Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by Wembley National Stadium Limited

1.  Please clarify details on the payment of the £120 million from Sport England, as well as provisions for repayment—including the liability of The FA for the grant should WNSL become insolvent—and a schedule of draw-down. It would be helpful to put the £120 million in the context of other income/support enjoyed by ENSDC/WNSL

  (i)  The £120 million was paid between November 1997 and May 2000 under three Lottery Funding Agreements (LFAs), dated 11/11/97, 15/5/98 and 12/1/99. All payments were made by Sport England to WNSL (known as ENSDC prior to March 1999). £3.26 million was spent on the project to Dec 1998 funding initial design work and the legal/due diligence fees in respect of purchasing Wembley Stadium from Wembley plc. £103 million was used to purchase the Stadium on 15 March 1999 and a further £3 million (approx) was incurred to pay stamp duty in April 1999. The remaining grant was used over the next year to fund specific costs in respect of the new Stadium. All requests for funds were supported by drawdown notices. A full schedule of payments is listed below:

Sub Total
Covered by LFA's dated 11/11/97 and 5/5/98
(Purchase of Wembley Stadium)
(Payment of Stamp Duty)
Sub Total
Covered by LFA dated 12/1/99
Total Grant

  (ii)  The provisions for repayment are set out in the LFA dated 12 January 1999. This provides for repayment in the event of failure to meet certain milestones or for events of default by either WNSL or The FA such as material breach of obligations, insolvency, material misrepresentation, fraud, illegal acts or a breach of overriding operating requirements incapable of remedy within a certain time frame.

  (iii)  The FA's obligations and the parameters of the support required to be given by the FA are also covered in this LFA. The FA's obligations are clearly stated to relate to providing as much support as possible, for example by procuring additional events, but there is no guarantee by the FA nor requirement for the FA to inject additional funds. It is worth noting, that at the time of the awarding of the grant, the Wembley Stadium business was producing a far larger pre-tax "profit" than The Football Association.

  (iv)  The £120 million grant represents approximately 10 years of profit before tax of the old stadium.

2.  Please clarify the purchase of the land involved in the sale of the existing stadium business (by whom, from whom, and for how much?) Please give details of steps taken to achieve / ensure value for money (including details of independent valuations)

  The Property and Fixed Assets were purchased by WNSL from Wembley plc for £103 million. This included £93.73 million for the Property and the fixed assets, although the value of the Property was not set out separately within the sale and purchase agreement. WNSL used a Chartered Surveyor & Leisure Property Specialist partnership to apportion the values of land and buildings. The land is included in the accounts at a value of £64.5 million. The buildings have since been written off.

  The valuation of the Stadium, its assets and related business of £103 million was supported by consultants PriceWaterhouseCoopers, who concluded that the price was fair and reasonable.

  At the time of purchase, interest in the site was demonstrated by at least three other parties. Arsenal FC had expressed an interest in buying the Stadium site while both ENIC and SFX (leisure and entertainment industry organisations) had expressed interests in buying the entire business of Wembley Plc (to include the Stadium site).

  WNSL understands that the three non-executive directors of Wembley Plc resigned from the company board around the time of the sale of the stadium site and business to ENSDC in part because they believed the sale to have been at an undervalue.

3.  Please clarify ownership of the land: details of current freehold and leasehold arrangements and any covenants or other agreements covering ownership and/or usage of the site.

  The ownership of the freehold is subject to a leasehold structure which can be summarised as follows:

    The WNSL freehold title to the Wembley site is divided into two areas, one of approximately 24 acres on which the Stadium stands and the other of seven acres of developmental land to the north of the Stadium plot. This development land is an integral part of the new Stadium plan and although owned freehold by WNSL is subject to an Option in favour of Wembley plc, described as follows. Wembley plc has the right to require WNSL to return any part of this seven acre tract that is not used for the development of the new National Stadium. In addition the Option land will revert in full to Wembley Plc if WNSL has not started to develop the site by 31 December 2002. WNSL must also give Wembley plc three months notice of its intention to use the Option land, ie by 30th September at the latest, if it is not to lose the land.

