Are Clouds Beginning to Gather Once Again at Home Park?
Having initially penned an epic two-parter in January 2012 about the travails of Plymouth Argyle as part of a short series of pieces on clubs in turmoil (which, for the record, featured alongside coverage of Coventry, Port Vale, Portsmouth and Preston North End) Roger Willis provided two updates in April 2012 and March 2014. A couple of years on, Roger returns to the scene to appraise where things stand at the club.
‘The only certainty is that nothing is certain’ — Pliny the Elder
In October 2016 it will be five years since Plymouth Argyle chairman, and majority shareholder, James Brent rescued the club from the ignominy of administration. In that time Argyle has morphed from a zombie club, dead in all but name, into a League 2 promotion challenger. In the last two campaigns, both of which promised so much, Argyle faltered in the play-offs. While both seasons ultimately ended on a massive low, solace could be taken from on-field progress — the club is no longer anxiously looking over its shoulder at relegation from the bottom rung of the Football League.
Quite what the immediate future holds for this year is currently as uncertain for Argyle as it is for any other club. The team that took the Pilgrims to two near-misses has been dismantled and a huge amount of new players has been recruited in their place — how long it will take them to properly gel is anyone’s guess.
So that, in prà©cis, is where the team has been and might be going but the focus of this piece is off the pitch. Exactly what has happened in the post-administration period to breathe life into this football club? As ever, the story is not quite as straightforward as one might hope…
Mr Brent’s Revolving Loan
In 2010, Mr Brent’s Natatomisam — the company which sits at the head of all of Mr Brent’s others — negotiated a £32 million, 18-year credit facility with Lloyds Bank which partly funded hotel acquisitions. However, the nature of the loan meant that money could be spent for any business purpose within the group and so was used, along with a still outstanding share charge, to settle the secured Lombard mortgage at a cost of £600,000, thus allowing Mr Brent to buy Plymouth Argyle Football Club.
When Argyle came out of administration the last hurdle was the Football League releasing its Golden Share. For this to be granted a business plan had to be submitted for assessment and approval. Job done, seemingly, but the FL’s then chairman Greg Clarke issued a cautionary ‘Leap of Faith’ statement querying whether the plan was achievable. That business plan was predicated on Argyle achieving an ambitious average home attendance of 8,500 for the first season. I use the word ‘ambitious’ euphemistically. Quite simply this was never going to happen and anybody with a reasonable grasp of Argyle’s history, particularly at League 2 level, would have known this. The inevitable happened with attendances falling well short of the target and Argyle continued to lose money with, after all that had happened, its lines of credit non-existent. The shortfall had to be met somehow and so Mr Brent paid £425,000 to purchase a parcel of land next to the ground in order to plug the gap. The fix was only temporary though. More money leaked away and another shortfall had to be met. This time Mr Brent stumped up loans to the club and all seemed well. Until February 2014, anyway, when Mr Brent was no longer able or willing to provide further loans, resulting in Tony Wrathall, a member of the previous board which had seen Argyle nosedive into near oblivion, being controversially reintroduced as a director with the release of a share transaction providing the next required batch of funding to the club.
The following month, it emerged that parts of Mr Brent’s hotel empire had folded. By now Lloyds had sold the revolving loan on to American hedge fund, Cerebus, which in turn sold it on to another company based in the Channel Islands. Somewhere along the way, the loan vanished with 2014 group accounts for Natatomisam witnessing a change in net debt from £44m in 2013 to just £186,000 a year later.
This gives a flavour of the club’s financial stability in the immediate aftermath of administration but as the months ticked by and turned into years one of the key agreements that enabled the exit became more and more pressing. The outstanding football creditor debt, at the outset c. £3.6 million, was payable with 15% paid upfront, 7% paid per year for each of 5 subsequent years and the remaining 50% (around £1.8 million) at conclusion although caveats applied and transfer profits, cup tie income and other unexpected income was to be used to accelerate the payment of the final sum. That final payment loomed large.
The Pavilions and the Civic Centre
After a prolonged period of silence regarding the final payment Plymouth City Council came to the rescue with a loan of £800,000 and with one leap the club was free from financial worry again. It should be noted that the loan was secured against the land that had been sold previously for £425,000 so between March 2012 and September 2014 that land had nearly doubled in value to the benefit of the land’s owners and not the club.
The loan was indicative of what appeared to be a very close working relationship between the Council and Mr Brent. Another strand was their March 2014 deal on the Pavilions, a city-centre leisure facility featuring an ice rink, swimming pool and concert/conference arena. The Pavilions had been running at a loss and was sold to Mr Brent for a nominal £1 with the council gifting Mr Brent a dowry of £2 million to take it off their hands. On re-evaluation following the purchase the Pavilions — which lies at the heart of a far bigger dockland regeneration — was valued at £4 million. Effectively, Plymouth City Council had given Mr Brent £2 million in cash and an asset worth £4 million in exchange for £1. Mr Brent then promptly transferred £900,000 from the Pavilions into his own personal pension fund.
By September 2014, however, the cracks began to appear in the relationship when a £50 million deal to convert Plymouth’s Civic Centre into a luxury hotel fell through. A plan that was largely dependent on Mr Brent securing a grant from the Arts Council, as announced in August 2013, never transpired. The site has since been acquired by regeneration company Urban Splash and remains a project in the planning stage. As to the Pavilions, there has been no sign of the project moving any further forward to date.
