Duff & Phelps have produced their latest report regarding their handling of the administration of Rangers Football Club PLC (RFC PLC).
It can be found here Rangers FC PLC Interim Report by Duff & Phelps 10 July.
I will go through it in detail, but there is an initial point which seems, to me, to be odd.
Perhaps someone in the media can ask D&P, or Media House, whose bill for providing PR services to RFC PLC since February 14 is £124,000, to clarify the matter of the ever shrinking value of RFC PLC’s interests in land?
Page 25 gives the breakdown of asset values in connection with the purchase thereof by “Sevco”.
The line I want to look at states as follows:-
HERITABLE PROPERTIES £1,500,000
The initial Report by D&P in April stated the following regarding properties owned by RFC PLC, on page 23. The Report can be viewed here Rangers FC PLC Report by Duff & Phelps April 2012.
“Freehold Properties – Ibrox Stadium
9.11 The Company‟s base of operations is within Ibrox Stadium, a UEFA 5 star rated, fully equipped and functional football stadium which covers approximately 6.9 hectares. The UEFA 5 star rating allows the Club to host UEFA Champions League and Europa League finals.
9.12 Ibrox Stadium has an all seating capacity of 51,082 and is regularly sold out for the Club‟s home game fixtures. For the 2011/12 season, there were 37,918 season ticketholders with season ticket prices having been frozen for the previous three years.
9.13 The Joint Administrators’ agents, Lambert Smith, were appointed to provide an indicative valuation of Ibrox Stadium on an existing use and alternative use basis.
Freehold Properties – Murray Park
9.14 Murray Park, the Club’s modern fully equipped training centre covers approximately 15.8 hectares. It was opened on 4 July 2001 after a £14m redevelopment. The training centre is regarded as one of the best in Europe.
9.15 Lambert Smith was also instructed by the Joint Administrators to provide an indicative valuation of Murray Park, on an existing use and alternative use basis.
9.16 The Company is party to various short term leases to support Playing Staff in the Football Academy and other leases in respect of property used by private retailers.
9.17 The Joint Administrators, in conjunction with advice provided by their agents, are reviewing the value of these leases and taking steps to surrender leases where appropriate, whilst still maintaining the operations of the Club.
Albion Road Car Park
9.18 The Albion Road Car Park is subject to a finance agreement and covers an area of approximately 2.6 hectares adjacent to Ibrox Stadium. It is anticipated that the Club will gain right, title and interest to the car park in 2023.”
Next we turn to the CVA Proposal, which can be seen here Rangers FC PLC CVA Proposal.
At page 9 this proposal listed the assets of RFC PLC as follows:-
The other heritable properties and leasehold interests of the Company;
The Player Contracts;
The SFA Membership;
The Company‘s share in the SPL;
The Goodwill and intellectual property rights;
Stock, plant and equipment and cash at bank;
Amounts owed to the Company (other than the Player Transfer Fees);
The High Court Proceedings; and
The Player Transfer Fees.
Page 37 of the proposal document gave the various options of a CVA, a sale of the business and liquidation.
The figure attributed to Freehold Properties was only brought out separately in connection with liquidation. It was stated to be £4,590,214.
No value was stated for freehold property under the CVA or asset sale. As the notes put it:-
“3. The sale consideration under the New Company scenario has not been apportioned. Under the Liquidation scenario, the club ceases to trade and therefore the player contracts terminate and registrations revert to the SFA and therefore may have no value. There is assumed to be no residual value in any Intellectual Property or Goodwill as the club has ceased to trade.”
The notes then go on to say:-
“4. The estimated realisable value of the freehold properties is based on the Joint Administrators’ agent’s valuation less holding and disposal costs based on a period of two years. It is possible these costs could exceed the gross realisable value rendering the properties onerous and without value.”
Therefore, in the CVA Proposal, dated 29th May 2012, D&P placed a value on the freehold properties of £4,590,214. This however was the value of the assets, based on the valuation prepared by D&P’s instructed valuers, less the cost of holding the assets for two years and then disposing of them.
I know that this saga seems to have taken a long time, but it has not been two years since D&P came on the scene.
Therefore that suggests to me that the actual value of the freehold properties, as assessed by the valuers, was in excess of £4,590,214.
How much did D&P attribute to (a) maintaining the properties for two years, and (b) how much to selling costs?
Taken at 2%, which is being generous to D&P, that would amount, VAT included, to in excess of £100,000. Costs of maintaining all the fixed assets for two years could be in excess of £300,000.
Therefore, on a rough but I think reasonable approach, the value of the freehold properties would be around £5 million at least.
On 14th June 2012, 15 days after that proposal was made, the heritable properties were sold to Sevco for £1.5 million.
I have a couple of questions therefore for D&P and for Mr Green, should he choose to answer them.
1 What was the valuation of the freehold properties arrived at for D&P?
2 How did D&P arrive at the valuation of £4,590,214, as shown in the CVBA Proposal?
3 What figure was stated on the dispositions transferring title to the freehold properties to Sevco?
4 What valuation has been put on those assets for the purposes of Stamp Duty Land Tax?
5 Can D&P explain why assets valued at around £5 million can be sold, two weeks later, for £1.5 million?
I am not suggesting, for the avoidance of doubt, skulduggery or malpractice, nor even misfeasance, on the part of D&P.
However, should BDO, who are about to become liquidators, wish to investigate the matter of gratuitous alienations, and asset sales taking place but for less than the full value, perhaps the above information might prompt them to ask these questions of D&P and of Mr Green and Sevco?
And, talking of undervalues, these assets were shown in the RFC PLC accounts as having a value in excess of £100 million.
Clearly the accurate valuation of land and buildings is an area I am doomed never to understand.