Tag Archives: Daniel Levy

Examining the rising costs of Tottenham’s £800m stadium

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“Brexit to blame as Spurs stadium costs double”, screamed the headlines this week, as it emerged the cost of the club’s new home has increased to an estimated £800m.

The eye-watering figure sparked concern among fans over the impact of the project on the club’s long-term financial future. In this piece, I will look at the £800m figure and the reasons why costs have increased so sharply.

Revised cost estimates

First the background: the new £800m estimate was revealed by chairman Daniel Levy in board-to-board minutes published by the THST, always one of the best sources of information on the project:

DL stated that the funds would come from different sources and that the cost of the stadium was now estimated circa £800m

In an email response to a question from a fan about why the stadium cost had seemingly doubled from the initial £400m estimate, chief executive Donna-Maria Cullen expanded further.

It is worth remembering that the original cost quoted for the stadium was some 7 years ago. This new ‘estimated’ figure relates predominantly to the stadium with some elements of substructure for the other builds particularly the Tottenham Experience. Brexit has added a straight 20% on costs for foreign goods due to the exchange rate, overtime working and increased construction costs similarly. Revised basement works also added to the cost. We are constantly managing costs and will continue to do so throughout the process along with funding plans to ensure the viability of the scheme.

Credit must go to Cullen for communicating directly with fans and attempting to ease concerns over the stadium’s viability.

As Cullen notes, this stadium project has been a long time in coming. A new stadium was first mooted in 2007, and planning permission for the old, 56,000 capacity design was gained in September 2010. The project then drifted for five years amid CPO litigation and interest in the Olympic Stadium site, before enhanced plans were approved in December 2015.

Understandably, the project cost has increased sharply over this period — it has become a bigger, and higher specification, stadium.

The first public estimate for the current version of the stadium came in December 2015. At a fan forum, Levy estimated the cost at £500m. This was in line with the financial Viability Report, which put the estimated bill for the whole scheme — this includes the housing and hotel component — at between £675m and £750m.

This £500m figure is a reasonable baseline — so if and when stadium costs hit £1bn, then we can talk about it doubling.

Explaining the jump

That said, £500m to £800m remains one heck of a jump — £300m is an awful lot of money: it is ten Moussa Sissokos, or 20 times the amount West Ham contributed to the Olympic Stadium rebuild.

In her email, Cullen outlined four key factors beyond the cost increase: the weakening of the pound due to Brexit, overtime working, increased construction costs and revised basement works.

Overtime costs are easily explained — go on the live webcams, and you’ll see workers on site for 18 hours a day, seven days a week. The timeline is phenomenally tight, with Spurs needing to complete work to a sufficient degree to ensure only one season is played at a reduced capacity WHL, and only one season at Wembley. Very soon, the club is going to have to make the decision on whether to knock down White Hart Lane — understandably, both club and contractors Mace will be want to be as far ahead at possible before crossing this point of no return.

On construction costs, the story of the club purchasing cranes is a good example of how costs can rise when the clock is ticking. The club couldn’t afford to wait for leased cranes, so instead bought new ones and will seek to recoup some money after work is finished.

Revised basement works appear to refer to changes to the design that were approved in 2015, prior to full planning permission being granted. The revised plans include more car parking and storage space, seemingly with the NFL groundshare in mind.

The final issue is the weakening of the pound, forcing up the price of imported equipment and goods.

A look at the five-year £/euro exchange rate highlights the problem Spurs have had. In early 2015, just as Spurs were at the peak stage of modelling stadium finances and cost planning, the pound strengthened considerably. For about a year, it hung there, and pretty much as the stadium was approved in December, it started to fall.

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Cullen blamed Brexit — and without doubt, Brexit gave the pound a kicking. But the pound was already falling well beforehand — and if you look at the 10-year trend, we’re kind of back where we were for much of 2009 to 2013. The timing is unfortunate — Spursy? — but the club is far from alone in being caught unawares by Brexit.

In terms of magnitude of impact and the 20 percent cost increase on imported goods, it’s hard to gauge without knowing more about where materials for the scheme are coming from. We could be talking millions, or tens of millions. But either way, currency fluctuations have impacted the budget: on the plus side, the weak pound should help exports of crap squad players to the eurozone and China this summer.

Nice things cost money

Does this add up to £300m? In all probability, no. There’s one other factor that — inevitability — has led to an increase in the final costs of the stadium: the fit-out.

When the £500m project figure was first estimated, there was inevitably going to be a lot of uncertainty about internal fittings — how much do tunnel clubs, cheese rooms, sky lounges and state-of-the-art beer bumps actually cost? There is bound to be guesswork for these bespoke elements — it’s not like Levy is heading down to Ikea armed with a pre-budgeted shopping list and club credit card.

Through the build phase, Spurs have been tweaking plans for the internals of the stadium. In responses to questions I posed in the summer, it was clear that issues like in-stadium technology were very much a work in progress. It was reported that Levy was travelling around London skyscrapers inspecting lift fittings to ensure the right specification for the stadium.

This story about the Minnesota Vikings and their spectacular new stadium illustrates how costs can shift. It was decided, during construction, that another 400 in-stadium screens were required (and money was duly extracted from taxpayers), while expensive-sounding network infrastructure had to be developed to cater for increasing demands for stadium wifi. Meanwhile, stadium builders are continuously learning — during the build of the US Bank Stadium, it became clear that the new 49ers home, the Levi’s Stadium, was not sufficiently catering to fan demands for instant replay — so the Vikings increased the number and quality of in-house cameras. You can imagine Spurs doing something similar — the introduction of video-refereeing will mean fans will need to see more to understand the game. These changes are part of the future proofing of the stadium design, but potentially cost a lot of money.

Shifting financial situation

While costs have been rising, so too have club revenues.

In the 2015 financial year, club revenues stood at £196m. Figures for for FY 2016 will be released soon — they should show revenues climbing to around £210-215m, per my estimates. But from here, the increase will be sharp — FY 2017 will see the new Premier League TV deal accounted for, and should send revenues close to £275m. In the following year, revenues could potentially increase further if Spurs are able to play in front of a sold-out Wembley week-in, week-out. You get the picture.

The amount Spurs can borrow is tied to income. Initially, it was reported Spurs would borrow £350m from banks — in reality, there may be the potential now to borrow more.

In an email lambasting lack of action by local authorities that *mysteriously* found its way onto the front page of the Evening Standard, Levy mentioned the financing had not yet been finalized — in all reality, at least some portion must be in place given the scale of construction so far. It was reported that of the initial funding package, the first £200m would be loaned up front — it may be that this “bridge” part is in place, but Spurs are looking to tap more than £150m in the second phase. This is speculation, but rising costs and income, combined with recent public comments, suggests this may be a potential scenario.

In addition to Spurs earning more, as the project has progressed, the club will have gained greater clarity on feasibility of generating additional revenue. While two of the 16 non-Spurs major events are locked out by the NFL, no doubt conversations are underway in terms of other events, given the stadium is due to open in just 18 months. I have previously speculated that AEG may be involved in organising these events — a Twitter exchange with the head of AEG’s new rugby division did little to deter me from this view.

