Get your United season ticket at.... errrr.... White Hart Lane?

The club's attempts to sell season tickets have moved on to an email shot to all "One United" members....

This is the email that members received today:

Note the lack of green and gold (so before January), in fact note the t-shirts (so not a photo from the harsh winter months)....

Note the.... errrr..... blue chair.... note Anderson on the pitch (and relatively up with play too).....

And suddenly you realise that the razor sharp Glazer marketing machine is trying to offload season tickets at Old Trafford with photos of..... errrr...... United away at White Hart Lane on September 12th 2009 (the third goal by Rooney in case you wondered).....

Thanks goodness these brilliant people are in charge of our club.

LUHG

How long do you have to wait on the “waiting list”?

The wait for a bespoke new Ferrari is over two years, for a Hermès “Birkin” handbag you have to wait nine months, and in some parts of the country the Daily Telegraph claims the waiting list for an allotment is up to 40 years.

So what about that other valuable commodity, the Manchester United Football Club Season Ticket? If you join the waiting list, how long do you have to wait?

You only have to wait 4 hours.

That’s how long it took one red to receive the following email, having registered himself, as an experiment, on the waiting list earlier the same day:

The following day, he received another email with a link to United’s (new this season) “Season Ticket waiting list booklet”.  As IMUSA have pointed out, this shows season tickets available everywhere with “limited availability” in the Family Stand (understandably) and North Stand Tier 3, the perennially unpopular “little Oslo” where fans find out what top flight football looks like when viewed through a distant letter box.  Limited availability in NT3? Or perhaps the only part of the ground not visible on TV?

The prize for the most amusingly desperate attempt of this renewals season (and a sad reflection on the club’s fabled CRM database) is won by this (from a Red Issue Sanctuary contributor):

“A few years ago my daughter (then 13) registered on MUFC.com [sic] in order to download photos of Ronaldo. This morning they have written to her asking if she would like a season ticket.”

The club remain tight lipped about renewals of course, and financially it is the widely reported collapse in executive/hospitality sales that will have the biggest impact.  I’m sure that bond investors will be keen to quiz the club on all this on the next quarterly results call on 27^th August.

LUHG

First Allied watch - no. 1 in an occasional series

Even the World Cup won't stop this blog from keeping an eye on what's happening in the Glazer family "empire" (more Brittas than Roman).  This is the first of an occasional series of updates about First Allied Corporation using the company's own published vacancy information and the relevant CMBS trustee reports (which are published monthly). Those readers who don't see the relevance of any of this to Manchester United can look away now.

For those who can't be bothered with the detail, the key points from this update are a) another centre has gone "delinquent" (i.e. has stopped paying its mortgage) and b) the First Allied Corp portfolio continues to weaken.

Market trends

Industry data across First Allied's major markets (Texas, greater DC, Georgia and North Carolina) remains quite weak, with property values still declining and only small signs of retail rental rates stabilising.  The charts below (source: Loopnet.com) show some of the trends, First Allied's properties tend to be in "metro" (i.e. suburban) areas:

Atlanta retail real estate prices remain weak

Dallas retail real estate - City recovers, suburbs in decline

Greenbelt MD (greater DC), rents stagnant

Charlotte prices declining....

but rents stabilising

June occupancy data

Occupancy rates across the business are inherently volatile, a single letting or tenant departure can have a material impact on a centre's occupancy.  In the last month, twenty centres have seen their occupancy rise and sixteen have seen their occupancy fall.  Occupancy in six centres has fallen by more than 5% percentage points, and another six centres have seen occupancy rise by more than 5% percentage points.  The large  falls are significantly greater than the large rises:

You can see how these changes knock on to run-rate debt service coverage ratios below (all figures are post interest only periods where these expire in 2010).

New letting activity has helped push run-rate DSCR back above 1x for Frisco Gate and Gleneagles Plaza, with Smoky Hill almost back to this level.  On the downside, River Plaza will no longer be able to cover its mortgage at current occupancy and Stonecrest Park is now at risk.

