Friday, 11 April 2008 

Dear Fellow Member, 

Dons Trust Special General Meeting – 7:00 pm on Monday 21 April 2008 

Last week, we issued a notice of a Special General meeting at 7.00 pm on Monday 21 April, to consider the following resolution. 

“That the Dons Trust Board should be empowered to authorise AFC Wimbledon Ltd to issue a Letter of Intent to, and subsequently enter into a contract with, the successful bidder in the tendering process for the extension of the West Stand in accordance with the proposals set out in the paper to be sent out no later than 12 April.” 

This document consists of the paper referred to in that resolution.   

At the meeting on 21 April we will be discussing and voting on whether to go ahead with this major project and on whether we should take on substantial extra borrowing to do so.  These are significant matters and I urge you to come and hear the debate if you possibly can.  If you can’t come, please make sure you cast your proxy vote on this important matter. 
 

Best wishes,

David Cox

Chair of the Dons Trust Board 
 

 

THE MAIN STAND EXTENSION – Summary of situation 

Introduction 

This paper sets out the current position regarding the main stand extension and the key issues we face when voting on whether to support the Dons Trust Board’s recommendation to proceed with the project. 

Summary 

• These proposals are a practical and affordable way of carrying out work sufficient to secure the permissions
• We need to implement the permissions or we face the prospect that we may be unable to renew them on acceptable terms, thereby killing off any hope of league football at Kingsmeadow
• Nonetheless, going ahead with the project will put a considerable strain on the club and the Trust and the risks need to be weighed carefully
• The day to day costs of the club will increase and, all other things being equal, this is likely to mean we will need to look for places to make cuts
• We will need to raise £100,000 per annum from fundraising for the foreseeable future

 

The following sections set out the background to the project, the reasons for these conclusions and the options we face. 

What are we proposing to do? 

The project comprises three main parts: 

1. To build an extension to the main stand at the Kingston Road end, providing an extra 200+ seats

 

2. To carry out internal changes and restructuring that will improve working facilities and the reception area, and also allow us to provide appropriate changing facilities when there are match officials of both genders.  This work also includes refurbishment of the main lobby toilets

 

3. To implement a controlled parking zone (‘CPZ’) around the stadium.  It is a condition of the planning permissions that we must do this if we proceed with item 1

 

What is the current status of the project? 

Following a tender to three companies, we have selected Pryer Construction (UK) Ltd (‘Pryer’) to carry out the project.  The next stage of the process is for AFC Wimbledon Limited to issue a Letter of Intent (‘LoI’) to Pryer.   

A LoI is a legal document that will commit the club to paying for any work undertaken by Pryer.  Eventually it will be replaced by a contract, but this is a way of Pryer being able to place orders for materials etc, which will take some time to produce, while being confident that their costs will be paid.  This is normal practice in this sort of project. 

At a meeting on Wednesday 2 April, the DT board was unanimous in its support of the project.  However, given the significant cost and the need for additional borrowings, the board decided that DT members should be asked to vote to empower AFC Wimbledon to enter into a LoI and, subsequently, a contract. 

This document is designed to brief members and to reflect some of the issues that were debated at the DTB meeting.   

Why do we have to implement the planning permissions now? 

When the stadium was bought in 2003, it already had planning permissions that allowed expansion of the stadium to a capacity of about 6,500.  These planning permissions were due to expire early in 2006. 

In late 2005 we applied for renewal of the permissions on the basis that nothing had changed since the first permission was granted (if nothing has changed, there are no grounds to refuse the application).  However, the Royal Borough of Kingston (‘RBK’) considered that there had been material changes in the planning environment (planning law, planning guidance, etc).  They also said that the change to AFC Wimbledon from Kingstonian was material from a planning point of view. 

The risk we faced was that permission to renew might be refused and then we would need to appeal. There are three kinds of appeal – cheap (written representations), expensive (informal hearings) and prohibitively expensive (a full public enquiry) - and it wouldn’t have been our decision which approach was taken. Any appeal would also have taken us past the deadline, so that if we lost it would have been too late to implement – the permission would have expired. 

We could have argued with RBK but, in the light of the above facts, we decided that the risk was too great and we withdrew the initial renewal application. We then worked with RBK planners on a revised renewal application, which involved quite a lot of extra work, largely with planning and transport consultants.  This, plus advice from other consultants, cost us about £20,000 and a substantial amount of time by club officials - but we were successful and the permissions, amended in a number of ways, were renewed for a three year period to March 2009. 

