Pitch Dark
With the punters in revolt over a floated idea of ground sharing with Fulham, attention has turned back to the people who own the pitch, the eponymous Chelsea Pitch Owners Plc. But where was their voice when this issue was raised? Does anyone know that they actually lost money last year? Or that their level of indebtedness increased? Or that they are now operating out of a unit on Wembley trading estate? Here we look at the ticking time-bomb sitting under all Chelsea supporters, and ask just how 'safe' is our pitch?
On Saturday March 20th 1993 Chelsea were preparing to host Tottenham in a League match, in the early stages of the monumental unbeaten run which has splendidly continued to this day. As a team containing the unlikely heroes Dave Beasant, Mal Donaghy and Tony Cascarino was getting changed, Blues fans reading the programme would have learned about a proposed new company, Chelsea Pitch Owners Plc. Following the blaze of launch publicity things have gone very quiet over the years, and a decade on, supporters and shareholders are starting to ask some fundamental questions about the scheme.
The story started over ten years before. Ken Bates was given to opportunity to buy the freehold of Chelsea's land for either £600,000 or £800,000 (depending on who's version you believe), as well as taking on debts of £2.3m. Bates refusal to take this offer ensured the separation of the club and their land, the latter owned by a property company that rented to the former. As the Nineties dawned, a combination of a dire property market and Bates fearsome litigiousness brought about the collapse of Cabra, the shell company that had hoped to redevelop the site. Ownership of the freehold passed to the main creditors, the Royal Bank of Scotland. In turn they negotiated a very fair twenty year lease with Chelsea Football Club, although by now the price was set at £22.8m, a fixed value payable at any stage over the duration of the lease. To make the purchase even easier, the 11.9 acres of land was initially divided into six separate parcels, available for purchase individually of each other. The cost of the piece of land which housed the pitch, was priced at £5m. This was the piece of land CPO was created to buy.
Like any number of things Bates has said over the years, his comments in that programme do not stand the test of time. In a full two page spread, Ken Bates, in full country squire mode, put the case. Despite the triumph of the lease signing, apparently Bates was being kept awake at nights worrying about what would happen to the ground after he was gone, such was his level of concern for the Chelsea supporters. The site was "very tempting to the next generation of property spivs" he mused, and he didn't want to see the "fruits snatched away" in the future. He even discussed the matter with his dogs on a walk around his mortgaged farm (he neglects to mention if "Tolly", his hound named after Stanley Tollman was still up to 'walkies' at this time). Finally, a brainwave. "If fans own the ground and only allow the Club to play on it, then all has been achieved. The redevelopment value of Stamford Bridge in these depressed days is probably £7m-£9m. In the next boom (yes, there will be one sometime) it could soar t £10m-£20m. Temptation indeed to sell! For just £5m you supporters can prevent this and see off once and for all the property spivs." Remember this was written ten years ago, which indicates an inflation rate well in excess of 2000% in the "redevelopment value" of the Village over the decade according to the current Village asset figure. A quite extraordinary figure indeed! As a consequence of this idea, the chairman of property Company Chelsea Village would therefore be able to "see off once and for all the property spivs." History may well reflect that is was all except one perhaps. This was a typical Bates plan. Get the supporters to pay for something that they thought they already owned, leaving the rest of the land free for his property development. 'Buying a share' was in effect making a donation, it was not an investment in any recognised financial sense. The Company issued 70,000 shares at £100 each, seeking to raise £7m. There were several caveats: "You won't get a dividend, the Company won't make a profit - or a loss for that matter - but you will be part of a brotherhood that, through the company, will own Stamford Bridge and so preserve football for future generations of Chelsea supporters" For the record, CPO lost £15,565 last year.
"There will be some other benefits. Why raise £7m when the ground purchase will only cost £5m?" This is a question which took on much greater significance 0n December 14th 1997. In his frenzy of excitement at getting hold of the £75m Eurobond, Bates casually mentioned that Chelsea Village was loaning the money to CPO to buy the freehold back from them. The Village had utilised part of the borrowed cash and purchased the freehold from the Harding estate, and then sold it on the CPO. What has never been satisfactorily been explained is why the £5m price, fixed over the twenty year period of the lease was ignored, and where the new price of £11,150,751 came from. We understand this increase in liability was not discussed beforehand by the CPO board. The upshot of this secretive move was that land bought by Bates in 1993 for £5m, was then 'sold' on to Chelsea supporters four years later at 223% of the cost! As Bates remarked recently, "That's how property companies make money". We spoke to Bob Sewell, the brave man who produces CPO accounts and asked him what the extra £6m was for. When pressed the best he could come up with "We got some extras with it", although he wouldn't go further. CPO shareholders might be interested to know what the "extras" that cost over £6m were exactly. None of this was mentioned in his 1997 programme piece, although he did take the trouble to once again remind everyone that this selfless act had made the ground "safe for ever from future generations of property spivs and corporate raiders". This huge transaction had to show up in the books, and it is stated quite clearly in both Chelsea Village and CPO accounts that the loan is interest-free and unsecured. Unfortunately, that is not the end of the matter.