With greater clarity on how the stadium is going to be used, Spurs may be more confident in pushing the boat out on internal fit-out — more expensive sound systems, better resolution screens, or whatever it is.

In terms of other financing sources, nothing is yet confirmed on naming rights, while advanced premium ticket sales have begun — the club reported about 50 percent of premium packages are now sold. Pinches of salt no doubt required. There is some indication that Joe Lewis recently put a certain amount of money into the club — £20m or so — but this can’t be confirmed. I’m personally dying to know if the NFL is putting money in up front. But either way, with more than £100m spent on property/site prep/design and legal costs, at least £350m coming from banks, and naming rights/advance sales to roll in, Spurs are well on the way to £800m regardless.

Final thought

Given the context of the £800m figure — revealed while relations with authorities over the White Hart Lane station development are strained and amid ongoing dialogue on affordable housing — some caution is advised.

But taking the £800m figure at face value, it doesn’t appear an unrealistic amount for Spurs to spend. The club will have a lot of debt, but increasing revenues to service it. If you look at costs of recent stadiums in the US, £800m is still quite modest — the Vikings stadium cost $1.2bn, while the new Falcons stadium in Atlanta will cost around $1.6bn.

The next few weeks promises to be the most stressful of the entire project.

Brent Council’s decision on Wembley, due March 23, has a multi-million pound impact on Spurs — being able to play in front of 90,000 rather than 51,000 next season will make a huge difference to the club’s bottom line.

Meanwhile, the club has to make the agonizing decision on whether to knock down White Hart Lane. Any delays after this happens — for example during the demolition and excavation of the old ground — could leave Spurs homeless and at the mercy of the FA, who have another tenant — with a lot more money — lined up to take Wembley once we’ve moved out.

Just because costs are increasingly sharply, doesn’t mean they are spiraling out of control. It’s a high-wire act — but if Spurs can pull it off, the rewards are huge.

Thanks for reading. Please follow me on Twitter for more Spurs chat.

 

Spurs need to rediscover transfer mojo

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In January 2016, Spurs were linked with three promising youngsters: Moussa Dembele of Fulham, Ademola Lookman of Charlton, and James Maddison of Coventry City.

The assumption at the time was that at least one would be signed before the transfer window closed. It seemed a trademark Spurs transfer approach: identify talented English youngsters at lower division clubs and bring them to White Hart Lane where they can develop and, hopefully, rise in value.

Dembele even reportedly travelled to Hotspur Way for a medical before the deal collapsed. Fulham, battling relegation from the Championship, demanded the player, whose contract was due to expire over the summer, remain at Craven Cottage on loan.

In the end, the transfer window closed, without Spurs making a signing.

The fate of the three players linked in January shows the opportunity cost that Spurs have paid for their prevarication, and underscores the problems Spurs have in the recruitment department at the moment.

Dembele has blossomed into a star at Celtic, banging in 20 goals in 38 appearances. He looked at home on the Champions League stage, and doesn’t appear likely to stay at Celtic for long. A £40m move to Chelsea was mooted in January, albeit with a strong clickbait element. In hindsight — and it was complicated with Spurs being asked to pay for a player on an expiring deal to return on loan – that £5 million not spent must haunt the club.

Lookman, meanwhile, joined Everton this January for £11m. He scored on his debut, and has impressed sufficiently to earn a start against Bournemouth on Saturday. It’s very early days, but he looks lively, pacey and technically good — similar to Alex Oxlade-Chamberlain before he moved to Arsenal and his career started to drift. Time will tell, but the early signs are promising.

Maddison, a creative midfielder with a hint of Ross Barkley about him, isn’t fairing so well. Norwich City scooped him up for £2m on deadline day — to the outrage of Coventry City fans who considered him a far more valuable asset — but allowed him to stay at Coventry. This season, he was loaned out to Aberdeen, where he played 14 times in the SPL, scoring twice and assisting seven times, and now finds himself back at Norwich, where he hasn’t made the matchday squad for a Championship match. He’s only 20, and there’s still time, but it doesn’t feel the trajectory of a star.

This January, the transfer window came and went without Spurs making any serious moves for anyone. A 1% percent chance of a deal turned into a 0.01% chance of a deal, but even that seemed to be overstating it. In fact, the only significant stories to emerge were about the dysfunction in the club’s recruitment department — Paul Mitchell, the head of recruitment, resigned, while Ian Broomfield, the international scout, left the club after his contract was not renewed.

Mitchell remains at the club, working out an 18-month notice period. This is an utterly ludicrous situation given the total lack of incentive for Mitchell to do his job properly. If Spurs were so keen to keep him from the clutches of rival clubs, then the club should have insisted on an 18-month period of gardening leave.

Mitchell has largely escaped criticism from the fans, painted as yet another victim of Daniel Levy’s control-freak approach. The exact breaking point isn’t known, but is normally pinpointed as the failure to sign Michy Batshuayi.

But this is far too kind on Mitchell. Before joining Spurs, Mitchell surely did his due diligence: He must have known that a) Spurs have a limited budget compared to top six rivals, especially with the stadium to finance, b) Even without these constraints, as a club run on rational lines, Spurs can’t win bidding wars with plaything clubs like Chelsea, and c) Levy is a hands on chairman who drives a hard bargain and is unafraid of falling out with people.

At the moment, it appears Spurs are going backwards in the transfer market, with Pochettino and Levy calling the shots in the absence of specialist recruitment staff. James Yorke summed it up in an article on Statsbomb:

If there are concerns about the direction the club is moving in, the structure of any transfer committee appears uneasy. Paul Mitchell continues to work his leave and the late summer transfers of Georges-Kevin N’Koudou and Moussa Sissoko looked like headscratchers at the time (with little or no statistical basis to either of them), and the lack of impact made by both players implies that Tottenham may need to apply greater care to their recruitment in future. Talk of Wilfried Zaha is hopefully wide of the mark as his apparently improved contributions for a struggling Crystal Palace carry a huge red flag based on little change in his shooting or creative numbers year on year, implying he’s running on little more than a warm streak of form.

You can see how a mistake like Moussa Sissoko happens given the void created by the departures of key recruitment staff. Pochettino says he wants a powerful, ball-carrying player to add a threat from wide positions, and Sissoko ticks that box. Levy looks at his spreadsheet, and sees room in the budget for a £30m player, paid for in £6m annual instalments. So boom, in Sissoko comes on deadline day. At no point does someone who has actually spent months assessing him say, “Hold on, this guy can’t pass, shoot or control the ball, he’s not up to the technical standard required for this Spurs team”

It’s simple logic, but while Pochettino is in a position to state what his squad is lacking, he isn’t in a position to scout players. There simply isn’t enough time in the day for him to do this and manage the team. Likewise Levy: his in-tray includes building and funding a stadium, contract negotiations, commercial deals, property development and representing Spurs at a Premier League level (think negotiations over TV money, etc). And anyway, neither of them are professional scouts or analysts.

Spurs have already paid the price for the missteps this summer. In October and November, with Champions League in full flow and the squad suffering injuries, a bad run of form allowed Chelsea to bolt clear in the league and saw Spurs crash down into the Europa League. Sissoko was signed as a box-ready product, yet was publicly called out by Pochettino and considered unselectable during this run. Vincent Janssen failed to score from open play while covering from Kane, while GK Nkoudou has barely featured beyond the odd cameo. In particular, he has struggled in his rare starts.

