Magnificent new facilities at Wests - the envy of all of us.
Why don't we cut some of the emotion out of this question about cost v return and look at the numbers?
Hutchinson say on their website the construction contract was $7.3 million - now one of those who claims to be involved (Homer Dog) says that cost doesn't include fittings or the cost of the new field - that's got to be another $1 million at least. But for arguments sake let's round it down to $8 million cost.
Wests releases have said the cost has been debt funded and the cost is covered by rentals from the businesses in the new building. At say 5% interest (at current rates) that's $400,000 per year in interest. Banks normally want at least 1.5 times interest cover so that implies minimum $600K p.a in net rent from tenants.
They have the restaurant and the physio /medical suites renting from them. Does that make up $600k p.a? Must do so or the bank wouldn't have lent them the money in the first place.
But that sounds like a massive rental for those businesses!
However, assuming they are paying $600k p.a. that would mean a surplus of $200k p.a. (after interest) to pay off $8 million in debt or 40 years repayment time.
Of course if the interest rate moves up 1% p.a it adds another 26 years to the repayment plan!
If interest rates jump by 2.5% p.a. from where they are today the surplus would evaporate completely so no repayment possible.
Does anyone think an interest rate of 7.5% p.a. is out of the question on commercial loans over next couple of years?
Must be some business plan to cover interest costs of $400k and more!
Then again Wests own website says the redevelopment cost was $10 million. Re-do my numbers based on a $10 million debt and the interest cost alone is pretty big!
Well done that they have pulled it off but I agree with Rugby Reg - it will be interesting for all rugby clubs in the country (amateur and professional) to see how this works.
Look forward to seeing Wests annual report for 2017 where all will be revealed as to rental amount and cost of the debt.
In the meantime, I bet all teams will enjoy playing in what is now clearly the best facility in QPR.
Why don't we cut some of the emotion out of this question about cost v return and look at the numbers?
Hutchinson say on their website the construction contract was $7.3 million - now one of those who claims to be involved (Homer Dog) says that cost doesn't include fittings or the cost of the new field - that's got to be another $1 million at least. But for arguments sake let's round it down to $8 million cost.
Wests releases have said the cost has been debt funded and the cost is covered by rentals from the businesses in the new building. At say 5% interest (at current rates) that's $400,000 per year in interest. Banks normally want at least 1.5 times interest cover so that implies minimum $600K p.a in net rent from tenants.
They have the restaurant and the physio /medical suites renting from them. Does that make up $600k p.a? Must do so or the bank wouldn't have lent them the money in the first place.
But that sounds like a massive rental for those businesses!
However, assuming they are paying $600k p.a. that would mean a surplus of $200k p.a. (after interest) to pay off $8 million in debt or 40 years repayment time.
Of course if the interest rate moves up 1% p.a it adds another 26 years to the repayment plan!
If interest rates jump by 2.5% p.a. from where they are today the surplus would evaporate completely so no repayment possible.
Does anyone think an interest rate of 7.5% p.a. is out of the question on commercial loans over next couple of years?
Must be some business plan to cover interest costs of $400k and more!
Then again Wests own website says the redevelopment cost was $10 million. Re-do my numbers based on a $10 million debt and the interest cost alone is pretty big!
Well done that they have pulled it off but I agree with Rugby Reg - it will be interesting for all rugby clubs in the country (amateur and professional) to see how this works.
Look forward to seeing Wests annual report for 2017 where all will be revealed as to rental amount and cost of the debt.
In the meantime, I bet all teams will enjoy playing in what is now clearly the best facility in QPR.
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