In the history of large-scale development projects, has one ever been delivered on time and on budget?
One piece of advice that was given to the writer of this blog when buying his first property was ‘whatever you think you need, triple it and it still won’t be enough…’
They were right.
The Scottish Parliament Building designed by Spanish architect Enric Miralles was expected to take two years at a cost of £40 million. In fact it took five years and cost £414 million.
It was announced in September that the Crossrail project which includes London’s 12th tube line will run at least nine months over schedule and the delays are expected to ‘add considerable extra cost’ to the already eye-watering £15 billion bill. This comes on top of the £600 million cash injection agreed by the Treasury and TfL in July.
The Battersea Power Station development sailed into waters of financial turbulence when developers realised work on the heritage site (which comes with very strict protocols and procedures) would be more expensive than they had originally envisioned. For example, the bricks used for the project need to come from the original source, any asbestos has to be carefully removed and the redevelopment of the building has to meet very precise structural integrity standards, all of which make for an exorbitant bill. The initial £750 million cost doubled to £1.5 billion and the profit return has been cut from 20% to a little over 8%.
The new Berlin Brandenburg Airport was started in 2006 with a planned open date of October 2011. Due to cost overruns, poor construction planning, execution, mismanagement and even corruption, a report by the German technical standards agency in 2017 suggested that it may not open until 2021 with costs flying high from an original budget of €1 billion to well over €6 billion.
The Sydney Opera House was delivered 10 years late and fourteen times over budget. Not music to the owners’ ears.
It’s not just massive construction projects that overrun. The 2014 Winter Olympics in Sochi were supposed to cost $12 billion but ended up costing $51 billion and the Boeing Dreamliner project was costed at $6 billion with the first planes due to be delivered to customers in 2008. It cost closer to $32 billion and the new planes didn’t arrive until 2011.
The list goes on and on and the latest construction project making the headlines is the Northumberland Development Project, otherwise known as the new Tottenham Hotspur Stadium.
White Elephant Lane?
Well, not quite. When it’s finished, the FedEx Bowl or whatever corporate behemoth ends up with the naming rights is going to be one of Europe’s premier football stadiums. The 62,062 capacity giant will incorporate Europe’s largest club shop, the ‘Tottenham Experience’ visitor’s centre, a 180-bed hotel and almost 600 apartments as well as considerable redevelopment to the immediate area, all of which is expected to top £850 million.
The original intention was to play the first few ‘home’ games of the season at Wembley and then move into the new stadium for the game against Liverpool on 15th September. That deadline was missed and revised to the 15th December vs. Burnley but it’s not going to be finished then either.
At the back end of October, Spurs Chairman Daniel Levy was asked about the delays. ‘There isn’t an hour that goes by when I am not asked when we will be able to stage our first game at our new home.’
He continued; ‘I wish I was able to confirm an exact opening date and fixture. However, in light of factors completely outside of our control, contractors missing deadlines and possible future unforeseen issues, we are naturally being cautious in respect of our timetable for our test events and official opening game.’
‘In light of [fans planning for the busy Christmas period], and taking into account the restricted availability of manpower over the festive period, we have taken the decision to confirm today (26th October) that all home games will be played at Wembley Stadium up to and including the game against Wolverhampton Wanderers on 29 December.’
The target is now the home game against Manchester United on January 13th but whispers and rumours on the message boards and social media suggest Spurs may end up playing the entire 2018/19 Premier League season at Wembley.
Football is expensive. In 1893, Scottish forward Willie Groves was transferred from West Brom to Aston Villa for £100. It took a further 35 years for that number to go over £10,000 with the transfer of David Jack from Bolton to Arsenal and then a further 50 years for Trevor Francis to become the first £1 million player, going from Birmingham to Forest in 1979.
Since the late 2000s, prices have gone stratospheric. Ronaldo went for £80 million then again for £99 million, Gareth Bale cost £86 million, Paul Pogba was £89 million, Ousmane Dembélé went to Barcelona from Dortmund for £135 million, Phillipe Coutinho joined him for what will end up at £142 million and then the PSG strike force of Kylian Mbappé (£166 million) and Neymar Jr (£198 million) made a mockery of football finance, even with the unlimited pockets of the petro-dollar zillionaires.
Spurs’ squad boasts eight of the 2018 World Cup semi-finalists including in Hugo Lloris the winning captain but while the company assets are worth a fortune – Harry Kane (£150 million+), Christian Eriksen (£80 million+), Dele Alli (£75 million+), Vincent Janssen (a tenner) – the stadium costs are starting to get out of control and with a chairman in Levy and Bahamas-based billionaire Joe Lewis as overlord so fiercely protective over every pound, not all is well aboard the good ship Tottenham Hotspur. Not so much on the pitch, more so on the balance sheet.
Writing in the Independent last week, football journalist Jack Pitt-Brooke put the numbers to the story after it was revealed the club are set to borrow another £237 million ‘to cover the spiralling costs of their new stadium build.’
The extension of the ‘development facility’ was confirmed with the three banking partners – Bank of America Merrill Lynch, HSBC and Goldman Sachs – and the extra money is earmarked to cover cash-flow issues as the build drags on.
In 2015, Manchester United raised $425 million of bonds through a private placement – when a borrower sells bonds privately to a small group of institutional investors, rather than offering them publicly – and Spurs are set to do the same.
‘Working with our Banking Partners and our financial advisor, Rothschild & Co, we shall be converting this development facility, which currently expires in April 2022, into notes with a mixture of debt maturities.’
All of this means that the club’s current net debt of £366 million is set to rise to £600 million when all said and done – and that’s just this weeks’ news.
Like all major development projects of this size (and bigger), it really is a case of ‘watch this space’ because the fans are getting antsy, the players and demi-god Mauricio Pochettino can’t be happy with such uncertainty, and Levy and Lewis must be going apoplectic back at HQ.
Even back in August, Paddy Power had Spurs long at 25/1 to move in by the end of the season but quickly suspended bets on the team not playing any games at the new stadium until the start of the 2019/20 campaign.
Still, at the time of writing they’re above Arsenal, so every cloud…
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