Pochettino has exhausted his old boys brigade with the signing of VIctor Wanyama, so new ideas are sorely needed. Instead of waiting until the summer, Spurs need to move fast to fill the recruitment void. There have been reports of various sporting directors being approached — former Roma honcho Walter Sabatini and Bayern’s Michael Reschke — if this is true, this should happen now or Spurs will miss a valuable half season of scouting time.

However, despite the money wasted on Sissoko and the whole N’Jie-Nkoudou boondoggle (personally, I’m giving Janssen a bit more time before dismissing him as a flop as there is a good technical player there), it’s the deals not done that will haunt Spurs more.

Dembele would have been the latest in a long line of successful acquisitions from lower divisions: Dele, Bale, Walker, Dawson, and so forth. No club does it better — identifying talent from English clubs and developing the hell out of them. For every Walker, say, there is a Kyle Naughton — but the beauty of signing young players is you normally get some return on them, and the value of the ones that make the grade far outweigh the money spent on the ones who don’t. Sure, there are serious talents emerging from the academy, but not in every position.

It’s time for Spurs to get back to what they do best in the transfer market. The beauty of football is, the next big thing is never far away.

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A new generation of Spurs fans craves FA Cup glory

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The trademark magic was in short supply in the FA Cup third round. Weakened teams, poorly chosen televised games, sparse crowds and an unexciting set of match-ups meant for an uninspired weekend of football.

Spurs summed it up with a laboured victory over a defensive Aston Villa side that came for a 0-0, and for 70 minutes looked like they might get one.

But sometimes the most glorious things spring from the humblest of beginnings, and as Spurs finally found their swagger, it was possible to let one’s thoughts drift ahead to Wembley in May, half-covered in Lillywhite, the trophy there for the taking if only the players believe. Maybe, just maybe, this is going to be our year.

Let’s be clear: Spurs are massively, extraordinarily, almost indescribably overdue an FA Cup win.

Our reputation as a “Cup team”, still trotted out dutifully by the BBC commentator as the teams emerged from the tunnel at White Hart Lane, is as hollow as the new structure emerging behind the Paxton Road stand.

Spurs have won the FA Cup just four times since 1966, and it has been 26 years since Spurs last reached the FA Cup final, when we beat Nottingham Forest 2-1. The only longer drought in the club’s history, since the first FA Cup win in 1901, came between 1921 and 1961. The League Cup has been somewhat more successful, with five finals in the intervening period; two victorious, three not.

Since Spurs were last in the FA Cup final, Chelsea have won it six times and Arsenal seven. Hell, Portsmouth and Wigan have both won it. Our eight wins are a distant memory. No Spurs fan under the age of 30 will have any memory of what it feels like to be an FA Cup winner.

Early football memories are snapshots, fleeting moments preserved for eternity while the rest has been washed away. My first Spurs memory was Gary Lineker scoring a winner in the league against Norwich. My second was Gazza, 15 minutes into the Cup final, injured after that tackle. My third was dancing around overexcitedly when Des Walker powered a header past his own keeper. No wonder I’m hooked.

One thing I can’t remember is Gary Mabbutt actually lifting the trophy. My guess is, I was already out in the garden with my brother, playing another game of three-and-in: him as Lineker, and Gazza, and Paul Stewart; me, the squitty little brother, forced to be Forest, but perfectly happy to be Psycho, or Walker, or Nigel Clough.

The FA Cup was such a fundamental part of me becoming a Spurs fan, and for younger Spurs fans to be deprived of what it feels like to win is cruel. It’s a chasm in the footballing experience every Spurs fan should have. It has to be corrected, as an urgent priority of the club.

So why this year? After all, we’ve had plenty of chances before, and found 25 different ways to blow it.

One difference now is that, for the first time, there isn’t a single draw that we fear. That feeling of watching the draw and thinking “please don’t let it be them” — that’s gone, or as is near as possible. Sure, Chelsea and Liverpool away still present psychological barriers to Spurs, but these are barriers this team has to overcome eventually. Now is the time.

If there’s fear, it’s on the other side — no-one wants to be drawn against Spurs at home these days. Just ask Antonio Conte or Pep Guardiola. And possibly Gareth Ainsworth.

Another reason is that, more than any other team, Spurs NEED to win something this season.

The lack of silverware is a cause of embarrassment. Mauricio Pochettino has never won a trophy as a manager, and few of the Spurs players need private trophy rooms in their North London mansions. ENIC’s ownership has been blighted by the trophy drought: just one, in 16 years — constant fuel for the agitators, and the agitated. There’s no trophy for finishing in the top six, and the only prize for finishing in the top four is financial.

What reassures me about this squad, as well as their talent, is their hunger: they get it.

“If in five years’ time we hadn’t won a trophy with this squad, everyone would be disappointed,” said Eric Dier, the future arriving as he donned the captain’s armband on Sunday. “Football is about winning trophies. Look at the players we have now and the basis we have to win things. We have to keep working hard and improving but the whole squad is desperate to win things.”

Desperation is a powerful motivating force.

The Champions League flop means even more reason to focus on the FA Cup. The Europa League is a consolation prize, an afterthought, a plate competition to fill the TV void on Thursday nights. It’s a long, gruelling contest, and extremely hard to win, yet it teases clubs into playing stronger than advised teams as it has the illusion of winnability. Spurs are veterans, and have never remotely threatened — nothing we did in the Champions League suggested we’ve gotten any better at finding midweek performances against technically proficient European opponents with vastly smaller budgets.

In my view, Pochettino should de-prioritize the Europa League, unashamedly. Kids, reserves, unwanteds — a strategic choice to cede ground in Europe, in search for gains on the home front. Poch will say the right things — “we try to win in every competition” — but sometimes hard decisions have to made.

The league this season is shaping to be a brutal slog, with six fairly even teams fighting desperately for four places. It’s no season to be messing around with Thursday trips to Eastern Europe. But the FA Cup is a weekend competition, so long as you win.

As Liverpool showed with their severely weakened team against Plymouth, the tightness of the title race may take attention away from the FA Cup. A little more rotation, a slip here, a slip there; it’s one of those seasons where it might open up, and it pays to be the last man standing. Already the bulk of Premier League’s middle class has slunk out, meaning less chance of that dangerous type of team that has nothing to play for except Cup glory.

The omens are good. Ball 26 in the fourth round draw, 26 years after our last victory, 26 for Ledley, one of our greatest modern players who should have won far more. Wycombe at home — yup, we should win that one.

I’m dreaming of FA Cup glory this season, more than ever before.

Thanks for reading. Please follow me on Twitter for more Spurs chat.

The power of incentives and why Spurs are finally in a position to achieve success

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Over the interminable international break, I’ve been thinking a lot about two things — Spurs and politics.

In politics, I’ve been following the US election avidly and trying to understand why, despite everything we are learning each day, tens of millions of perfectly sane and patriotic Americans will vote for Donald Trump on November 8th.

For Spurs, I’ve been thinking about the success the club is currently experiencing, and trying to understand if there is some deeper explanation than merely an outbreak of managerial competence and a couple of decent signings.

