O Hell – Crisis At Leyton Orient?

O Hell – Crisis At Leyton Orient?

By on Jan 30, 2009 in English League Football, Finance | 11 comments

It was only last week that we discussed Leyton Orient’s possible mooting of a move from their home at Brisbane Road to Harlow in Essex. It seemed likely at the time that this was an idea that was being, for the want of a better phrase, being run up the flagpole to see if it flew. This week, however, Orient shareholders received a letter which is worrying in the extreme. The main body of the letter is here. As you can see, it proposes the sale of the club’s Brisbane Road stadium to a company called Matchroom Sport. The details of the deal are pretty straightforward. Matchroom will purchase the stadium for £6m. For five years, Orient will stay there free of rent for five years. Then, the rent will increase to £180,000 per year for five years. Five years further on, the amount payable may be further reviewed, and then again five years after that.

This, however, isn’t the only significant detail in the letter. In addition to this, Leyton Orient Football Club won’t actually receive the full £6m from the sale of the stadium. Over the years, Matchroom have lent Leyton Orient money, so £3.4m of the £6m paid for the stadium will not be paid to the club at all. It will, effectively, be kept by Matchroom in settlement of debts for loans already made to the club. In other words, in cash terms, Leyton Orient will receive £2.4m for the sale of Brisbane Road, which, according to the letter from the directors of Leyton Orient Football Club, can be spent on “improving the strength of depth of our playing squad”. Orient will also share 50/50 any profits from sale of the land over £6m, as well. Curious that they should talk about a twenty year long lease and then mention this in the same letter. There is also one final sting in the tail, that all Leyton Orient shareholders and supporters will be already aware of. The owner of Matchroom Sport is Barry Hearn, who is also the chairman of Leyton Orient.

Where, then, do we start with this? What are the possible motives for such a sale? It’s difficult to analyse the details of it for any length of time without coming away from it feeling somewhat depressed. It’s a fairly established opinion at Brisbane Road that Leyton Orient cannot continue in the long term there. The conversion of all four corners of the stadium into blocks of flats have effectively ended the possibility of any significant further development there and, as things stand, Brisbane Road can hold around 9,200 people. The club has looked at moving to Harlow, of course, and has also looked into the possibility of moving to the Olympic Stadium in Stratford after the 2012 games. The Olympic Stadium is to be regenerated as a 25,000 seater stadium after the games, but the idea of 4,000-odd Orient supporters rattling around this vast stadium with an athletics track around it doesn’t appeal to most of the clubs supporters. An annual rent of £180,000 in five years time is a substantial amount of money for the club to have to find in order to stay at Brisbane Road, and that amount is guaranteed for only five years. There could be substantial increases in ten years time. It’s difficult to see anything in the detail which secures the long term future of Leyton Orient Football Club – only various clauses which make their medium term future at Brisbane Road look shaky and without providing and answers regarding their long term.

Then, there is the small matter of the £2.6m that the club will receive as part of the deal. This is not a great deal of money. £50,000 per week for a year, to be precise. Depending on what their wage budget currently is, it would be enough to cover the running costs of the club for somewhere between one and two years. And then it has gone, forever. In some ways, the letter echoes what happened at Brighton & Hove Albion in the 1990s. At Brighton, the club’s directors sold the Goldstone Ground to property developers without having made any plans for a new stadium or having even consulted with the council to build a new one. They ended up playing two seasons seventy miles away in Gillingham before returning to the ramshackle Withdean Stadium, which has been a drain on the club’s resources for a decade now. At the time of writing, work has just begun on their new stadium at Falmer, and they are looking likely to be finally back at somewhere that they can call “home” in two years. Brighton supporters can say from experience that leaving your home ground can be a devastating experience, and one that it can be incredibly difficult to bounce back from.

Ultimately, Orient supporters have to ask themselves how this proposal benefits them, and how it benefits Matchroom. Matchroom will get a prime piece of East London real estate, all ready to be redeveloped in line with the proposed with the regeneration of the area for the next Olympics, and they get it cheap. No matter what loans Barry Hearn’s company has put into the club, £6m is very cheap for a piece of land of that size in that area, even allowing for recent property falls. And Matchroom wouldn’t even be paying that. They’d be paying £2.6m, with the rest written off on the accounts sheets. Orient, in contrast, would lose more or less their only asset. They would be depending on the continuing goodwill of Matchroom, not only postpone any sale of the ground before a new one is found, but also to prevent any hikes in the cost of the rent in ten or fifteen years time. There is currently still some debate over whether Hearn will be able to use his block vote to force the matter through as he has an interest in the affairs of both companies, but one suspects that Orient supporters need to start mobilising now, getting behind their Supporters Trust and making completely certain that Mr Hearn is left with no doubt as to their feelings on the matter. It is not merely scaremongering to say that the very future of their football club could be at stake and they will repent at leisure should one the worst case scenarios come to pass.

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    11 Comments

  1. Don’t let Hearn get away with this. Surely there must be a way that O’s fans can block him and the rest of us can get behind them and offer support?

    Absolutely disgusting. So much for Hearn being a lifelong fan!