The original time-span estimated to raise the £5m for ground purchase and £2m for "for fitting out Club premises to be situated between the East Stand and new North Stand for the exclusive use of CPO shareholders" was ten years. Share sales started brightly, although how many were persuaded to hand over their £100 so that they could possess "a great share certificate which will become a collector's piece in years to come" is unknown, people generally thought they were actually 'saving the club'. Even the lure of paying an extra fifty quid to be presented with your certificate on the pitch by Robert Fleck or another out of favour player couldn't stop the slowdown of sales as more and more people questioned what exactly it was that they were getting for their money. An outrageous piece of blackmail force-sold a few more to people who found that the £100 purchase would secure an otherwise unobtainable 1997 FA Cup Final ticket. The FA had a long hard look at that episode, but in their usual supine fashion did nothing (although they did criticise Bates over his £500 'Champagne Reception' - plus Cup Final ticket thrown in at the same time).
After the initial flurry of interest, it soon became clear that they were not going to sell 70,000 shares in the decade By the late nineties CPO was mentioned less and less round the Village. At this time it was not operating anything like a Plc, with decisions being unilaterally made by the new chairman, one Peter Tillot, who was appointed in December 2000. Tillot, fresh from bankrupting his previous two companies quickly moved CPO into the football memorabilia market, and a company called CPO Memorabilia was formed. This was all done without shareholders or board members being informed beforehand, but a link to a separate CPO Memorabilia website appeared on the official site. This apparently separate company then proceeded to sell off through auction any Chelsea memorabilia Tillot could find, including historical correspondence signed by Gus Mears, who lest we forget founded a football club where Chelsea Village now stands. At a time when Bates was bragging about the 'museum' that was being built as part of the property development, CPO was shipping out our heritage for a song. This really was a hidden scandal, real pieces of the our football club's history being disposed of through the back door by a man who seemed to feel he could act as he wanted. None of this activity was reported in the CPO accounts, no profits ever raised were accounted for. One by one the other directors considered their professional positions and decided to leave the board of CPO. Tillot seemed to be running it as his own little business. The separation of the memorabilia business now appears complete. Recent visitors to the CPO website are informed that the business has moved to Fan-atic, Unit 1-5 Hallmark Trading Centre, Fourth Way, Wembley, Middx, HA9 0LB. Nowhere is this substantial change of purpose mentioned in the annual report, and nowhere do the monies realise appear on the books. How have they got away with this? With the talk of a groundshare with Fulham floating around, the actual role of the CPO has come under closer scrutiny. Surely, if Fulham want to play on CPO's pitch they have to ask CPO for the privilege, but the new chairman Richard King did not surface to assuage fears. So how safe is the pitch? Most supporters seem to think there is nothing to worry about, because CPO 'owns' the ground, but the situation is much more parlous than that. CPO has an asset, the pitch, but it also has a huge debt.
The pitch is let to Chelsea Football Club for a peppercorn rent, but there is no other guaranteed income source. Sales of the £100 'donation' shares has all but dried up, with only 364 being sold last year, completing the grand total of 11,238 sold as of last year's accounts. Remember the plan was to sell 70,000 within ten years, but at last year's rate of sale it is going to take another 161 years to reach that target! The level of debt to Chelsea Village is still a staggering £9,026,404. A disturbing enough figure in its own right, but when you consider that CPO's net debt the previous year (2001) was £9,001,833, and in 2000 it was only £8,967,517 it is clear things are drastically wrong. To reiterate, CPO's net debt increased by £24,571 last year, and by £34,316 the year before that. Almost as alarming is the reported trading loss of £38,071 last year. How can this be, after all Bates did state categorically that the company would never make a loss, but it is there in the accounts. You won't read about it in the programme notes, but CPO is a financial mess.
Should this concern Chelsea supporters? The bulk of the debt is 'unsecured and interest free' which sounds reassuring, but that only applies as long as the debt is held by Chelsea Village. The £9m+ debt is recorded in the Village accounts as an 'asset', and is used to defray some of the real external debt. Supporters should be aware that when Bates talks about the Village's 'assets', those assets are in part over £9m owed by the supporters, not for anything that they have had, but just for the right for Chelsea football club to play on the Stamford Bridge pitch. As a supporter, you owe, rather than own, a chunk of Chelsea Village's assets. But a company which is going to take over 160 years to sell its shares, a company whose debt is increasing, and who are trading at a loss is arguably no asset at all. It is clearly a non-performing liability and the debt needs to be written off. But if that happened another huge hole would appear in the Chelsea Village books, this time for over £9m. Remember that when liabilities exceed assets a company is technically insolvent.
If Chelsea Village went bankrupt the picture gets even bleaker again. The Eurobond creditors would look to realise assets to get some of their cash back, and CPO will be faced with the choice of paying the debt in full or being declared bankrupt. The stark reality here is that the pitch is 'safe' as long as Chelsea Village doesn't go bankrupt, which it will if it continues to lose money. If the Village does finally sink, CPO will have to come up with £9m or the pitch is gone. It is our belief that most Chelsea supporters are unaware of this possibility.
So far from being 'safe', the future of Chelsea Football Club is dependent on Chelsea Village arresting the annual rise in losses (£16.5m last year) and turning a profit. In other words, the future is very unsafe indeed. This calamitous state of affairs does not even take into account the effect of any sale of Village assets to an outside company. Who would own the stands? Would Chelsea Football Club be forced to rent their own stands back from a property company? The Football Club is already deprived of nearly all of its ancillary income - match day catering, match day 'corporate' etc, and even has to pay for every Village meal or even Village cup of tea that a player consumes. With such a massive financial disadvantage compared to our rival clubs, the future looks bleak indeed. Chelsea Pitch Owners was established to ensure that property spivs did not get hold of our inherited land. The bad news is that it looks to have failed.
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