Ricoh Valuation. (1 Viewer)

[Senior Vick from Alicante]

I am genuinely interested to see what the general opinion is on a valuation of the Ricoh on here. Sisu value the stadium at various figures according to posters but the consensus seems to be some thing on or around the 5 million mark which would equate to what they were wiling to pay for ACL'S loan from the bank. If you take this as a basic formula then the council will value it at a minimum 14 million as that is what they bailed them out for, the problem with both of these figures is that they are not valuations based on the true sense of the word, we all know that Tesco paid a large majority of the costs through the land purchase but this still clouds the issue.

I am not a property expert but I would value a complex like that at something north of 50 million, we have recently purchased a main road sight to expand into and the total cost including the land we sit on is around the 3 million mark and the footprint for the land we own is less than an acre. What do others on the forum think the Ricoh is actually worth? NOPM

 

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[RoboCCFC90]

I am genuinely interested to see what the general opinion is on a valuation of the Ricoh on here. Sisu value the stadium at various figures according to posters but the consensus seems to be some thing on or around the 5 million mark which would equate to what they were wiling to pay for ACL'S loan from the bank. If you take this as a basic formula then the council will value it at a minimum 14 million as that is what they bailed them out for, the problem with both of these figures is that they are not valuations based on the true sense of the word, we all know that Tesco paid a large majority of the costs through the land purchase but this still clouds the issue.

I am not a property expert but I would value a complex like that at something north of 50 million, we have recently purchased a main road sight to expand into and the total cost including the land we sit on is around the 3 million mark and the footprint for the land we own is less than an acre. What do others on the forum think the Ricoh is actually worth? NOPM

If Sisu believe they will purchase the Ricoh Freehold for £4M then unfortunately they're deluded or crazy (pick whichever suits). The total constrcutiuon cost to memory was north of £110M, a valuation of the Arena would be at least be half of that amount.

 

[ccfcway]

well sisu are prepared to pay £20m + for a lego stadium.

They should start by offering that and see what happens !

I suggest thats not going to happen though

 

[kingharvest]

But they didn't value the freehold at £4m did they? Wasn't that their value of the 'business' i.e. ACL?

 

[stupot07]

A good idea would be both sides getting an independent valuation or 2, then coming together and negotiating a price somewhere in the middle.


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[RoboCCFC90]

well sisu are prepared to pay £20m + for a lego stadium.

They should start by offering that and see what happens !

I suggest thats not going to happen though

Will that be enough though? Ann Lucas has already stated that she wants to get the best deal for the People of Coventry.

 

[stupot07]

Will that be enough though? Ann Lucas has already stated that she wants to get the best deal for the People of Coventry.

We don't know what a good deal looks like, they certainly won't get anywhere near the construction costs, and how much is a freehold worth when you have a long term tenant leaseholder who's already paid the lease up front? I have no idea.


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[GaryPendrysEyes]

Like the rent, the Ricoh is worth what someone will pay for it.
I would assume the land around the stadium, if included, would on its own be over 4m,

 

[wafw1971]

The council in my opinion has had more than enough of a return for the £10 million investment, that being said I would guess that the Ricoh Arena on its own is not worth that much as a leasehold, the business (ACL) is worth £6.4 million according to what was in the paper (does this include the Alan Higgs share), so to buy the business you would say £7 Million then the cost of the lease, well I have no idea.

The Freehold of the Arena and surrounding land could be worth £20 to £30 Million but you will still need to buy out the businesses that is currently locked into a lease, as a landlord you cannot just buy the freehold then kick out the sitting tenants until the lease runs out.

 

[Skyblue4u]

The council are legally obliged to sell it at market value only so it can old be sold for what it's worth

 

[Moff]

No idea, not an expert in these matters (although wish I was as I would earn more) and suppose we could surmise all day but without an expert we will never know. Does that help?

 

[magic82ball]

A good idea would be both sides getting an independent valuation or 2, then coming together and negotiating a price somewhere in the middle.