The time for applying for a further renewal is now close.  However, every time we apply there is a risk that the application will fail or the terms of the renewal may become so onerous that we can’t or won’t comply with them.  In summary, the problems we face are: 

• There is a general presumption that if you apply for a planning permission you do intend to implement it.  By March 2009 it will be eight years since the original application, and recent government guidelines specifically discourage local planning authorities from continuously renewing planning permissions;
• New regulations emerge all the time, especially in the area of ‘sustainability’, whereby, for example, we might be required to provide 20% of our power from green sources – this could mean solar panels on the stand roof, which would be expensive – and to procure a significant proportion of the materials from local sources, which could again be expensive

 

We can’t be sure of a renewal on terms that are acceptable to us and, if we lose the permissions, we will probably never be able to play league football at Kingsmeadow.  Therefore, the football club board decided, supported by the DT board, that we should implement them.   

What are the consequences of implementing the permissions? 

‘Implementing’ a planning permission doesn’t have the same meaning that most people would assume in everyday life.  We have been advised that extending the main stand would be regarded as an implementation of the permissions and this would make them secure – we would not need to renew them again. There is then a new risk, which is that the council might issue a Completion Notice, demanding that we complete all the work, demolish the work already undertaken or make good the site – this is possible, but it is very rare and we consider it to be an acceptable risk. 

There is one other major issue re implementing the permissions, which is that doing so will trigger the legal conditions (known as Section 106 conditions) that are attached to them.  Exactly how we comply with some of them is still under discussion with RBK but the expensive one is that we are committed to paying for the implementation and operation of a Controlled Parking Zone (‘CPZ’).   

Unlike most of the other S106 conditions, the CPZ does not need to be in place before the works starts - a survey of residents is required first.  We have written to RBK asking them to start this survey early, so as to clarify the issues and likely costs, but the costs will still be unknown when we start although, obviously, we do have some estimates – see the next section of this paper. 

What will it cost? 

The quote from Pryer is the lowest of three we received.  This includes items 1. and 2. on page 2 of this paper, but not item 3 (the CPZ).  The costs are as follows:

 

 

To be clear, the DT board is seeking empowerment for all the work to be undertaken, subject to affordable finance being available and clarification of some issues. 

Note: The cost of the CPZ is uncertain but our consultants’ estimates range between £100,000 and £200,000.  They have speculated that we ought to be able to get the costs down to £100,000 but this is uncertain until the residents’ survey has been carried out so we’ve assumed an amount in the middle of the range. 

Where is the money coming from? 

The possible sources of finance are as follows: 

Cash currently held by Dons Trust     £100,000

Last tranche of Barclays loan (note 1)           250,000

Additional facility from Barclays (note 2)      250,000

Possible grant from FSIF (note 3)                                   130,000

Early renewal of FYSTs (note 4)                                    80,000

Additional DT Bond issue (note 5)            250,000

Total possible funds available                                     £1,060,000 

Note 1 - Barclays bank 

We already have a facility of £600,000 at bank rate + 2.5%. By the end of April we are likely to have drawn down £350,000 and the balance of £250,000 is available for the stand extension 

Note 2 - Barclays bank, additional facility 

Barclays bank has said it is willing to provide an additional loan of £250,000 and to increase the duration of the original loan and this extra facility to 15 years.   The interest rate will be the same as for the existing loan, i.e. base rate plus 2.5%  

Note 3 - Grant from FSIF 

We have had a number of discussions with the grants team at FSIF.  There are some potential threats to our grant, as follows: 

1. The timescale for the grant application means that it will not be finalised before we need to start work.  The FSIF can, if it wishes to do so, issue a non-binding letter to us, saying that we can start work before their final decision and they will not refuse our claim for that reason, but there is always a chance that we will be refused for some other reason.  At present, the FSIF are not in a position to say whether they are able or willing to issue such a letter

 

2. Grants from the FSIF are often (but not always – they have some flexibility) for work needed to get up to the standard needed for the level the team is in or is approaching.  We are already very close to the required level for a Conference ground and so we might fail on this basis.  However, we don’t expect the application to fail as we understand that providing extra seating when all available seats are sold is a strong reason for awarding a grant

 

Overall, we are optimistic, but not certain, that our application will be successful. 

Note 4 - Early renewal of FYSTs 

Most five year season tickets are at the end of their third year.  The value of FYSTs bought to date is approximately £200,000, of which £180,000 were bought in year one and have therefore been used for three years. 