‘Higher Home Park’
Another ambitious property deal related to the desperate need for Home Park’s decaying grandstand to be replaced as part of a wider ‘Higher Home Park’ redevelopment scheme, and involved the Council both donating some parkland and then subsidizing costs in perpetuity thereafter. The scheme was also tied to the Pavilions in that it included an ice rink which — as part of the Pavilions deal — Mr Brent was obliged to provide somewhere in the city. The £150 million development would also include an IMAX cinema, hotel and much more yet would have controversially seen Home Park’s potential capacity restricted to less than 17,000 seats.
However, Higher Home Park was effectively rendered defunct by the approval of British Land’s broadly similar intentions for Plymouth’s Bretonside Bus Station and the farrago all but obliterated the relationship between Council and Mr Brent. It remains to be seen whether a political change in council leadership at the last local elections will resuscitate it.
As an aside, if a pattern of ambitious schemes which are not subsequently realized is beginning to emerge then the story of Oldway only enhances this. Oldway is a mansion in Paignton, a small south Devon town 30 miles east of Plymouth, and was the home of the Singer family. In September 2012, Mr Brent’s Akkeron Group signed an agreement to purchase the site based on planning permissions obtained for its restoration and redevelopment. However, the project never really left the drawing board and led to much acrimony and legal wrangling with Torbay Council. When the Council challenged Akkeron Regeneration’s ability to meet its financial commitments in court earlier this year Mr Brent was able to use his ownership of the Pavilions to prove that he could securitize a mortgage to release the required funding. However, the whole scheme fell through a fortnight ago with all agreements being cancelled.
Purchasing the Freehold
As part of the sale of Home Park to Plymouth City Council in 2011 there was a clause: every 5 years the club could buy the ground back at a cost of 12 times the annual rent, which would currently be about £1.7 million. To this end, that option could be exercised in October 2016, and Mr Brent seems to be very keen on taking up the deal.
What follows is guesswork and supposition, but I suspect that a company will be established to purchase the freehold. This company will probably appear to be ‘Argyle’ but it won’t be, not exactly. That company will then get the ground re-valued at a higher price (just as a previous Argyle board did roughly 10 years ago, setting in motion the chain of events that led to administration). This will establish an instant paper profit on the deal and as the value of the asset increases over time so too will the parent company’s. The ground will probably be purchased via a loan or a mortgage of some sort. Argyle would pay the interest-accruing loan or mortgage monthly out of income to the lender; likely, in Mr Brent’s own words, not to be a financial institution. Not only will the asset value increase almost immediately and thereafter over time but the liability will reduce with every payment the club makes out of its income. It is a deal almost risk-free and far too lucrative to let slip.
But then what? The club will be no nearer to getting a new grandstand and the plusses in one part of the Akkeron empire will likely offset the losses in another, and if Mr Brent’s companies were to fail any assets it held, such as Home Park, would fall to… somebody and could be anybody. Buying Home Park looks like a very good deal for Mr Brent but not nearly such a good one for Argyle which will either pay a mortgage for somebody else to own the ground or pay rent to a third party, leaving the club not only stripped of every asset it once had (players, paperclips and brand name apart) but also paying monthly for the privilege.
I’m being alarmist and it can’t happen? Something like it is already happening. Remember that parcel of land once worth £425,000 but now valued at at least £800,000 and transferred to Mr Brent’s HHP Nominees Ltd? The club’s offices and shop sit on it and they are therefore paying rent to… somebody because HHP Nominees Ltd doesn’t appear to own it any more since it no longer lists it as an asset.
This tangled web of corporate entrepreneurialism should be familiar to those who have followed this tale from the start. Everything always seems to be guaranteed, re-structured, re-financed, re-valued and secured against something else somewhere else in a corporate portfolio and future progress depends upon attracting external investment partners to schemes as — or, perhaps more appropriately in this instance, if — they progress. It is very rare that anything is ever purchased outright with one’s own money, and costs are usually loaded against the future income of the corporate branch concerned and if a little, or failing that a lot of, public money helps the deal along then so much the better. The deferred payment of the club’s historic administration debt is an illustrative case in that it was loaded against club income over 5 years and then put off a little longer thanks to the £800,000 council loan.
No doubt a strong argument will be made for the purchase of the freehold. A similarly robust case was made at the outset of Mr Brent’s tenure with openness and transparency promised so that the horrors of administration would never be repeated, yet in the past week the Argyle Fans’ Trust have announced that they will withdraw from any further dialogue with the club’s board following a falling out; an ambitious scheme for the Pavilions was assured but work has yet to begin; the non-delivery of the Civic Centre redevelopment resulted in the loss of that project to a company with a proven track record; grand plans were promised at Oldway but all agreements have been now terminated; and the Higher Home Park scheme lies abandoned. Now we approach a new milestone, who can blame anyone for lacking confidence in whatever Mr Brent has to say about the benefits of the purchase for the club, no matter how compelling a case he makes.
I do not expect Plymouth Argyle FC to purchase Home Park in October in any simple, tangible way but I fully expect Plymouth City Council to sell it to Mr Brent in some way, shape or form. The upshot of which will, possibly permanently, separate the club and stadium in a manner much more fraught with risk to the club than the current arrangement, with what is always likely to be a benevolent landlord in the shape of Plymouth City Council. Quite where this will leave the club in the future is, as Pliny the Elder once pithily observed, certainly uncertain but it is all horribly reminiscent of the methodology that ultimately led to Argyle’s administration and near extinction back in 2010.