    Rob Bernard

    January 30, 2009

  2. It shows what a farce the “fit and proper” test is Hearn would pass the test but still potentially seriously damage Orient.

    Leaving your home without a new one to move into…..as a Wimbledon fan you could say that we have had it slighlty worse than Brighton too…(but I know where you are coming from ;-) )

    Jertzee

    January 30, 2009

  3. This article is spot on. Although the buzz around the club indicates that he could be selling out at any moment. Hearn’s major achievement at Orient is not a footballing one, but building up an ‘asset’ that can be sold on at some time.

    stripester

    January 30, 2009

  4. David Beckham for the number 7 shirt!!!

    Shep

    January 30, 2009

  5. This seems a pretty balanced article.

    It does not help for people to get emotional and angry and blame Barry Hearn whose cash and time have given us League football for the last 14 or so years when there were no alternative offers available at the time the previous Owner’s business ventures collapsed with Civil war in Africa.

    Presumably in those intervening years no one has come available to make what Barry Hearn considers a fair offer. It is reasonable he should get his money back and also do fair business out of his time at Orient.

    Maybe the latest prospect of a sale to a group connected with local lad David Beckham will be viable, but I do not want to see any big spenders throwing money at the club making huge losses, only for it all to come tumbling down when they move on. What I hope for is a fair owner who will aim to run a club that can be financially viable by it’s own trading which sadly, despite great efforts, Matchroom have not achieved but they are to be thanked for keeping O’s going, solvent and with no scandals or Administration like too many other clubs.

    Tolkny

    January 30, 2009

  6. See link to attached statement from Leyton Orient Fans Trust on this issue:

    http://www.leytonorientfanstrust.com/story.asp?storyChosen=174

    The waters have been somewhat muddied by today’s news that Hearn is in discussions with another party to sell the club, but the basic fact is that FC’s that sell the property rights to their grounds usually end up in a financial (and for the fans – emotional) mess.

    Jimmy Cass

    January 30, 2009

  7. Lets be grateful that Mr. Hearn has been at the healm for the last 14 or so years, as there were not too many other parties seriously stepping forward to take over from Tony Wood.
    On a general note I am wondering what the writers qualifications are to comment on property values for football grounds in the east end of london. He states it to be cheap at £6Million. He seems to have forgotten that all four corners of the ground have already been developed.
    Finally, I am a Leyton Orient supporter and lets be realistic we are never going to be a Premiership side and the 9500 capacity at the Matchroom will do us for a long time yet.

    Christopher

    January 30, 2009

  8. The bottom line here is that Orient will be left needing a new ground, and £2.6M doesn’t even come close to the amount needed for that. In ten years time, the rent could be upped to an amount the club could not possible afford. Even if you give Hearn the benefit of the doubt and say that he does not intend this, no-one can know who will be in control of Matchroom in 2019, and what their priorities might be.

    The ground, now that Orient have what is effectively a permanent lease on it, is the one asset that might secure the future of the club, even if it is eventually sold to finance a move. With that gone, the cash received will dwindle away and the club will end up with yet more debts, secured against nothing.

    Mark Waters

    January 30, 2009

  9. First of all, let me take a moment to thank you all for contributing to the comments on this post.

    Christopher: Orient have something very valuable. Their own home, security for the future, a base of operations. I don’t believe that you can put a value on it above and beyond something comparatively intangible like “the cost of a new stadium which is better than the one we have now, is in a location that is convenient for all of our supporters and takes us forward as a club”.

    If, however, you want a cold, hard statistic that throws the £6m figure into perspective, then I can give you one. When Sam Hammam sold the Plough Lane site that was the home of Wimbledon Football Club in 1998, he received £8m for it. Just to clarify – that’s one-third more than Brisbane Road is valued at now, and this was eleven years ago. Even allowing for the recent fall in property values and the fact that the four corners of the stadium have already been developed, the figure of £6m seems like a surprisingly low one. Also, of course, this is being generous and not even taking into account the fact that your club will only see £2.4m of this money.

    admin

    January 30, 2009

  10. Cambridge United have gone down that route, the £2M was soon eaten up, and we have to pay £200k a year rent, which is due for review this year.
    The buyer was a director who was doing it “for the good of the club”, and said the club could buy the ground back when it had the money. An offer of £4M was supposedly made and rejected!
    The only good point is we have a 50 year lease.

    Orient should do whatever they can to keep ownership of their ground, and only seel when they have somewhere else to go.

    Cheers,
    Terry

    Terry

    January 31, 2009

  11. Admin.
    Thank you for your comments. Comparing Plough Lane to Brisbane Road is like comparing chalk with cheese or Kaka with a conference player. We should also remember that prior to Mr. Hearns involvement we did not own the ground. Mr. Hearn purchased the ground however you like to look at it and developed it to its current form.
    Now he is obviously extracting himself from the club he is realising his investment. Thats life, benefactors that may have supported football clubs in the 1970′s and 1980′s but are now long gone its purely business. Some will survive and some will not. Now doesn’t the Winston/Harding era at the club look appealing for once!!

    Christopher

    January 31, 2009

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