We propose to offer an early renewal of FYSTs (i.e. inviting fans to make the remaining two years back up to five years). Assuming a high (but not total) acceptance of the offer, it seems reasonable that we could raise as much as £80,000 (compared to a theoretical amount we might raise of £180,000 x 3/5 = £108,000).  This is clearly uncertain but, with an additional general push on FYSTs, including an offer that increases in main stand prices won’t apply if you buy now, £80,000 appears to be an achievable target. 

Note 5 - DT Bond 

At our request, the Finance Working Group reviewed the various possible sources of finance for the club and they concluded that a new Bond was the most likely to be effective.  Indeed, they believe that, with appropriate presentation, it might raise as much as £250,000. 

This is ambitious, but we believe that we can raise at least £150,000 and that £250,000 may be within our range. 

The availability of funds can be summarised (incorporating our judgements of likeliness of raising the money) as follows: 

 

Clearly these judgements are subject to challenge but we believe that they are realistic.   

Additional running costs arising from the project 

The budget for next season is well underway and we aim to take it to the next DT board meeting.  However, we already know that we are unlikely to get any major new sources of income except the increase in entrance costs (and associated increase in season tickets) which we will discuss at that date. 

The interest costs of the total funds we need will depend on where the money comes from.  The appendix to this paper shows the repayment schedule that is most favourable to the club (i.e. is the easiest to achieve) and the likely interest cost in the first year is about £73,000 (compared to a forecast of £30,000 in the current year). 

There is also a cost to running the CPZ.  We do not know what this will be but we are advised that it could be as much as £20,000 per annum 

In short, the total additional running costs of going for the whole project (i.e. items 1, 2 and 3 on page 2) are likely to be about £63,000 in the early years, although it will be about £10,000 less in year one, as we don’t expect to have to pay for an entire year of the CPZ.  

We hope to recoup about £40,000 from increased matchday and season ticket prices but the overall effect will be to reduce the wages budget unless we can find a way of earning lots more profits from the club’s activities.  While we are giving this our attention, there is a limit to what we can achieve in this area 

Repaying the capital (£000s) 

The appendix shows the detailed analysis of the capital repayments if we are able to get access to all the sources of money listed earlier in this paper.  The calculations were based on minimising the annual capital repayments, since these are dependent on fundraising. 

The calculations show that, in general, so long as we can maintain fundraising at about £100,000 per annum, we can afford the repayments.  At present, we raise between £60,000 and £65,000 per annum from the Dons Draw and Golden Goals and, so long as these stay at about this level, the remaining amount is challenging but not impossible.  But we will need to sustain it for years, not just do it for one year. 

There are several different combinations of borrowings that we might choose from.  Each of them has a specific advantage, but with an associated disadvantage – for example if we sell more DT Bonds, this will reduce the interest we pay but, as a general rule, the Bonds need repaying sooner, with increased pressure on fundraising.  If we go ahead, the board will select the sources of funds which, in their view, best meet our needs and ability to pay. 

What do DT members need to decide? 

Briefly, the decision you face as members is whether or not, in the light of the facts presented to you in this document, you are you happy to empower the DT board to authorise the club to go ahead with this project. 

The DT board has recommended that you vote in favour of the resolution set out on page 2 of this document. 

Erik Samuelson, on behalf of the Dons Trust board

10 April 2008 
 
 
 
 
 

Appendix – capital repayment schedule and effect on profit 

This section shows the repayment schedule which gives the minimum annual capital repayment.  It is based on a capital repayment schedule over 15 years (the period of the Barclays loan). 

Key assumptions in these calculations are: 

• the cost of the project is £810,000
• the repayment schedule for existing DT Bond holders remains unchanged
• interest rates remain unchanged at 7.75% throughout the period of the loan
• £80,000 of FYSTs are renewed this year and the remained of the original purchases are renewed in two years’ time (when most of them expire).  It also assumes that this cycle will repeat itself over future years

 

Scenario - Funding that gives the minimum annual amounts of capital repayment 

 
 

Note that with this additional borrowing our total debt to Barclays will be £850,000 since we currently owe them £350,000.  The repayment schedule is therefore based on repaying the full £850,000 over 15 years. 

 

This repayment schedule looks manageable.   In practice, we would almost certainly use some of the money from FYSTs to even out the amounts needed each year, rather than having ‘feast and famine’ years when we would sometimes scarcely need to raise any funds and other years when we would be stretched to achieve our targets.  

The total costs from this level of borrowing in the first year would be, at current rates: 

Barclays loan interest     £66,000

DT Bond interest             7,000

Estimated cost of operating CPZ for 6 months   10,000

Total cost          83,000

Current year interest cost per forecast    30,000

Additional cost in year one    £53,000