Trustee reports

The main news from the June trustee reports relate to Ulster Terrace (Denver, Colorado) which has now gone delinquent (last mortgage payment was 11th May 2010) and Lakeview Crossing (Dallas, Texas) where the "Special Servicer" reports "Imminent default due to cash flow problems."  Schoolhouse Plaza (Ohio) remains delinquent for a second month.

Conclusion

There is nothing in the latest data from First Allied or the mortgage trustees to change my original view on the company.  The coming months will see more and more centres run into severe financial problems as interest only periods end and tenant demand and rents remain weak, and the Glazers will have to decide whether to support them financially or let them fail.  There's more chance of the United States winning the World Cup than First Allied generating any significant cash flow for it's owners in 2010.

LUHG

David Gill sticks to his guns - so where's the money coming from?

David Gill has replied to my open letter of 8th June.  This is his reply:

So on the subject of repaying the PIKS, he is sticking to what he said on BBC Radio 5Live back in January:

“We [the senior executives of Manchester United] don’t wake up worrying about the PIK interest,we don’t worry about the PIK repayment. That is something that the family, the owners, have put in place and they will ensure is repaid or is part of their overall financial planning in due course, but that is nothing to do with the club. You’d have to speak to the owners and get their views as to their plans etc in respect to that. This notion that Manchester United is £716m in debt is just a total misconception frankly.”

I'm not surprised that David is maintaining his stance on this issue, although I'd have liked the scoop if he'd written to say "fair cop Anders".

But this official denial that the repayment of the PIKS (currently around £220m and rising) is "nothing to do with the club" raises the question of how on earth they CAN be repaid.  Let's consider the options:

Borrow against Glazer family assets

In the aftermath of the revelations about First Allied, the Bucs spokesman confirmed (by saying "Companies they [the Glazers] own generate revenues in excess of $800 million each year.") that the family only own three major businesses, United, the Bucs and First Allied.  All three are already borrowed up to the maximum possible.  So the option of borrowing to repay the PIKS can be ruled out.

Sell assets

My work on First Allied shows that there is not sufficient value in that business to repay the PIKS.  If the family did sell United, this would of course eliminate the issue, but they have publicly denied they will.  The option of selling the Bucs is always there of course.  Forbes magazine thinks the value of the franchise is falling, but even at a price of $900m and deducting debt, the sale of the Bucs would easily provide enough to repay the PIKS.  A Tampa Bay journalist told me he thought such a sale unthinkable as NFL franchises are long-term licences to print money, but the option is definitely there. 

Use United's cash anyway

Could it be that David Gill believes that his comments are consistent with using the club's cash to pay the PIKS? He talks about not "worrying about the PIK interest" and that management don't "worry about the PIK repayment", but "worry" is not the issue here.  When he says "That [the PIKS]...is nothing to do with the club." does he just mean the fact that they are not secured on the club's assets but rather its equity?  I think someone who thought such apparently reassuring statements were consistent with taking a quarter of a billion pounds out of Manchester United to repay the Glazers' debt would be guilty of dissembling. 

So I can't think of any other viable way to repay the PIKS and I know that senior United staff have given non-attributable briefings to journalists in which they concede it is the probable course of action.

How has it come to this? Why are we left trying to deconstruct 88 words spoken in January?  Why won't the club engage with concerned supporters? If people like me are scaremongering, why not explain why?  Instead we have the pathetic spectacle of a football club anonymously claiming "victory" over its own supporters in the pages of the Daily Mail.

This is the sad state of Manchester United Football Club in 2010; silent, aggressive and resentful of its own supporters.  And that is a great, great shame.


LUHG

My advice – don’t renew

There are just two full days until the season ticket renewal deadline.  Judging by articles in the media and my own sources in the ticket office, tens of thousands of season ticket holders have not yet renewed and there is panic at the club.

For what it's worth, this is my advice for those considering what to do. It is my personal view only:

Any reduction in income will increase the chances of the Glazers selling our club.  They can only take out dividends if certain profit targets are met.  This makes them vulnerable to lower income.

The most effective action supporters can take to shorten the Glazers' ownership of our club is to not renew their season tickets for 2010/11.