  At the time of the site purchase there was extensive debate between ENSDC and Wembley Plc as to the land required to build an 80,000 seat stadium at Wembley, with ENSDC favouring the largest possible land tract. The above arrangement represented a compromise whereby ENSDC received a substantial (in the opinion of Wembley Plc) tract of land, with any land not to be used for the new stadium eventually returning to the ownership of Wembley Plc.

  Both tracts are subject to a further lease structure, which was put in place to restrict the use of the site to use as a national stadium and to provide a mechanism for paying 1 per cent of turnover to ENST for charitable purposes after five years of operation of the new Stadium.

  At present a 999-year headlease has been granted by WNSL to an intermediary company called ENSPCL or "Propco" in return for a 130 year Underlease granted back by Propco to WNSL.

  The original intention was to transfer Propco's interest in the 999 year lease to ENST when the funding was in place.

  However, following discussion with Sport England and the Banks, it is likely that the structure will be simplified to remove both ENST and the lease structure. The 1 per cent of turnover would still be paid for the above purposes but by a different mechanism.

  WNSL also have rights to use the car parks owned by Wembley plc on event days by virtue of a 125 year lease granted in March 1999 for a £2.5 million premium.

  Hilton Hotels had a covenant on the entire Wembley site, which was passed on to ENSDC/WNSL. This prevents any other company operating a hotel in competition with Hilton. WNSL was in negotiations with Hilton when the project was suspended and the hotel was subsequently removed form the design.

  The freehold transfer document contains detailed development conditions regulating WNSL's rights over adjoining Wembley plc land during the construction period. It also allows Wembley plc the right to approve the planning consent for the new stadium and generally restricts the use of the land to use as a national stadium.

  There are also further covenants in favour of Wembley plc which impose certain restrictions on the use of the Stadium site. These restrictions are to protect Wembley plc's continuing business areas and essentially relate to use for: indoor sporting events or concerts; conferences, exhibitions and banqueting for more than 2,000 people; outdoor events (other than sporting events) for less than 30,000 people.

4.  Please clarify the ownership of WNSL; including the legal status and practical effect of the "golden share" owned by the ENST and its rights to appoint directors previously, and the situation pertaining now.

  WNSL has two shareholders. The FA owns all of the Ordinary shares and ENST owns the single "A" share or "golden share". The ordinary shares were acquired by the FA from ENST in January 1999 and the "golden share" was created at that time as a requirement of Sport England.

  The rights attached to the golden share ensure that ENST and Sport England's consent is required before certain "restricted matters" can be allowed to happen. These include: The FA ceasing to control WNSL; alterations to WNSL's constitution (including matters affecting the golden share); material change to the nature of WNSL's business; WNSL selling the Stadium other than as allowed under the LFA; and WNSL paying a dividend within the first five years of operation.

  The golden share also allows ENST to appoint five directors to the WNSL Board during the design period with its representation reducing to three directors during construction and then reducing to one director during operation.

  It should be noted that following discussions with Sport England and DCMS, the current ENST structure is likely to change. The intention is to dissolve ENST and transfer the golden share to Sport England. The "A" shareholder would not be allowed to appoint WNSL Board directors unless WNSL breaches the LFA in which case Sport England would be able to appoint three directors.

  The current WNSL Board consists of seven non-executive directors appointed by the FA. These include Michael Jeffries (Chairman), Bob Murray, David Ross, Peter Mead, Adam Crozier, Clive Sherling and Keith Harris. The company articles are in the process of being changed (with Sport England approval).

5.  On the project structure please clarify the roles, responsibilities and relationships between: Sport England, the English National Stadium Trust, and the English National Stadium Development Company Limited / Wembley National Stadium Limited and Wembley Plc.

  Sport England: awarded WNSL a £120 million lottery grant to cover the acquisition of Wembley Stadium from Wembley plc and to the cover the design costs necessary to achieve planning consent.

  The grant was provided subject to certain obligations covered by the three Lottery Funding Agreements (LFA's).

