19/08/2012
NEWS STORY
The British Grand Prix will get a new promoter by the end of the year if plans currently being pursued by the British Racing Drivers Club (BRDC) get off the ground.
The plans are connected to the sale of a lease of Silverstone, which is home to the British GP and is owned by the BRDC. It has been widely-reported that the BRDC wanted to sell a lease on land at Silverstone in order to raise money to clear the club's debts and fund developments at the track. However, a recent article in the Telegraph, written by Pitpass' business editor Christian Sylt, reveals that not only will the new leaseholder get the land but it will also get management of Silverstone itself and will become promoter of the British GP as well as all the other races held there.
The development is significant since it will put a huge amount of control in the hands of the new leaseholder which is expected to pay as much as £150m for a lease of up to 150 years. There are fears that it could see control of Britain's most historic circuit go offshore but, one thing that is for sure is that its future should be secure regardless of what happens.
"The new partner would become the new British Grand Prix promoter," says BRDC chairman Stuart Rolt adding that "the plan is to completely separate on a financial level Silverstone from the BRDC for the period of the lease. We are looking for an entity that has the muscle, financial power and the belief in Silverstone to take over what the BRDC has been doing all these years. That is to press forward with the investment plan and also to take on the responsibilities and contracts that already exist." Rolt explains the reason for this is that "there is not much point in leasing a race circuit if you don't have the business to operate it so the operating businesses would be transferred into the hands of the lessor."
The BRDC did a similar deal in 2000 when marketing firm Interpublic took over management of Silverstone. The arrangement was short-lived as Interpublic made huge losses on the deal and it ended three years early in April 2004.
The race to find a new leaseholder has already stalled once. It began three years ago when BRDC members gave permission for a lease to be granted on the land. The club then engaged accountancy firm PricewaterhouseCoopers to contact potential investors and all manner of rumours began flying around including the claim that the family trust of F1's boss Bernie Ecclestone would invest in Silverstone. A reader on one website who purported to have inside knowledge of Silverstone claimed in July last year that "BCE's family trust agreed to takeover Silverstone at the end of last week." This rumour was subsequently picked up by the editor of the website but never came true.
What is understood is that last year the BRDC entered into exclusive talks with a preferred bidder, believed to have been a Qatari consortium. The talks fell through and in May the BRDC announced it had opened discussions with other parties.
One stumbling block has been the BRDC's right to veto development on the land and prevent a leaseholder from using it as security for debt financing. However, that is no longer a problem as Rolt reveals that at the BRDC's Annual General Meeting earlier this month "the members agreed that the restrictions should be lifted so we are now able to engage with interested parties more constructively."
It allows a leaseholder to develop the 850 acres of land on the Silverstone site without needing to get permission from the BRDC. Likewise, the land could also be used as security for the leaseholder to raise a loan which in itself could be used to offset the cost of paying the BRDC.
In short, this paves the way for a deal and Rolt says that "by the end of the year at the latest we will have either done a comprehensive deal for all of Silverstone or we will maybe be talking to entities about renting or buying a long lease on parts of the non-circuit land. That would be the fall-back because the land we have now got planning permission for is attractive to a broad range of property developers who can see it and do their sums. It doesn't come with the complexities of a Formula One contract and all the other things that go with a fairly complex business therefore it is an easier sell."
The land is the BRDC's biggest asset and was valued at £51.8m by property consultancy Jones Lang LaSalle in February 2010. Keeping it at F1 standards is an expensive business and last year Silverstone opened a £27m pit and paddock complex funded with debt from Lloyds. The BRDC's plans include construction of a new business park, technology park, education campus and three hotels. It wants to sell a lease on Silverstone to cover the construction cost and clear the debt.
"We have said to investors that it has to be a deal that satisfies our requirements as a club because the club will want to clear its borrowings, it will want to set itself up in a strong financial state for the future, and be secure. So from the members' point of view the club will be safe and secure financially into the foreseeable future. Then there is a second sum of money which needs to be available and that is to invest in the circuit, a hotel and grandstands. The partner is doing that investment. Once you add all that together you get up to a very big number. It is roughly £150m total."
Rolt says there is "good interest" from potential leaseholders and adds that "there is an urgency now to see it through or stop and go back to where we were which is running our own circuit and running our own land."
He adds that the attraction for a leaseholder is not just that it gets control of Silverstone and the land but also that "we can make the lease as long as we like. In the property world people consider 150 years as the freehold. If you ask people to step forward and commit to investment they need a payback." In itself this helps to justify the £150m price-tag and Rolt says "there is always an attraction about an offer that has a lot of money upfront."
A deal would transform the BRDC's finances. The British Grand Prix contract costs it an estimated £13.4m annually and increases by around 5% every year. This contributed to the BRDC widening its net loss from £600,000 in 2010 to £4.5m last year.
Rolt says that the BRDC is not getting the investor on-board to leave the Club with a profit. Instead, he sees its future role as being more akin to the All England Club which owns Wimbledon and is active in the grass roots of tennis.
"We would be very active in the world of bringing on young British drivers," he says adding "that may not just be giving them cash or sponsoring, it is also driver training, simulator packages and all these ways young drivers are already helped."
It is a very worthy aim to shoot for and although it would see control of Silverstone slip through the hands of BRDC members Rolt stresses that the circuit will ultimately never leave their grasp. "The BRDC board would never get authority to sell the freehold of Silverstone," he says. The fact that the members agreed to lift the development restrictions on the land suggests that they are comfortable with a deal taking place and want it to happen. Only time will tell whether it does or not.