In these two divergent trains of thought, strangely, I’ve found myself coming back to a similar place: the importance of incentives, both good and bad, in shaping outcomes and behaviour.

To a neutral observer (at least as neutral as anyone can be given the impact the US president has on the whole world), Trump’s rise has been baffling. Trump appears to be a sociopathic, predatory conman whose hiding-in-plain-sight brazenness and questionable sexual history has more than a shade of the Jimmy Saville about it. His evident emotional, intellectual and political shortcomings threaten a dangerously volatile presidency, and this could have all manner of devastating consequences given the power of the office (like, you know, commanding the US armed forces).

However, if you’ve spent the past eight years and more watching Fox News and listening to US talk radio, it will have seeped into your subconscious that America is changing for the worse, you are the main loser from that change, and that the current political establishment, embodied by one Hillary Clinton, is creating that change. I’m generalising of course, but you can see the incentive is now there to vote Trump: If you believe the current system is the problem, you have the incentive to vote for the one guy who appears to be from outside it and is talking very loudly about destroying it.

The rest — the ability to ignore facts about Trump and believe lies told by Trump — is an unparalleled epidemic of cognitive dissonance, and will be studied by psychologists and political scientists for generations to come should, as the polls suggest, Clinton limp pathetically to victory.

If that’s an example of a “bad” incentive — although philosophically speaking an incentive is just an incentive, immune to such subjective labelling — then Spurs currently are an example of the “good”.

Arguably the most famous example of incentives in football is the other lot. For years, Arsene Wenger has been told to deliver a Top 4 finish and Champions League football, and been strongly incentivized to do so through ongoing employment on increasingly lucrative terms. Arsenal fans no doubt wonder, if Wenger had been incentivized to win a title — through either the offer of more money or the threat of the sack — he may have done more to seriously challenge for the title in the past dozen or so seasons.

Chelsea are another example of how incentives can have a fundamental impact on a football club. Despite investing millions and being a dominant force in youth football, Chelsea have failed to see an academy graduate (barring the expensive Matic outlier) given an extended run in the first team since John Terry. The problem has been that a succession of managers have been so concerned about satisfying Roman Abramovich’s thirst for trophies that none has been able to risk the inevitable ups and downs that come with blooding young players.

In North London (yeah, take that, any Arsenal fans who read this), Spurs have been having some incentive problems of their own through the ENIC era. Specifically, the “buy-low, sell-high” business model that powered Spurs up from the middle of the Premier League pack to the “best of the rest” may have inadvertently created the incentives that prevented the club from taking the next step.

Think of that giddy time when Gareth Bale was beginning his metamorphosis, or Luka Modric was making Harry Redknapp’s team hum in central midfield, or Dimitar Berbatov was oozing class up front. There was always that fear we had as fans: “If he keeps playing this well, we’ll never be able to keep him.”

And this wasn’t mere pessimistic terrace talk — this was simply a statement of fact, given the financial model of the club at the time. This model created perverse incentives — success in player development and coaching could mean instability and the loss of key players, and what could be a step forward in fact turned into a step back. Little wonder, then, the club churned through a succession of managers.

The debacle that was the post-Bale reboot brought into full view the flaws of this strategy. The vision for how the club was supposed to be run hasn’t changed on a strategic level since Daniel Levy decided to move on from Harry Redknapp: an ambitious young manager committed to playing dynamic football and running the club in a modern, professional way.

Andre Villas-Boas, for all his personal shortcomings, was hamstrung by conflicting incentives and objectives: he had to sell his star player, yet somehow mould a collection of cheap replacements into a winning team without a sustained dip in performance. There were many reasons that AVB failed, but the incentives were never right.

I’m pretty sure that AVB was supposed to become what Mauricio Pochettino is now, but for Pochettino the incentives now are perfect.

He is charged with building a team that is greater than the sum of the parts, without the need to sell key players but accepting as a consequence that there are limited funds to acquire new ones. Instead of trying to compete with the moneybags clubs in the transfer market, Spurs are forced to do things in a different way, and are benefitting from doing so through squad unity and a vibrancy other clubs lack. Pochettino and the club have every incentive to develop young homegrown talent, especially since Harry Kane has shown how worthwhile it can be. Crucially, with no need to sell, there is no upper limit now on what can be achieved — when Pochettino talks about building the “project” and competing for titles, he means it, because that is the aim.

No doubt the club’s ability to resist cashing in on star players will be tested in years to come. But curiously, the new stadium, while hindering the ability to spend, creates a further incentive not to sell.

Spurs will be borrowing a lot of money to build the stadium, but the success of the investment ultimately rests on selling the 25,000 extra tickets each match and filling the lush new hospitality areas. This will be much easier with a successful and appealing team — as the ability of the club to sell out Wembley against three deeply uninspiring Champions League opponents this season attests. Spurs, therefore, have every incentive to keep Kane, Dele Alli and so on, no matter how easy Manchester United fans seem to think it will be to eventually tempt them away.

There are many reasons why I’m excited about Spurs at the moment, and there are many explanations about why the club is now moving forward even at a time it is increasingly financially disadvantaged compared to cash-rich rivals. This isn’t to take away credit from the remarkable job that Pochettino is doing, and the contrast with AVB is stark. Pochettino has immense sway at Hotspur Way now — a strong manager has the power to shape incentives.

A lot of things have to go right for a football club to succeed, but if the incentives aren’t right, change is just going round and round in a circle.

Think of the current team, if the old problem of selling star players reared its head again. Instead of building a single, ongoing project, Pochettino would be facing the challenge of replacing departing talent with cheaper, younger alternatives. You can’t defy footballing gravity forever, and Pochettino wouldn’t have the incentive to risk this damage to his reputation. Eventually he’d would walk away, reputation enhanced, like he did at Southampton (or, if he left it too late, leave sacked and heading back down the managerial pyramid, like most of his predecessors at Spurs).

There are many ways to describe the state of affairs at Spurs currently, but when we talk about stars aligning, virtuous circles, everyone pushing in the same direction or whatever expression it is (i’ve used a fair few…), key to it all is that the incentives are right.

Long may it continue.

And now, having written all that, I’m off to put a fiver on Trump to beat Clinton and West Brom to beat Spurs on Saturday.

Thanks for reading. Please follow me on Twitter for more Spurs chat.

New stadium update: ‘More or less’ on time and budget, 500 White Hart Lane, the NFL gamble explained, and more

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Given the recent flurry of news and public comments, it is high time for another update on where things stand with the Spurs stadium project.

In recent weeks, the installation of dozens of giant “rakers” have started to finally give the structure that unique stadium shape, while along the High Road the stadium is starting to rise up high above the hoardings.

In this post, I’ll talk timelines, the NFL, training centres, housing and various other things. My last stadium update, from June, is here.

Timeline and costs

The regular board-to-board meetings between the club and the Tottenham Hotspur Supporters Trust have proven useful in gaining insight into the state of the project.

Per the minutes of the last meeting, released on Friday, Daniel Levy confirmed that the project is “more or less” on time and budget.

Crews are working seven days a week, with the aim of being ready to move out in the summer and ensure that only one year away at Wembley is needed.

