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New deal for Newlands a huge boost for rugby
The Western Province Rugby Football Union takes exception to the insinuation that it acted without due consideration over the future of Newlands and the move to the Cape Town Stadium.
One thing I have learnt about leadership is that you can never please everyone, and that leaders who try, don’t get very far. Instead, a leader needs to listen to advice, to think things through on the basis of principle and, ultimately, to decide on the best course of action for the greater good.
In the 19 months that I have been president of the Western Province Rugby Football Union (WPRFU), I have found that this process has served me well. Indeed, I have drawn on it often over the last month in our discussions over the future of Newlands and our move to the Cape Town Stadium.
When our agreement with Investec fell through on 1 June 2020, I realised that I needed to act quickly and decisively to safeguard our future. But I also knew that we needed to assess all the available evidence, do the required due diligence and do what is best for Western Province rugby, the development of the sport and the citizens of this province.
And so, I take exception to the insinuation in the article “WP rugby’s future on the line in Newlands saga” (Daily Maverick, 6 July 2020) that the members of the WPRFU have acted without due caution. On the contrary, in our negotiations for a better deal for the Union, we have exercised great care every step of the way.
It seems that this negative perception stems from a misreading of the WPRFU’s agreement with Flyt Property Investment to develop Newlands. So, let’s take this opportunity to put out the relevant facts of the matter.
In short, the proposed new deal will see Flyt Investment Property advance R112-million to the WPRFU to pay off previous loans taken from Investec and Remgro. This will enable us to consolidate our debt – debt which we already owed – and to unlock the inherent value in the Newlands stadium property to put us on a firm financial footing into the future.
Flyt Property Investment and the WPRFU will also incorporate a new company called Newlands DevCo that will be owned by both parties. Newlands DevCo’s sole purpose will be to obtain development rights and develop the Newlands Rugby Stadium property as a mixed-use development with an anticipated developable bulk of no less than 60,000m2. Importantly, this will be a 50:50 partnership between WPRFU and Flyt Property Investment, which means the parties will enjoy an equal share in all economic benefits derived in the future.
In addition, it is proposed that another new company will be incorporated between the WPRFU and Flyt Property Investment called Brookside DevCo. This new company will purchase the Brookside property and its purpose will be to obtain development rights and develop the Brookside property as a mixed-use development. This deal will give the WPRFU access to an estimated R40-million in cash up front, plus 50% of development profits down the line.
Importantly, while the WPRFU is a 50% partner, it will not need to contribute towards the envisaged R2-billion development costs. The WPRFU is providing the land, while Flyt Property Investment, as the developer and financing partner, will be required to raise the development funding.
The proposed new deal will enable the WPRFU to leverage its property portfolio for the most economic gains in order to ensure the sustainability of Western province rugby over the short, medium and long term.
Like any loan agreement, WPRFU was required to provide security in the form of most of our properties, at values that reflect South Africa’s current economic climate, depressed property market and risks associated with Covid-19. An independent valuation of all the properties will take place in one years’ time, and each year thereafter. This could make it possible for some of the properties to be released as a security arrangement that has been built-in as a safeguard for the WPRFU’s benefit. Even though these properties are used as security for the loan, we can still develop them for our benefit and are currently negotiating with other developers in this regard.
Significantly, the WPRFU will also have two seats on the board of directors of both the Newlands DevCo and Brookside DevCo. This will ensure we have direct oversight and ongoing presence in the planning phase for both development projects and, again demonstrates the fact that the WPRFU and Flyt Property Investment are partners in the proposed new deal.
When it comes to the previous deal with Investec, it is important to again clarify that the R110-million received from it was also a loan, which would always have needed to be repaid by the WPRFU. If development rights were obtained for the Newlands Stadium, the WPRFU would have been required to provide Investec with leasehold rights to the value of R110-million and an additional R45-million up front payment should the Sports Science property be incorporated at a later stage. If the agreement lapsed, or these rights were not obtained, we would have been required to settle this debt.
The WPRFU, which has been at pains to deliver the best possible deal for the clubs and the communities, raised various concerns from the onset of negotiations with Investec until the end. Unfortunately, both parties failed to reach an agreement by the 1 June 2020 deadline.
When it comes to the new deal, the WPRFU conducted an extensive financial due diligence on Flyt Investment Property in order to provide us with the comfort we required to negotiate a transaction with them. This investigation strongly confirmed Flyt’s ability to pay the R112-million needed to settle our existing liabilities to Remgro and Investec within the deadlines we were facing. It also confirmed that Flyt Property Group is strong enough to execute a R2-billion development.
It is clear that this proposed deal is far less risky than previous arrangements as it not only allows the WPRFU significantly more control, but also due economic benefits as a 50% partner.
Implying otherwise shows a profound misunderstanding of the decisions taken by the WPRFU in order to secure a better future for Western Province rugby, and to invest in clubs and players in our disadvantaged communities.
We recognise that Newlands will always have its place in the history of rugby in the province and the country, which we will certainly pay tribute to over the coming year. However, I believe that the new deal provides an opportunity for an exciting new era for Western Province rugby and I look forward to embarking on this next chapter with all of our members and the Flyt Property Group. DM
Zelt Marais is President of the Western Province Football Rugby Union.