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You are right but a potential sticking point might be the SISU valuation would be based on no income from football club, ie. as it is now, whereas ACL/CCC would be inclined to use this as this is what it would and has been used for. Given both parties histories, negotiations would be a nightmare.

I must admit to being completely confused with the valuations. It cost north of £110m to build, yet figures of £5m are mentioned.

Didn't CCFC have an option of £10m on half the stadium at one point? Would they be buying all the stadium and if so does that mean negotiating purchases with both ACL/CCC?

 

[bigfatronssba]

You are right but a potential sticking point might be the SISU valuation would be based on no income from football club, ie. as it is now, whereas ACL/CCC would be inclined to use this as this is what it would and has been used for. Given both parties histories, negotiations would be a nightmare.

I must admit to being completely confused with the valuations. It cost north of £110m to build, yet figures of £5m are mentioned.

Didn't CCFC have an option of £10m on half the stadium at one point? Would they be buying all the stadium and if so does that mean negotiating purchases with both ACL/CCC?

The CCFC option was to buy half of ACL, not the Freehold.

 

[Sky Blue Dal]

We don't know what a good deal looks like, they certainly won't get anywhere near the construction costs, and how much is a freehold worth when you have a long term tenant leaseholder who's already paid the lease up front? I have no idea.


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I agree, they are not going to get anywhere near the construction costs.


All I can see is that, ACL/HIGGS/CCC are trying recuperate as much of the money they have invested in constructing and running this stadium and SISU are trying to do the same but making silly offers for the stadium in hope of recuperating back the investment they have made towards the club.

If Anne Lucas is saying she wants to do the best deal for the people of Coventry who many are not football fans, then I say good on her.

We have look at a bigger picture ... It's not all about football and CCFC Who wants to see the city they live in lose any money which would affect them in the long run.

 

[grego_gee]

Valuing commercial property is surprisingly straightforward.
It is based on the income that the investment would produce ie rent.
If the purchaser could leave their money in the bank and get a greater income they are not goint to invest.
For a nutshell indication a purchaser would be looking for 7% return.
to get a capital value divide the rental value by 7% (0.07) to get the capital value
thus when we were paying £1.3m
the capital value could have been expressed as £1.3m / 0.07= £18.5m

 

[lewys33]

Not really sure if its worth talking about this. According to various sources (not going to start reeling them off) the £6.4 mill valuation was for ACL in a distressed situation. ML said that their valuation was closer to £3 mill or £4 mill (not sure if he was referring to ACL or Freehold, I am guessing freehold because .....)

Didn't Tim Fisher recently say they would buy the freehold, and it would be up to CCC to "liquidate" ACL? I seriously doubt that it would happen.

 

[magic82ball]

Valuing commercial property is surprisingly straightforward.
It is based on the income that the investment would produce ie rent.
If the purchaser could leave their money in the bank and get a greater income they are not goint to invest.
For a nutshell indication a purchaser would be looking for 7% return.
to get a capital value divide the rental value by 7% (0.07) to get the capital value
thus when we were paying £1.3m
the capital value could have been expressed as £1.3m / 0.07= £18.5m

So no rent received = £0 val?

Surely it has to be more complex than that? What about the fact the income would be massively increased as soon as they took over due to the club being brought back?

 

[bigfatronssba]

The whole crux of the matter though is what the Ricoh is worth now isn't necessarily what it will be worth in the future.

The council is under no obligation to sell. Therefore why would it take a loss by excepting a £5m bid? The council has an obligation to get the greatest return possible, and if that means hanging on to the Ricoh until some unspecified date in the future, then that is what they'll do.

 

[italiahorse]

I think people are getting mixed up between the Lease and the Freehold.
The Ricoh stadium with freehold would be in the region of £40M and as a whole £60M-£70M with the rest of the complex. IMHO

In addition I don't think they want to sell.

 

[Hugh Jarse]

The land it stands on has to be 'worth' more than £5M?