Cost-wise, “the financial model is in good shape”, Levy said, but he noted the impact of the weakened pound and 7-day work schedule. “All possible resources” were being put into construction to ensure deadlines were met, Levy said, a hint the project is currently at the higher end of its budget.

What does “all possible resources” mean, in practice, beyond extending the hours worked on site to the permitted maximum?

Earlier this month, industry website Building.co.uk published a story stating that Spurs had purchased the five cranes that are being used on the site, as they were unable to hire any when required. Obviously the increased cost of purchasing cranes, rather than waiting for rented cranes to come available, was something the club was prepared to bear in order to ensure deadlines were met.

Given the fact that crews are on site seven days a week, and are even working during matchdays when there are 32,000 fans in the vicinity, it is safe to assume the pace of work is at the absolute maximum, and there is little to no leeway for delay.

Less positive are “considerable” delays to the rebuilding of White Hart Lane station, as well as Haringey’s High Road West regeneration plan. I’m not immediately clear what impact this will have on the club and matchgoing fans when the new stadium opens. Presumably insufficient public transport capacity may require some alternative arrangements on matchdays to ensure safety, but I am speculating. I’d welcome any insight on this.

The NFL explained

Earlier this month, ESPN published the rarest of things: a Daniel Levy interview.

It was fascinating as finally, among other things, Levy’s rationale for building a stadium with NFL facilities was revealed.

Previously, I’ve had fun trying to divine what the rationale may be, but now we know — there is no clear commitment from the NFL, just a considered gamble from Spurs that ultimately, when the NFL is ready for a London franchise, the league will select New White Hart Lane as its home.

“If it ever got to a stage where the NFL decided it wanted to have a permanent team in London, this stadium could literally be, whatever the team was, it would be their stadium as opposed to an NFL team feeling they’re renting Tottenham’s stadium.

“We would welcome very much close cooperation with the NFL and a dedicated team. Obviously a decision is entirely theirs whether they do bring a team to the UK, and where it would be located is something that would be talked about. But yes, we would be very much welcome to that scenario.

“Clearly we wouldn’t both be putting all this into this stadium if there wasn’t the prospect of one day a team eventually coming to London. But there are certainly no guarantees that A) a team comes to London, and B) they have to use our stadium. I think we’re all putting the effort in in the hopes that they will do it.”

Of course, there may be more to the 10-year, two-game agreement that can be currently disclosed, but these comments are the clearest indication of the state of affairs so far.

As far as I have seen, there have been no new comments from senior NFL figures since my last piece on the subject of a permanent London franchise. New London mayor Sadiq Khan expressed support for the idea after a trip to the US, where his meetings included one with Shahid Khan, the owner of the Jacksonville Jaguars, widely seen as the most likely franchise to relocate.

However, Spurs are finding other ways to make themselves useful to the NFL.

In subsequent excerpts of the interview, Levy essentially pitched the club’s services in providing training facilities for the NFL should a team be relocated.

“The NFL, a number of times when they’ve come to the UK, has used our training facility and, when a foreign organisation goes to another territory, I think being in partnership with a local operator brings enormous benefits.

“We’re going into this, hopefully the intention is our relationship will expand over time and we’re working very closely together. But I think in terms of training facilities and things like that, we have discussed that with the NFL, but again that’s something for the NFL to decide upon.”

The training facility of a London NFL team will be one of the knottiest issues for the NFL. It’s not like in most US cities where facilities can be thrown up very quickly — in London, it takes years to acquire land and gain consent. Spurs have a huge training facility, and there may be ways of reconfiguring what is there for NFL use, or even expanding slightly such has been done with the new player accommodation. See this thread for more details:

Spurs have a chance to make themselves very useful to the NFL here, and are smart to exploit this angle. It should be noted, NFL commissioner Roger Goodell visited the facility last autumn so will know just how impressive it is.

One final thought: this was a great interview, and Daniel Levy should do more.

I’m not saying he should take to tweeting like an idiot or start Kardashianizing himself like Jose Mourinho, but rather in a targeted way, get out there a little bit.

Raising the profile of the club now may have benefits in the search for stadium sponsors. So go and have “Lunch with the FT”, talk to AdWeek, get Gary Lineker around for some multi-channel PR schmoozefest as he does so effectively with his Goal Hanger productions.

The football media narrative is stuck on Jose, Jose and more Jose, with an occasional bout of Klopp-itis or Pep-worship. Mauricio Pochettino, when he’s not going rogue and comparing academy prospects to Lionel Messi, is circumspect in his dealings with the media and his English is still limited in terms of expressing himself fully.

There’s a great story to tell about Spurs at the moment, and it’s not really being told, in my opinion.

The club is producing more homegrown talent than anyone and is the major contributor of English players to the national team. It is building a world-class stadium without any assistance from the taxpayer. In general terms, the club is punching wildly above its weight in on-field performance, as the recent Manchester United financial statement highlighted.

If ever there was a time to talk about Spurs, it’s now.

Pictures — then and now

Construction is advancing rapidly, but what is it going to look like come the final farewell to old White Hart Lane in May next year?

I first saw this picture posted by @HotspurSam, and it is well worth showing again. It’s just an impression, but you can see how progress will need to be seriously rapid over the next seven to eight months. The picture in the top-right corner is the most eye-grabbing — that’s what we should see in May.

stadiumprogression

As I’ve said previously, it is going to look absolutely bizarre.

On the subject of progress, here are a couple of photos. The first is from June 2015, and the second is the latest aerial shot from the club (with blue lines and tint, but you get the picture).

stadiumjune15stadiumsept23

Pretty cool, huh?

The other White Hart Lane development

On September 12, Spurs received approval for its 500 White Hart Lane development, subject to a Section 106 agreement.

The industrial site was bought for the relocation of Archway Sheet Metal, but they did not take up the offer and ultimately moved elsewhere. The club then marketed the site to other occupants, unsuccessfully, before deciding to turn it into housing. It is a major project, with 144 residential units and (some) retail space.

The vote by the Haringey planning sub-committee was a close one — a motion to reject the proposal was lost by five votes to six, and then the project was approved by six votes to four with one abstention. There was noisy opposition to the project, per video of the event.

This is an interesting project in so much as Spurs are doing it at all. After Archway opted against taking the site, the easiest thing to do would have been to sell it on (no doubt at a nice profit given ever-rising land values in London). But, clearly, Spurs have a taste for property development and opted for the more ambitious option.

What Spurs do with 500 White Hart Lane — develop it themselves, or sell on a consented scheme to another developer — may offer hints for what will happen to the final stage of the stadium project.

Once the stadium itself is completed in (hopefully) the summer of 2018, attention will turn to the “Southern Development Land”. This in itself is a huge development, including a 180-room hotel, 585 housing units and other facilities.

While the stadium itself will cost around £500 million, this final phase will take the bill for the project to the £675m-£750 million figure. It is a huge challenge, and the general assumption is that Spurs will ultimately sell this off as a consented scheme and allow someone else to take the risk on it. It may not be that easy, though, as the scheme has a low “internal rate of return” — a measure of the appeal of a potential development to investors.

