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:
| 11/11/97 | £50,000
| |
| 21/11/97 | £115,000
| |
| 16/12/97 | £156,000
| |
| 3/2/99 | £194,000
| |
| 19/2/98 | £105,552
| |
| 16/3/98 | £234,000
| |
| 30/4/98 | £45,455
| |
| 15/5/98 | £59,993
| |
| 29/5/98 | £1,073,500
| |
| 11/9/98 | £326,500
| |
| 12/10/98 | £900,000
| |
| Sub Total | £3,260,000
| Covered by LFA's dated 11/11/97 and 5/5/98
|
| 29/1/99 | £543,000
| |
| 13/2/99 | £457,000
| |
| 15/3/99 | £103,000,000
| (Purchase of Wembley Stadium)
|
| 15/3/99 | £1,731,000
| |
| 26/3/99 | £562,163
| |
| 6/4/99 | £2,987,837
| (Payment of Stamp Duty) |
| 18/1/00 | £3,600,000
| |
| 2/5/00 | £1,119,369
| |
| 24/5/00 | £2,177,245
| |
| 28/7/00 | £562,386
| |
| Sub Total | £116,740,000
| Covered by LFA dated 12/1/99
|
| Total Grant | £120,000,000
| |
(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.
DISCUSSION/CIRCULATION
OF TROPUS
AND JAMES/BLP
REPORTS
Tropus
James/BLP
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.
ENST
Not circulated but representatives present at WNSL Board
meetings (see above).
Not circulated but representatives present at WNSL Board
meetings (see above).
DCMS
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.
Banks
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.
Others
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).
Media
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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