AN update on financial aspects of the project from Neil Wolstenholme

 THE SHAREHOLDERS

• Everton Football Club — 50% 
• Liverpool City Council — 25% 
• English Partnerships — 12.5% 
• NWRDA — 12.5%

This gives a 50:50 split between public and private ownership of the project (the precise balance among the public shareholders may vary depending on how much money each puts up).  They are the shareholders in the project (the equity). 

 THE FUNDING

Equity — £60M   Everton FC will put up £30M, ie, 50% and the  various Public shareholders will put up £30M — the remaining 50%

EU Objective 1 — £35M  This will be funded as a Merseyside-wide contribution from the European Regional Development Fund element — NOT from either the ring-fenced City Centre pot or the European Structural Fund.  There'll be some more info coming out on this shortly that will provide far more detail than this and will show how spurious the arguments of Peter Kilfoyle and the Abercromby ward councillors have been in this area.

Development Receipt — £40M  This is the estimated contribution from the various private developers who will take on the non-arena elements of the project (see below).  This is obviously a best guess / target but it has been checked by 3 different sets of independent consultants already. 

Waterfront Arena Company Bond — £20M  EFC will own 50% of a company taking out a long-term debt of £20M.  If there is a shortfall in any other area or a cost overrun, this could increase but the plan is to operate a fixed-price construction contract (there is always wriggle room, however) and if there was a significant shortfall in EU funds (not anticipated), the project could be at risk.

There is one other potential source of funding that would offset any risk here — sale of naming rights.  This requires EU approval but if received the amounts could be substantial based on US experience and the limited UK experience to date.

 EVERTON'S INVESTMENT

Where does EFC fund their £30M from?  

I don't know.  I have been told 2 equally plausible variations) but both Joe Dwyer (Liverpool Vision) and Mike Storey (Liverpool council) have said that EFC have PROVED the money is there.  As their necks are on the block for any screw ups, they will have made damn sure before expressing this confidence.  Obvious possibilities include more debt (aarrgghh!) or new equity from existing shareholders or new investors who are lined up.

The key point here is that the shareholders contribute only £60M in equity to the Arena so the fact that EFC get 50% for £30M is in fact totally in line with their contribution — all of the rest is coming from a combination of grant, loan and development receipts (at least that is the plan).  It isn't magic, just clever business.

As for the rest of the project.  It is my understanding that this will be farmed out to either a lead private developer (e.g. Bovis Lend Lease, who are set to be the management contractors for the Arena construction) or to a consortium of private developers (housing, retail, hotel, cinema etc).  Discussions in this area have been going on for a while and there is a lot of competition involved.  Whether this will yield the projected £40M for the project is a judgement call.  Whether the Waterfront Arena company will retain any long-term financial interest in these aspects is unclear but it would seem unlikely based on the funding model (but that is speculation, not fact!!!).

 THE REVENUE

What is certain is that EFC would own 50% of the Arena and would derive income in the following way (some details will no doubt be subject to negotiation):

• 100% of match receipts and direct matchday income 
• 50% of income from other events 
• 50% of other income (e.g. 'pouring rights'; naming rights if not offset against capital cost; parking income; etc.) 

LESS: 

• Management Fee to the Waterfront Arena Company  Probably 50% of the general running costs of the facility and of the costs of financing and repaying the long-term debt
• Facility Fee  100% of the incremental match day costs e.g. stewarding etc. etc. — EFC may continue to pay such costs directly)

The conundrum is whether the incremental income from increased capacity, more premium & executive seats + 50% of all other Arena related income more than offsets our share of the running costs (and remember that as we own 50% of the management company we are effectively paying half of our management fee to ourselves).  All the projections (which have been poured over by two sets of accountants and a variety of other experts and consultants) say they will — and then some...  If the Arena performs to business plan and EFC get crowds close to capacity, the NET boost to EFC's coffers would be (so I'm told — but I haven't seen the projections) in excess of £15M per annum.

Now I know there are lots of 'if' statements in the above because the deal is complex, the funding isn't finalised yet, the plans aren't approved, the thing isn't built and it isn't up and running.  I'm not asking anyone to take a leap of faith and assume it will all go to plan (I certainly do NOT assume that, there have been hiccoughs along the way so far and no doubt there will be more) all I am asking is that we at least get away from peddling myths about EFC getting something for nothing etc.  

This project is only commercially viable because EFC are involved as we provide a core use for the facility and a strong enough income stream to cover half the operating costs.  We also provide a high profile attraction (believe it or not — providing we manage to stay in the Premiership!!!) for other developers, potential naming rights parties etc.

Neil Wolstenholme
21 March 2002