Either way, it’s one to keep an eye on — the focus at the club now will be firmly on getting the stadium done on time.

Until a decision is made, I am going to keep using the £675m-£750 million figure for the project. Ultimately, the hotel and housing has to be built, and currently the obligation to do so lies with the club.

And finally

I’ve written a couple of pieces recently related to the stadium — this one on naming rights, and this one on the challenge of balancing spending between the stadium and the team.

Do have a read if you’ve not already done so — they are detailed pieces, and should be of interest to those following this project.

Meanwhile, over at Chelsea, the club is now in a second period of public consultation due to changes to its plan to redevelop Stamford Bridge.

There’s a Twitter thread here with various links.

I wrote in May that this second consultation would be required — so I’m pleased that what I reported proved to be accurate.

However, from my initial reading of Chelsea’s changes, I’m not entirely clear how the concerns raised by Network Rail about safety and access to the railway that will run under the West Stand have been assuaged.

Any journalists or bloggers interested in a story could do far worse than give Network Rail a call — this stadium simply won’t be built until they sign off, and they were far from happy with the initial plans. My blogging time is limited now so I can’t follow this project as closely as I have done previously.

Thanks for reading, please follow me on Twitter for more stadium chat. Comments welcome, in particular on issues concerning delays to public infrastructure and the plans for the Southern Development Land.

The balancing act: Can Spurs find a way to remain competitive through the stadium construction phase?

stadium_aerial_aug1216_730b

If it didn’t already feel real, the sight of the new stadium starting to rise up from the ground illustrates that a new era is finally dawning on Spurs. The next five years promise to be one of the most exciting, and most risky, periods in the club’s history.

Spurs are borrowing at least £350 million from banks, plus securitising future commercial and matchday revenues, in order to fund the stadium project and associated development.

The debt load will surpass what Arsenal took on to build the Emirates a decade ago, and will only be topped by Manchester United, who last year paid around £35 million in financing and £15 million in dividend payments for the privilege of being owned by the Glazer family.

Having spent a decade wading through the planning process and acquiring the land, now the club has the challenge of delivering a 61,000-seater stadium in a densely populated part of London on a tight timeframe, and to budget.

Things appear to be on track at this early stage, but an extraordinarily challenging few years await. The reward is clear though — New White Hart Lane promises to be a world-class stadium, and a true sporting cathedral that is everything the dreary Olympic Stadium will never be.

I have previously written about the stadium financing issue in great detail. In this post, I am going to take a look at the broader state of the club’s finances, and the challenges that lie ahead through the stadium construction phase.

Moving away from pragmatic player trading

A look through the recent financial history of Spurs reveals a number of distinct eras, layered on top of each other like sedimentary rock.

From 2001 to 2007, you have the “Early ENIC” years, in which Daniel Levy inherited the mess from Alan Sugar and piled on more mess as he tried to get to grips with the intricacies of Premier League chairmanship.

From around 2007, the “Wheeler Dealer” era truly began. This was a period of frenzied transfer activity that gradually pushed Spurs from mid-table to the fringes of Champions League contention, but without any sense of stability or sustainability beyond the confidence that more bargains would be found, and more mega fees extracted. This era came to a shuddering halt with the failure of the Bale money splurge, and the realisation that Spurs were never going to be able to compete with the moneybags elite when needing to sell as well as buy.

Since 2014, a new era has emerged, with a more prudent approach to player trading and a greater focus on cost controls. How much this is connected to the stadium funding, or the arrival of Mauricio Pochettino, is unclear. Certainly, you suspect Andre Villas-Boas was supposed to be ambitious young manager to lead Spurs through the tricky stadium construction phase, but there was a problem with a beanie hat and not everything works out.

Pochettino has made a virtue out of having a young, hungry and therefore relatively cheap squad, and the narrow band into which most of the player salaries reportedly fall is seen as a contributing factor to squad unity. Likewise, the club has had the incentive to ensure its accounts are glistening as it struck agreements on financing — a little money saved now could mean a lower rate of interest on the £350 million stadium loan.

Tottenham has been a consistently profitable club in the past decade, but has been reliant on player trading (profit on disposal of intangible assets, as it is known) to achieve this, as the following chart shows:

ProfitandTrading

In the past decade, the club is £152 million in profit. However, in that time, accounting profit on player trading is £295 million — without player trading, the club would have theoretically lost £143 million. Of course it’s not nearly that simple, but it illustrates the degree that Spurs have needed to sell in order to buy.

When Levy referred to “pragmatic player trading” in the club’s rather panicky statement to reassure disgruntled fans in September 2015, it didn’t sound right to me due to the suggestion of a continuation of the “buy low, sell high” era that had already started to pass. “Prudent player trading” would have been a better phrase — no need to sell players the manager wants to keep, but limits on what can be spent and a more cautious approach to acquisitions.

What the stadium financing phase needs is as great a degree of stability as is possible in the anarchic environment of Premier League football. Player trading is the biggest uncertainty of them all in football’s financial landscape. Now that Pochettino has cleared out the flotsam inherited from the Franco Baldini era, fans can expect the “churn” to reduce in transfer windows to come.

Cost controls in action

If you read any analysis of THFC finances from recent years, you’ll see some variant on the following phrase: “Daniel Levy runs a tight ship”.

There are many stories of these cost controls in action — my personal favourite was Mido being told to run across the tarmac to ensure he got a seat with extra legroom on a budget airline flight to London after being bought from Roma.

For a couple of months a year, this gets frustrating. The club’s approach to transfers is akin to dental surgery — deals are done painfully and slowly. Contract negotiations seem to drag on endlessly, key targets are missed, players leaving the club are left in limbo while the market is scoured for someone desperate enough to pay the premium.

Part of this, undoubtedly, is personality driven, and there appears a genuine relish in tough negotiations and brinkmanship. But part of this is necessity — with matchday revenues at their limit, and the club unable for various reasons to match the commercial growth of the richer clubs, it has become increasingly important to find value in the transfer market and control player costs with the stadium financing ahead.

I want to illustrate “where the money goes” at Spurs, and demonstrate what these cost controls actually look like.
.
I’ve gathered data from the past 10 years for revenue and the two major outgoings, namely wages and transfer spend.

(For transfer spend I will use the figure for amortisation. Amortisation is an accounting method whereby the cost of buying players is spread over the lengths of their contracts. There’s an explanation at the bottom of this piece, but essentially amortisation is an annual figure that shows how much the club is actually spending on transfers. The advantage of this is that, while most transfer fees are undisclosed, the amortisation figure is listed in the accounts.)

Here is a chart:

RevWageandAmort

This gives you a picture of how revenue and wages are rising, but transfer spending has actually been quite flat.

However, if you combine wages and amortisation, something interesting happens:

RevWplusA

As you can see, wages plus amortisation tracks revenue remarkably closely from 2007-2014, to the point that it is almost a mirror. It is only in 2010 (financial year) when the gap becomes close. You can see the balance-sheet management in play to ensure spending remained at the desired level.

Why am I so confidently proclaiming a new financial era? Look at 2014. For the first time, revenue starts to diverge, and there is every indication that the divergence will grow starker over the next two financial years.

