Gonzo has already covered the subject on Hammers Chat of what the real prize is for Daniel Křetínský regarding his intention to increase his shareholding in West Ham, yet this made me feel compelled to dig deeper.
Křetínský’s interest is likely tied to the strategic value of the London Stadium and its surrounding land. The land premium is not currently priced into the club because West Ham does not own the stadium or the land, and the stadium itself is reportedly valued at zero due to its onerous lease and heavy operating losses.
Buying the stadium and surrounding land may be Kretinsky’s long term plan
The stadium’s owners over the years including (E20/LLDC/GLA) have according to published accounts posted annual losses ranging from £20m to £68m. Losses per West Ham home game have been estimated at £500k+, (source Stadia World) paid by London taxpayers, while the total lifetime cost of the stadium to the public sector is now approximately £1.26 billion. The stadium is expensive to operate and expensive to convert between athletics and football. West Ham were paying only £4.6m per year in rent (which is set to drop to £2.1m in the Championship) and keep all match day revenue.
In essence the stadium is a financial black hole, but not for West Ham. For the club, it’s the best lease in world football.
London stadium has a huge footprint of potentially valuable land
The GLA (Greater London Authority) is reportedly absorbing the losses, and eventually a political or financial tipping point may force a restructuring. This would allow Křetínský to buy the stadium cheaply in the future. If the GLA eventually wants out, West Ham would be the only logical buyer. Given the stadium’s zero valuation and huge losses, the club could acquire it cheaply, but would need to fund redevelopment. As every West Ham supporter knows the current design is flawed for football, yet if the lower bowl was rebuilt and athletics mode removed it has future potential.
Based on this, Křetínský, should he pursue a full take over is not buying West Ham for land value, because it controls none. However, he may be buying the optionality that comes with being the anchor tenant of a failing public asset. A stadium acquisition would only include the land directly under and around the stadium. The footprint is relatively small compared to the wider Olympic Park, yet, owning the stadium positions the club to negotiate for adjacent plots.
The GLA owns 635 hectares of land around the park, a private partner could be invited in to unlock further value. This is a multi‑billion‑pound opportunity, but only if the GLA eventually sells.
Even though Westfield covers retail, there is still scope for residential towers, hotels, entertainment venues, training facilities, hospitality complexes and commercial office space. The Olympic Park is still under long-term regeneration.
A Stadium-led district model, similar to Tottenhams model (Northumberland Development Project) would create a stadium surrounded by year-round revenue assets.
There also would be monetising naming rights.
The LLDC had failed repeatedly to sell naming rights, a private owner could unlock this.
Ironically, West Ham is actually a hindrance to the land opportunity. The lease is the reason the stadium is valued at zero and loses money.
It prevents redevelopment and makes the asset unattractive. Therefore, in the long term West Ham is actually the key to unlocking the land. Any redevelopment requires the anchor tenant to be on board. Owning the club gives Křetínský leverage over the stadium’s future.
West Ham United are ultimately the gateway to a distressed public asset in a prime London location.
The Czech Sphynx funded his original investment in West Ham via 1890 Holdings, a subsidiary of his wider investment structure. The only two publicly listed owners are Kretinsky and Patrick Tkac, Co-Founder of J&T Finance Group. Tkac has a reported estimated net worth of around €1.8bn – €2bn.
This has long been a patient capital play, one Kretinsky is known for, and not a short-term football investment.
The cooment about the stadium atmosphere and comparison with the Empire Stadium Wembley is well made. Nevertheless any purchase of the stadium with a view to modification would require buying out British Athletic’s contractual entitlement, which would not come cheap. In any event if anyone wanted to pour vast amounts of money into the club it would be far better spent on strengthening the playing side than on the stadium.
The long time aim is to buy the stadium once the politicians get fed up with defending the costs to taxpayers of current agreement. Boris the bungler messed up the original bidding process to buy like mist things he touched!
The narrative around the stadium is boring. I attended the old Wembley, it had a dog track and the bends of the Speedway track between the pitch and the stands. I never heard anyone complaining about a lack of atmosphere due to that set up. The London Stadium is far better than the old Wembley; it’s up to us all to make the atmosphere.
There are many reasons why I don’t this will happen and the one everyone ignores is while West Ham have a cast iron tenancy at the stadium, UK also has an unchallengeable lease to use the stadium as an athletics stadium every July – something they will never be prepared to give up. This limits all ideas of redevelopment.
I imagine IF DK was to buy the stadium the GLA would charge such an astronomical price for any adjacent plots due to the losses it has incurred that it wouldn’t make any financial sense for him, what with the cost of the redevelopment of the site to create the aforementioned residential and commercial opportunities. Owning the land immediately surrounding and below the stadium seems to offer very little ROI what with the cost of redevelopment. If the GLA were willing to make the billions they would likely want to sell of parts of the land they would have done so by now. I was there at the weekend and there were lots of bars and restaurants and yet it was like a ghost town. And that’s with all of the apartments that have gone up over the years.
It’s a theory Matt and my opinion doesn’t come from a place of knowledge or experience of such situations but there doesn’t seem to be a lot of logic behind DK splashing out. If anything, I imagine he’s more likely to cash in his West Ham chips once we get out of the Championship than buy the club outright
Many thanks for an excellent piece Matt. Makes a lot of sense.