not interested in buying The Willows but we will be a partner in terms of redeveloping that site.
SK: Partner with who?
JM: Partner with the bit that Salford Reds own basically.
SK: What is Godliman Watson Home's [founded by Salford Reds Director Iain Watson, which bought the Willows land from owner John Wilkinson with, we understand, a part loan from John Wilkinson] involvement on that site?
JM: You'll have to ask Watson. The fact remains that, yes, we do own some of the land around there – things like the car park.
SK: So you're going to be joint developers of that land?
JM: Yep
SK: What for?
JM: Housing probably
SK: Affordable housing?
JM: Well I'd like to see affordable housing on there but we'll have to see what return we can get in terms of the actual site.
SK: I've got this report that talks about the Council's "possible acquisition of land at Willows Road/Kennedy Road" and this that talks about "Willows Road leasehold acquisition and grant of development agreement"…
JM: Where's that from?
SK: Well it is a Council report, you should know…
JM: Well there was an issue about acquisition of freeholds around there. What we're trying to do is to package the land up so that when the Reds do vacate the land we can agree on a development to take place on that land.
SK: People are worried about profiteering by Salford Reds directors
JM: OK so you're not accusing the Council of profiteering, you're accusing the Reds directors?
SK: We're not accusing anyone…I've got to get my head around this but the land sold by Wilkinson to Watson…
JM: Yeah
SK: …with money borrowed from Wilkinson, which is really odd. And then the Council goes and buys it and he makes a profit – that's not right is it?
JM: No it wouldn't be right if that was the case
SK: I don't know, that's why I'm asking you.
JM: Right, ok, I don't think there was any profiteering by the directors. I think what the club's agreeing, is to develop the land to provide them with some resources. And as you know we've shown a commitment to the Reds as well and we want to make sure that we get a return on our money as well.
SK: What kind of commitment?
JM: There's been no secret. I think you've published it on your website anyway (*4), we've been supporting the club for a while.
SK: How much?
JM: Does it matter?
SK: Yeah, come on…
JM: I'm not going to be specific at the moment because we're …our objective is two things here…Our objective is to get them into the Super League to make sure that their franchise is renewed because it's incredibly important. So we've got to make sure that we develop a level of support to ensure that happens. And also to make sure that they're viable tenants for the stadium as well because if that club goes bust…I was going to say it was the only professional sports club in Salford but that's not quite true is it …
SK: No, there's Salford City Football Club that don't get a penny…
JM: But the Reds are the only ones playing at the top level. The point is that a lot of people, not just the people who attend, get a great deal of pleasure from the Reds and we've got to try and make sure of its survival…
*1. The Salford Star asked the Council way back in November `What interest is Salford Council paying on the £22m loan? And when is it expected to be paid back? Is Salford Council itself actually running and staffing the stadium?'
Paul Walker, Director for Sustainable Development replied on behalf of the joint venture company:
"The joint venture company fully acknowledges the grant assistance from the NWDA which has enabled the reclamation of the site, along with the loan from the Council which has enabled the provision of the Community Stadium itself, where construction has already started. But it is a loan and the company will service that loan in the usual way.
"Moreover, the company is absolutely delighted that Salford City Reds have decided to make the City of Salford Community Stadium its new home, and they will obviously pay the Joint Venture Company an appropriate sum to use the new facilities. However, as I'm sure you will understand this is a commercial arrangement between the company and the Reds and it is therefore not felt to be appropriate to say what its financial terms are.
"But the really key point here is that this is a community stadium and its facilities will be able to be used at reasonable prices by a wide range of community groups for all sorts of purposes; so this is a Stadium for everyone, and everyone will be very welcome to use it. In addition to that the Community Stadium will be another attraction for visitors and tourists, which will help to not only make Salford an even more attractive and vibrant place, but will also boost the local economy.
The Salford Star replied that he hadn't answered the question… "It's incredibly appropriate to know what the financial terms are with Salford Reds - if the tax payers of Salford are making this happen for the rugby team then surely we are entitled to know their financial commitment. Can you also tell us what the "reasonable prices" are that the community will be expected to pay to use the facilities?"
Paul Walker never replied.
*2 and *3: The Council finally replied to these questions on 11th January…
"The Joint Venture Company shareholders are Peel and the Council, who have equal Board Directors and shares. The Council won't be staffing the stadium."
*4: £350,000 at the last count – see here – but we understand it's a hell of a lot more!
Stop Press: 25th January 2011
Yesterday Salford Council approved the surrender of the lease for the Willows Car park and officially entered into a devlopment agreement with Godliman Watson Homes Ltd. The reasons given were "to better secure the repayment of loans made by the City Council to the Salford City Reds Rugby Club and to provide a return to the council for their financial support of the club".
The full decision reads: "I, Councillor David Lancaster, Lead Member for Property in exercise of the powers conferred on me by Paragraph J, (k)(1) of the Scheme of Delegation of the Council do hereby approve the Surrender of the lease of the Willows Road Car Park, Willows Road, Weaste from The Willows Variety Centre Limited and entering into a development agreement, including a contract for sale and profit share arrangement with Godliman Watson Homes Limited (GWH Limited) in respect of the Willows Rugby Ground and the Willows Road Car Park with the City Solicitor completing all necessary legal formalities."
* John Merry Interview Part 1 - A Tale of Two Cities: Salford 2011 click here
* John Merry Interview Part 2 - The Tesco Affair click here
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