In the next accounts, the following senior players will come off the books, or be added:

OUT: Paulinho, Holtby, Capoue, Kaboul, Stambouli, Chirches, Soldado, Lennon, Adebayor.

IN: Wimmer, Trippier, N’Jie, Alderweireld, Son,

While there have also been a number of new contracts, and there are hints some of Adebayor’s contract pay-off may have been factored into the 2015 accounts, in all likelihood the wage bill is going to be level or even lower in the 2016 accounts. Meanwhile, the strong league performance means TV money will increase. In the 2017 accounts, we’ll have both the new Premier League TV deal kicking in, and Champions League revenue, to counterbalance a series of new contracts and the signings made in the past window.

My prediction is that revenue and first-team spending will continue to diverge in the next two years. This puts Spurs in opposition to most other Premier League clubs, which are frantically offloading the new TV money on transfer fees and wages as fast as it is pouring in.

As it stands, here are the combined wages and amortisation for the four clubs arguably “closest” to Spurs financially (United are on a different planet, and Chelsea and City are billionaire playthings, so a comparison isn’t worthwhile):

Arsenal — £244.1m
Liverpool — £227m
Tottenham — £139.4m
Everton — £97m
West Ham — £94.3m

In previous years, Spurs have been all alone in “sixth” place in spending on wages (among several other indicators of club “size”) — we will start to see other clubs narrowing the gap. Some may interpret this as a lack of ambition, but ultimately Spurs have a £750 million stadium scheme to fund, which seems pretty ambitious to me.

The growing gap between revenue and first-team spending means more funds that can be rolled into the stadium project. Spurs appear to be positioning themselves to absorb the spike in financing costs that is to come.

In short, since 2014 Spurs have been shifting to a more sustainable model that relies less on big transfer fees to balance the books. The emergence of home-grown stars like Harry Kane, smart acquisitions like Dele Alli and Eric Dier, and the strong management of Mauricio Pochettino have turbocharged this shift. Sometimes you need a bit of luck.

Learning from Arsenal

Over the next five years, the period of peak financing, Spurs need to strike a balance between funding stadium construction, and remaining competitive on the pitch.

Over the next two seasons in particular, the financial benefits Spurs can accrue from being competitive (Champions League money, greater share of British TV money, improved receipts from Wembley), relative to the amount of money that can be saved, justify continued investment in the playing squad. A competitive and appealing Spurs team will greatly help the club sell the increased number of tickets and long-term hospitality packages that is the rationale underpinning the whole project.

Levy has repeatedly stated that there is no need to sell players to fund the stadium, including at the last board-to-board meeting with the Tottenham Hotspur Supporters’ Trust. This isn’t just a statement of confidence in the funding package for the stadium, but also recognition of the need to ensure Spurs field a strong team on opening day of the 2018/19 season.

However, there is a difference between not needing to sell players, and having limits on what can be spent to secure new ones. The extent to which Spurs can compete for new players over the next five years will depend on how much Spurs will have to spend to finance construction. Spurs will be taking on huge debt — at least £350 million — but the key will be controlling the amount that is spent each year on interest payments and repayment of principal.

(Why do I keep saying five years? As previously reported, the £350 million loan will be a five-year loan, which will then be refinanced — per the Viability Report for the project submitted during the planning process. Until I hear otherwise, I will assume the basic funding plan is the same.)

As the only other club to have built and financed a comparable project, the best example for what lies ahead is Arsenal. I don’t want to go into too much detail as the comparison isn’t perfect, but there are a few points worth making.

Arsenal, notoriously, felt the squeeze during construction, creating a need for parsimony that some fans argue Arsene Wenger has never really shaken off. Spurs have the great advantage of learning from Arsenal’s experience. From my understanding of what I have read, Arsenal ploughed ahead without all the required funding in place, which made it more expensive and at one stage forced construction to stop. Spurs can’t afford such a delay given the tight time schedule imposed by the need to play away from White Hart Lane.

I’ve attempted to gather data for the finance costs paid out by Arsenal, to demonstrate, not so much the amounts, as the “profile” — how finance costs will peak and then reduce and flatten to a tidy annual sum. This is extremely hard — Arsenal have refinanced their debt load on several occasions, making it hard to track. The chart below gives the club’s stated figures for interest charges in the period, and debt payments due in the coming year (repayment of principal).

Arsenal raised debt for both the Ashburton Grove stadium project, and the redevelopment of Highbury — likewise, Spurs will be funding property development (on the “southern development land” on the stadium site and at 500 White Hart Lane) as well as stadium construction. I can’t be sure all the debt payments relate to stadium/property development, so take the figures with a pinch of salt. But, it is a consistent measure.

Arsenal Emirates Financing

The 2007 figure isn’t right, as I can’t find the “repayment of principal” number due to refinancing, frustratingly. But for the first four years, you can see how total financing costs were between £35m and £45m — quite a burden. From 2008, things levelled out, and Arsenal continues to spend around £19m a year on its Emirates “mortgage”.

Spurs can expect a similar profile to this. For five years, repayments and interest will be high, but then the bank loan will be refinanced into a long-term debt package at a lower rate of interest. Arsenal’s debt is split about 80-20 between fixed-rate and floating-rate bonds, at 5.8 percent and 6.6 percent interest respectively. More than any aspect of this whole project, I expect Daniel Levy to get the best possible terms on this sort of financial jiggery-pokery — he has years of experience.

We won’t know how much Spurs are spending on financing costs (I could ask, but I will get a polite note stating the commercial sensitivity of the topic, I guarantee) until the accounts covering the financing period are published — we’ll have to wait for the 2016 accounts, published in April/May of 2017. Any attempt to put a figure on it on my part would be conjecture. But it will be substantial.

One final point of comparison with Arsenal is the shift in the broader financial environment of a Premier League football club in the past decade. Here are the comparative revenues of Arsenal at the peak of Emirates financing, and Spurs last year:

ArsSpurRev

As you can see, Tottenham’s revenue is nearly £60 million higher, due to more commercial income and TV money (and that number will spike in future accounts with the new TV deal).

On the one hand, Spurs are taking on a bigger finance package — £350m versus £260m. On the other hand, Spurs are doing it from a stronger financial position — £196m revenue versus £137m.

The ability of Spurs to control financing costs and maximise revenues during the construction phase will ultimately determine the amount that is ringfenced to be spent on transfers and wages.

Capital expenditure

What shouldn’t be forgotten amid the talk of the massive new financial burden is that, for years now, Spurs have been investing heavily in both the stadium project and the training centre.

In the meeting with the THST in May this year, Daniel Levy stated that £150 million had been invested in the stadium project to date. Per the last accounts, the “cumulative” spend on the stadium (professional fees and “enabling works”) was stated to be £59 million, up from £40.9 million in the previous year. On top of that £59 million are property acquisitions, professional fees/other costs for the previous design that will have been written off, and construction costs in the six-week period between when Spurs gained the final green light and the board-to-board meeting.

As for the training centre, upon opening, it was capitalised at £27.5 million — in line with the £30 million price tag that is generally put about for the wonderful facility.

This £177.5 million capital expenditure has taken place over the past nine financial years (prior to 07/08 there was none). The average spend is about £20m per year, although of course it is far from a straight line. This investment has been funded by a combination of equity contributions, bank loans and club profits.