 

[RoboCCFC90]

Not really sure if its worth talking about this. According to various sources (not going to start reeling them off) the £6.4 mill valuation was for ACL in a distressed situation. ML said that their valuation was closer to £3 mill or £4 mill (not sure if he was referring to ACL or Freehold, I am guessing freehold because .....)

Didn't Tim Fisher recently say they would buy the freehold, and it would be up to CCC to "liquidate" ACL? I seriously doubt that it would happen.

Only because Tim Fisher said about bringing in AEG as a management company.

 

[Moston]

The valuation is nowhere near as simple as has been claimed!

It is impossible to speculate unless all the facts of tenure are fully known...and they are all up in the air.

Who's interest are you valuing? - value to freehold owner? or 50% share? - value of freehold subject to a tenancy? or value freehold of vacant possession? Value of the Areana? or the value of the complex? - value of Complex or of surrounding land included? Is land (etc) subject to tenancy? I guess the Casino (etc) is subject to a different tenancy - which further clouds the issue.

It is correct to state the value is determined by income received - but also potential income received. Interpretation of this varies considerably and is why commercial valuations are done by professionals.

A SISU valuer and a Council/ACL valuer will need to agree facts as to what they are in fact valuing!, at an agreed valuation date.

Hypothetical Freehold vacant? or subject to tenancy - if so how long has the lease left to run?, prospects of closure of lease? yahdy yahdy yah.

In other words - don't hold your breath for 2 independent valuations to be agreed anytime soon.

 

[lewys33]

Only because Tim Fisher said about bringing in AEG as a management company.

That is fair enough. I still seriously doubt CCC would be happy to do that though.

 

[wingy]

The lease ACL hold currently lowers the Value of the Freehold . One way to solve that would be to revert to a simple rental agreement ,the footing they started off on ,also removes SISU's stance on State aid.

 

[RoboCCFC90]

I think people are getting mixed up between the Lease and the Freehold.
The Ricoh stadium with freehold would be in the region of £40M and as a whole £60M-£70M with the rest of the complex. IMHO

In addition I don't think they want to sell.

Well in comparison the six fingered muupets from up the M69 brought there ground for £17M in March this year, now obviously the KP is not as well equipped as the Ricoh, but the KP was built at 1/3 of the Ricoh's contructions costs.

The Ricoh will be at least double the value of the KP when it was bought in March.

 

[mrtrench]

Valuing commercial property is surprisingly straightforward.
It is based on the income that the investment would produce ie rent.
If the purchaser could leave their money in the bank and get a greater income they are not goint to invest.
For a nutshell indication a purchaser would be looking for 7% return.
to get a capital value divide the rental value by 7% (0.07) to get the capital value
thus when we were paying £1.3m
the capital value could have been expressed as £1.3m / 0.07= £18.5m

Beat me to it - had just started playing with some yield and revenue assumptions in Excel. I also assumed 7% yield, although that may be a little high. I assumed total income of 2mm giving a valuation of 28.5mm.

To answer magic82ball, it is the income potential that should be used. The fact that SISU withheld their rent is not relevant. I reckon that properly managed, one should be able to get 2mm pa revenues from the Ricoh (Casino, special events, catering etc.)

 

[RoboCCFC90]

That is fair enough. I still seriously doubt CCC would be happy to do that though.

True enough, can see Fisher's point though (can't believe I am saying that).

 

[lewys33]

Well in comparison the six fingered muupets from up the M69 brought there ground for £17M in March this year, now obviously the KP is not as well equipped as the Ricoh, but the KP was built at 1/3 of the Ricoh's contructions costs.

The Ricoh will be at least double the value of the KP when it was bought in March.

That is a good starting point though isn't it? £17 mill for a similar sized stadium albeit less equiped. Anything less than that has to be branded ridiculous.

 

[wingy]

The valuation is nowhere near as simple as has been claimed!