I understand that giving up going to Old Trafford is an incredibly hard thing for fans to do, not renewing my own ticket has been very difficult. It was difficult too for the many fans who stopped going in 2005. Sacrifices are sometimes needed to achieve important change.

Many supporters will want to continue to go on an occasional basis and switching to "match-by-match" and reducing the money you pay the Glazers in this way is also helpful to the cause, although obviously has less impact.

I really believe that supporter action can accelerate the process of changing the ownership of our football club. It is not just tokenism. Ridding our club of the Glazers requires both an offer for the club and a willingness on the family's part to sell at a reasonable price. Non-renewal introduces risk to their business model and increases the chance of them selling.

Finally of course, all supporters should reach their own decisions and remain United in respecting the choices of others.

LUHG

An(other) open letter to David Gill

In the aftermath of the new research showing the parlous state of the Glazers' US property business that I and others have published in the last few days (not to mention this timely piece from Forbes today), I have written another open letter to David Gill.  This time there is no need for ten questions, one will suffice:

"In light of these revelations, can you assure United supporters that none of the club’s current or future cash will be used to repay the Glazer family’s PIKS?"

This is the full letter (downloadable here):

LUHG

Is Malcolm Glazer a better boss than Tom DeLay?

Edit: 8th June 2010.  If you think I'm being harsh, check out these two comments on this statement from NFL commentators including one of the main sports writers on the Tampa local paper, The St Petersburg Times:

St Petersburg Times
Adam Schein

I couldn't help but laugh at the swift statement issued by the Tampa Bay Buccaneers spokesman Jonathan Grella today. The man used to be press spokesman for disgraced House Speaker Tom DeLay. Plus ca change.....

This is what he said:

"Buccaneers fans should know that the Glazer family is as financially well-positioned as ever before.

"Companies they own generate revenues in excess of $800 million each year.

"Sophisticated real estate experts know that the family's refinancing of their commercial real estate before the global meltdown has proven to be the wise move.

"While First Allied represents only a small portion of their asset portfolio, it continues to generate significant profits, enjoys over 90-percent occupancy, and has long term non-recourse financing.

"This franchise remains committed to bringing the resources to build its next championship team.''

Let's do the paragraphs one by one.
1. On my calculations, the three companies generated revenue of c. $780m (it depends on the exchange rate you use for United), so no missing gems. As someone once said, “Turnover is vanity, profit is sanity, cash flow is king”. Revenues are not profits and First Allied proves it. Old friend of United, AIG, had revenues of $96bn the year it went bust. Anyway, it's interesting that he chose to quote a revenue figure.

2. As these details have never been published before, we must wonder who these "sophisticated real estate experts" are. Maybe the commercial property lending department of Lehmans? Anyway, how wise is it to remortgage in 2005, 2006 and even worse in 2007? Of the 35 remortgaged properties, nine already can't cover their "wise" loans and eleven more will join them when interest free periods end. 

3. I have looked at every shopping centre they own (bar one that had 2008 cash flow of $0.5m) and "significant profit" is not possible. The $9.7m I have quoted is cash flow before income taxes (be they personal to the Glazers or corporate taxes) and before any head office costs (First Allied operates out of three offices and employs such cheap staff as Edward Glazer). The cash flow will fall to just over $7m per annum as interest only periods end, if occupancy rates don't pick up.

The 90% occupancy doesn't tally with actual data. On their website, First Allied like to include buildings they don't actually own, but are on the site. You can see a "142,438 sq ft" centre here (including Walmart). The 90,000 sq ft Walmart isn't owned by First Allied (I checked the county records), so occupancy is 88.3% not 96.5%.

I calculate occupancy to be 86%, but frankly it doesn't matter. The centres in trouble (DSCR below 1x) have occupancy that averages 79%, the one with DSCR above 1x average 94%.

Non-recourse just means that the bancruptcy of a centre doesn't knock on to other companies.  Brilliant.

4. Does being "committed to bringing the resources" actually mean anything?  If you've got resources, why not bring them?

LUHG