As an aside, I was curious to see how much money has been put in by ENIC to fund this sort of expenditure in the past decade, and how much has come from loans/profits.

This stuff gets hard to track as the club accounts are pretty complex. But from what I can make of it, in 2014 there was a £40m injection, while in 2010 there was a £15m injection plus a further £18.4m “investment in group companies”. This refers to the many subsidiaries that are mostly focused on property, so it would be reasonable to suggest this was for property purchases.

From my chats with people who know about this stuff (OK, that’ll be @ztranche), this equity contribution has been in the form of loans converted into preference shares.

The combined equity contribution is £73.4m, meaning the rest — £104 million or so — has been funded by loans and from profits. This is equity contribution is fairly modest, given the size of Joe Lewis’s Tavistock Group portfolio and the way the value of the club is going to soar once the stadium is complete. I’d compare this level of investment to adding a conservatory to your house to increase the value, rather than being a sugar daddy and sticking a helipad on the roof. But the money was found, and the investment now will help the club in years to come (and help “Uncle Joe” cash in, if and when he sells).

Overall, while not on the level of the stadium financing costs once the £350m loan kicks in, this £177.5m is not an inconsiderable amount of capital investment in the period. It will have given Spurs experience in managing its balance sheet to ensure not all the TV money is pissed away on agents and transfer fees. There is an adjustment coming, but won’t be like Spurs are accelerating from 0 to 60mph — we’ve already been cruising along at 30mph for a while now.

Final thought

The next five years is about finding the right balance between funding the stadium and funding a competitive team. It’ll be hugely challenging, and even if Spurs get it “right”, events out of the club’s control — luck, relative performance of others, macroeconomy, you name it — may mean it looks like the club got it “wrong”.

Underinvestment in the playing squad could have a negative impact on the viability of the stadium project, just as overinvestment could. It is safe to assume Spurs will be on the cautious side of this spectrum — the unofficial target of a 45 percent wages-turnover ratio hints as much.

But, building a new stadium doesn’t mean the club must put away the chequebook for a few years — in fact, the club must not. A drift back towards mid-table would be counterproductive in terms of both lost revenues, and the potential loss of Champions League calibre players that would harm the effort to sell tickets and hospitality packages in the new stadium when it opens.

I don’t want to see the club hide behind the stadium project as an excuse for not sufficiently strengthening the playing squad. The fact that Spurs were prepared to overpay on deadline day to secure a player like Moussa Sissoko shows the money is there, and the club is prepared to spend it. Likewise, continued investment in Hotspur Way through the construction of player accommodation shows the bigger picture isn’t being ignored, and the club is not being stretched beyond its limits by the stadium scheme.

The data I have gathered shows, in my opinion, that Spurs are well positioned for the huge leap that is now being taken. Years of pragmatism in the transfer market, and stringent cost controls, mean Spurs are as well prepared as they could be for the jump in stadium-related spending that is coming.

The spike in Premier League money, improvements in performance under Mauricio Pochettino and emergence of a clutch of homegrown talents are perfectly timed and give Spurs a little more leeway, arguably, than Arsenal had when building the Emirates. Of course, the Premier League TV deal has an inflationary impact on transfers and wages, which makes finding value harder.

Investing big bucks during boom years on capital projects such as training centres and stadium upgrades is exactly what a football club should be doing from a business perspective. Personally, I am very happy with what is being attempted and fully supportive. Some readers will disagree — that is your right.

For Daniel Levy, the new stadium is his vision and the defining project of his chairmanship. He has skin in the game — as the owner of a significant portion of the club, his net worth will soar if the stadium project is completed successfully.

The incentives for him to get things right are clear. But finding the right balance will be hugely challenging, and involve much guesswork. It’s going to get interesting, folks.

Thanks for reading, please follow me on Twitter for more chat. I welcome comments and criticism (preferably constructive) — I’m not an accountant or economist, so there are bound to be areas where my analysis falls short.

Tottenham’s most expensive signing, relative to revenue

“Has English football gone mad?”

With Manchester United set to smash through the £100 million barrier with their deal to bring back Paul Pogba, and Manchester City considering spending £50 million on a relatively unproven John Stones, the sentiment is frequently expressed by journalists and fans.

No doubt, similar questions about the game’s financial sanity were asked 20 years ago when Newcastle spent £15 million to bring favourite son Alan Shearer back to the northeast from Blackburn.

Of all the transfer deals I can remember, it was the Shearer one that stood out and made me think: How much?!?

It seemed an incredible amount of money for Newcastle to spend on a single player in 1996. By contrast, huge fees paid by Real Madrid, for example for Gareth Bale, have always seemed more understandable given the vast wealth and global reach of the Spanish club.

This got me wondering, how expensive was Shearer for Newcastle at the time? Adjusted for inflation, £15 million would now be £25.4 million. But more, my question was how big a deal was Shearer for Newcastle at the time, compared to its total revenue as a football club back in the very early days of the TV boom?

For the 1996/97 season, Newcastle’s revenue, according to club accounts filed with Companies House, was £28.97 million. The deal for Shearer, at £15 million, was equivalent to 51.77 percent of the club’s total revenue.

Newcastle’s total revenue, according to the last accounts, now stand at £128.8 million. If you fired up the time machine and did the same deal today, Newcastle would be spending £66.8 million on Alan Shearer.

As Newcastle fans will be painfully aware, Mike Ashley is more likely to offer his Sports Direct slaves permanent contracts than spend that much on a footballer.

Using the same 51.77 percent figure, this would be equivalent of Manchester United spending £204 million on Pogba, or Manchester City spending £182 million on Stones.

For Spurs, it would be the equivalent of spending £101.5 million on a player. Can you imagine Daniel Levy sanctioning that?

This in turn got me wondering, who is Tottenham’s Shearer? While Erik Lamela is the club’s record signing, at £30 million (£25.8m plus clauses), who was the most expensive Spurs player, relative to the club’s revenue at the time?

I dug out some data* and created the following chart.

TransferRevenueHistory

As you can see, the most expensive, at the time, and by quite some margin, was Sergei Rebrov. His £11 million move from Dinamo Kiev was equivalent to nearly 23 percent of the club’s annual revenue that year.

Rebrov is followed by Les Ferdinand (19.4 percent) and Chris Armstrong (18 percent). In fourth is Lamela.

When I first thought about this, my guess was Darren Bent, but his transfer was funded by one of the biggest jumps in revenue (with a new TV deal kicking in), so he is only in fifth place on the all-time list. I daresay Sandra Redknapp would have been higher.

Of course, this is just a snapshot and not to be taken too seriously. As a club that has been run for a profit, rather than as a plaything, what Spurs spend is a reflection of what has been received.

But nonetheless, as a snapshot, it is an interesting one. Some of those names — Fazio, Bentley, Reid, Vega and Rebrov himself — are a reminder of what a massive crapshoot the transfer market is. Which is why spending an amount equivalent to 51.77 percent of your revenue is a crazy idea, and one unlikely to be repeated any time soon.

English football may well have gone mad, but it went mad a long time ago. If anything it has become a little more sane, but as the numbers get bigger, it just doesn’t seem that way.

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