  WNSL, Sport England and the FA signed the latest LFA on 12 January 1999. The key requirements imposed on WNSL are:

    —  to build the new Stadium to provide a minimum of 80,000 seats for football and rugby matches and 65,000 for athletics events and to comply with various technical requirements;

    —  to operate the new Stadium primarily as a site for sporting "Flagship Events" and secondly for concerts, conference and ancillary uses;

    —  to promote the reputation and integrity of English sport and provide recognition of the contribution of Sport England; and

    —  to operate the new Stadium taking account of certain policy requirements, which include ensuring non-discriminatory access for the public, adequate transportation and community use.

  Sport England has monitored the project throughout the development to ensure it meets the requirements of the Lottery Funding Agreement.

  ENST: is a company limited by guarantee which was established for charitable purposes. It holds a "golden share" in WNSL, as described above. Under the corporate structure of WNSL described above, ENST is the vehicle used (by Sport England) to secure the public interest in the affairs of WNSL.

  ENSDC/WNSL: ENSDC was formed by the ENST in June 1997 as the company to develop a new national stadium. ENSDC changed its name in March 1999 to WNSL.

  Wembley plc: maintains ownership (by itself and/or through its subsidiary Wembley London Limited) of the remainder of the Wembley complex (including Wembley Arena, Conference Centre and Exhibition Halls). Its relationship with WNSL is contractual, governed primarily by the Sale and Purchase Agreement under which WNSL acquired the Stadium from Wembley plc.

6.  Please clarify WNSL's distribution of (or substantive discussion of) (a) Tropus report, (b) James/BLP reports; and when?

  WNSL has regularly taken legal advice on this matter.

  Confidentiality restrictions imposed by Tropus on the Tropus report have meant that WNSL has been unable to provide a copy to any third party without the consent of Tropus. WNSL has therefore only been able to disclose this where required to do so by law, ie to the CMS Committee (as WNSL understands the Committee's power to require the production of documents even where covered by confidentiality obligations) and (in part) in the course of arbitration proceedings.

  Further details relating to the distribution of these documents are set out below.




WNSL Board

  Discussed at meetings of 10 September, 5 November and 3 December 2001.

  Discussed at meetings of 10 September, 5 November and 3 December 2001.

The FA Board

  Reported to FA Board following presentation to WNSL but not circulated. Representatives present at WNSL Board meetings (see above).

  Representatives present at WNSL Board meetings (see above). Circulated through lawyers on 19 December 2001 to A Crozier and G Thompson only.

Sport England

  Not circulated but representative present at WNSL Board meetings (see above).

  Representatives present at WNSL Board meetings (see above). Circulated through lawyers on 18 December 2001 to I Fytche and T Price only, and on 21 December 2001 to J Branson, T Brooking, D Moffet, R Bottomley, D Ross and Sir R Knox-Johnson only.


  Not circulated but representatives present at WNSL Board meetings (see above).

  Not circulated but representatives present at WNSL Board meetings (see above).


  Not circulated but will have been advised by Patrick Carter. Tropus met Carter in July or August 2001.

  Sir Rodney Walker wrote to Nicholas Kroll, acting Permanent Secretary at the DCMS on 12 November, informing him of the allegations and the review. Report circulated through lawyers on 17 December 2001 to Secretary of State, S Street, P Drew, R Raine, B Bush and P Carter only.


  Barclays made aware of allegations during due diligence.

  West LB made aware of allegations during due diligence.

  Barclays' lawyers due to be advised of contents but Barclays withdrew from funding negotiations.

  West LB's lawyers advised of contents during due diligence May 2002.

Patrick Carter

  Advised of Tropus concerns July 2001 and met Tropus.

  Met with BLP report team during preparation of report.


  Relevant extracts disclosed on request as part of arbitration disclosure (under Arbitration Act) between WNSL and Letheby and Christopher (the caterers at the former stadium).

  Relevant extracts disclosed on request as part of arbitration disclosure (under Arbitration Act) between WNSL and Letheby and Christopher.

Select Committee

  The report has been made available to the Committee as required (May 2002).

  The report has been made available to the Committee as required (May 2002).


  WNSL has not disclosed or discussed but the contents appear to have been disclosed to or discussed with:

    The Sunday Telegraph

    The Evening Standard

    The Daily Telegraph

    The Mail on Sunday

    The Times

20 May 2002

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