It is impossible to speculate unless all the facts of tenure are fully known...and they are all up in the air.

Who's interest are you valuing? - value to freehold owner? or 50% share? - value of freehold subject to a tenancy? or value freehold of vacant possession? Value of the Areana? or the value of the complex? - value of Complex or of surrounding land included? Is land (etc) subject to tenancy? I guess the Casino (etc) is subject to a different tenancy - which further clouds the issue.

It is correct to state the value is determined by income received - but also potential income received. Interpretation of this varies considerably and is why commercial valuations are done by professionals.

A SISU valuer and a Council/ACL valuer will need to agree facts as to what they are in fact valuing!, at an agreed valuation date.

Hypothetical Freehold vacant? or subject to tenancy - if so how long has the lease left to run?, prospects of closure of lease? yahdy yahdy yah.

In other words - don't hold your breath for 2 independent valuations to be agreed anytime soon.

Excellent summation Moston ,you're not in the field are you by any chance?

 

[fernandopartridge]

Excellent summation Moston ,you're not in the field are you by any chance?

No, he's in the office.

 

[RoboCCFC90]

That is a good starting point though isn't it? £17 mill for a similar sized stadium albeit less equiped. Anything less than that has to be branded ridiculous.

Absolutely, you'd have to agree that £17M is a good starting point, combined with the hotel, casino, additional land, etc, you are looking at least £30M for the Arena possible pushing £40M.

 

[mrtrench]

The valuation is nowhere near as simple as has been claimed!

It is impossible to speculate unless all the facts of tenure are fully known...and they are all up in the air.

Who's interest are you valuing? - value to freehold owner? or 50% share? - value of freehold subject to a tenancy? or value freehold of vacant possession? Value of the Areana? or the value of the complex? - value of Complex or of surrounding land included? Is land (etc) subject to tenancy? I guess the Casino (etc) is subject to a different tenancy - which further clouds the issue.

It is correct to state the value is determined by income received - but also potential income received. Interpretation of this varies considerably and is why commercial valuations are done by professionals.

A SISU valuer and a Council/ACL valuer will need to agree facts as to what they are in fact valuing!, at an agreed valuation date.

Hypothetical Freehold vacant? or subject to tenancy - if so how long has the lease left to run?, prospects of closure of lease? yahdy yahdy yah.

In other words - don't hold your breath for 2 independent valuations to be agreed anytime soon.

Well, yes... Of course there are nuances and there will be a lot of negotiation within a range, but that doesn't invalidate grego-gee's helpful post which at least gives people on here and understanding of the rationale for valuing commercial property and hence the ballpark for a price.

 

[mrtrench]

20-30 year gilts trading at 3.5%, so I reckon 7% is a bit high. 6% yield assumption gives a valuation of 33mm - again on projected revenue of 2mm.


2.5mm revenue and 6% yield gives you 42mm valuation.

 

[skybluesam66]

If it was purely a fair valuation, then it would be somewhere between 15- 50m

However, in this arbitration, SISU will have ACL in a double nelson, and water torture, before the final negotiation - so I am expecting something like £1.75 (for those hawksby and jacobs fans)

 

[grego_gee]

The whole crux of the matter though is what the Ricoh is worth now isn't necessarily what it will be worth in the future.

The council is under no obligation to sell. Therefore why would it take a loss by excepting a £5m bid? The council has an obligation to get the greatest return possible, and if that means hanging on to the Ricoh until some unspecified date in the future, then that is what they'll do.

Another aspect to consider is the cost of holding onto the "asset".
From my experience close to 2% pa (of replacement value) should be budgeted for planned and responsive maintenance..

for the replacement value we could work on the building cost of £60m = £1.2m pa for maintenance, although for a stadium building I would agree a lower level could suffice
there are other costs
heating & power
rates - interesting here because CCC was forced to give a rebate of £400k to CCFC because they were only using it for 23 days a year - someone else has responsibility for the rest of the year. Not clear who,the freehold is owned through another Quango.