please log in to view this image Hull City Council has been accused of overseeing a "complete loss of control" over the running of the KC Stadium. Official papers claim the stadium was allowed to slip from public to private control in a series of deals. In accounts filed by the Stadium Management Company (SMC), director and Hull City owner Assem Allam claims the council agreed to previous owner Russell Bartlett arranging a mortgage deal with the Royal Bank of Scotland in 2007 on the stadium's lease through a new holding company "for no obvious reason", despite clauses in the lease that could have prevented any such move. The council says it was never asked to agree to anything. The authority also maintains clauses in the lease allowed for such a deal. Under Mr Allam, the SMC has spent £4.5m to clear two loans and interest taken out by Mr Bartlett on the lease. But with the holding company owning the SMC, he claims it left the council powerless to prevent it from changing hands in the future. In the accounts, he says: "By agreeing to this change, the council have lost control over any future transfer of ownership of SMC, as any buyer can purchase the holding company. "This complete loss of control appears to have been given voluntarily for no obvious reason." The accounts say the SMC "continues to take legal advice in relation to the actions of the city council". Stadium used to raise private cash The KC Stadium has long been regarded as a public asset of Hull's after being funded by the council's profits from its share of the Kingston Communications privatisation in 1999. However, the council has now been accused of effectively relinquishing all control over the city's prized asset by allowing business deals to be made against it. The move has been revealed in the latest accounts filed by the Superstadium Management Company (SMC). The SMC is owned by Hull City's owners Assem Allam and his son Ehab, and operates the KC and adjacent facilities under a long-term lease with the council. The Allams say the council should not have allowed previous Hull City owner Russell Bartlett to take out two loans from the Royal Bank of Scotland (RBS) on the stadium lease during his time at the club. They also claim the council effectively "lost control" over any future transfer of SMC's ownership â and therefore control over the stadium â when the loans were arranged through a holding company formed by Mr Bartlett to buy the club and the SMC lease off City's previous owner Adam Pearson in 2007. The Allams recently agreed to pay £2.4m plus interest to RBS after initially challenging disputed loan repayments inherited from the Bartlett regime. According to the accounts, the repayment contributed to a £5m loss for the SMC in 2013-14. Now, the Allams appear to have set their sights on the city council over the issue. A review of business included in the SMC's accounts approved and signed by Assem Allam says the lease of the stadium "stipulates an absolute bar" against assigning the lease in the first ten years without the council's consent. It adds: "In spite of this stipulation, the previous owner managed to obtain the loans secured upon the lease. "The loans were advanced to the company and taken out, almost immediately, and the security was given, with no obvious benefit to SMC." The report says an unidentified "senior executive" at the council had approved the lease being assigned to RBS and the SMC ownership being passed to Mr Bartlett's holding company. It adds: "By agreeing to this change, the council have lost control over any future transfer of ownership of SMC as any buyer can purchase the holding company. "The city council have not given any explanation for the actions of their senior officer other than to say he is no longer with the council." After initially challenging the bank's demands, the Allams say they eventually agreed to repay the outstanding loans to RBS on legal advice. They also face having to pay a further £1.7m, plus interest, to RBS over the next three years because the loans were guaranteed by the holding company set up by Mr Bartlett and now owned by the Allams. However, the report adds: "The company continues to take legal advice in relation to the actions of Hull City Council." It says the holding company â Superstadium Holding Company â currently has no assets. In a statement, the council denied any approval from the authority was needed at the time of the loans being arranged. The council said a clause in the lease allowed the leaseholder assignment rights without notifying the authority "in the case of a charge to a respectable and responsible financial institution". It added: "At the time of the creation of the mortgage with RBS they were considered to be a responsible financial institution and the consent of the council was neither sought or required." The council said the ten-year rule referred to the SMC report did not apply in this case because of the clause allowing dealings with a responsible financial institution. The Mail understands that, in the wake of the financial problems, the SMC is being restructured under Ehab Allam to reduce costs and give it more security for coming years. A rocky relationship The turbulent relationship between the Allam family and Hull City Council shows little sign of heading towards calmer waters if the latest set of accounts for the Superstadium Management Company (SMC) are anything to go by. In them, the Allams accuse the council of turning a blind eye when former Hull City owner Russell Bartlett took out two loans on the KC Stadium lease in 2007. On its part, the council says its consent was neither sought or required at the time. As a result of the loans being guaranteed by a holding company set up by Mr Bartlett and inherited by the Allams, the accounts reveal they have been forced to spend £4.5m of their own money paying off a mortgage taken out by someone else. As the loans were originally used by Mr Bartlett to help buy the club, it looks as if the Allams have effectively ended up funding two takeovers. http://www.hulldailymail.co.uk/Alla...tory-24139003-detail/story.html#ixzz3IBXKzxMP
It's obviously another stick to beat the council with in this petty war, but in reality, there's no way a massive debt to RBS should have been missed during the due diligence process.
I always knew that Bartlett had borrowed from the "club" to help buy the "club" so presumably this was how the "club" found money to lend to Bartlett.
Not sure how this will affect the current leadership of the council even if true. All of the dates in question fall under Carl Minns' tenure rather than Brady's. Labour regained control at the 2011 elections, the LDs had control from 2007, when Pearson was still in charge of City. He can hardly use this as a stick to hit the council with when it was not on their watch.
If he can after the council for the cash he will, I think who was in charge at the time is academic, he'll still see it as a way to get at the current incumbents.
I didn't see anything in the article about this debt being missed during the Allams takeover (unless I missed it) and assumed it's been a long standing argument. If the council have acted in an inappropriate manner with this community asset, it should be highlighted.
Am I thinking of something else, because all this was in the papers and discussed on message boards at the time, wasn't it? I remember someone explaining to me how Duffen could get a mortgage from a lease.
The council team responsible have a lot to answer for here, and despite it being a Lib-Dem authority at the time it would have been senior council manager not a councillor who would have allowed any deal to be brokered. Still those responsible to the councillors should have to explain as to why as a department they would risk a public asset. I can see their point but the due diligence should have picked it up at the time they bought the club and took over the SMC, and even then if it is as they say surely they could have not taken the SMC, let it go bust and arranged a buy back from RBS including the stadium which the banks would then have. Its no different from buying a used car, not doing a HPI check and then moaning when the bailiffs come knocking at the door. I don't understand why the Allams cannot broker a leasehold deal that has a 99 or 100 year leasehold. They would effectively own the ground and be able to raise capital against its future incomes to fund any works. You don't hear Sheikh Mansour moaning that Manchester City Council won't sell him Eastlands! He get's on with it. Funds expansion of the stadium, all for the good of the football club and the community. There will be further stick beating because no doubt the buffoon Terry Geraghty will muddy the waters further in the next day or so. Maybe Geraghty V Allam should be on the undercard next May at the boxing! Winner takes the KC!.
Must have been the Premier Club subscriptions that were mortgaged. They were paid via the SMC (now goes the club direct). I can't think of any other income that the SMC would have, both City and Hull FC's rents were not market price ? Some auditor/accountant employed by Allam has royally ****ed-up the due diligence process. They probably concentrated on purely the club's financial position and didn't bother to check the SMC. A simple Companies House check would show a mortgage/charge on any SMC assets. Caveat Emptor and all that.
The Allams would not want to broker a new lease as the council have probably learned their lesson by getting nothing back from the SMC for years......any new lease would probably end up costing the Allams much more than the loans they are having to repay.
It was reported at the time that a large amount was borrowed against future season ticket sales, I'm guessing that as you say it was the Premier Club subscriptions
The Premier Club memberships were five year debentures at the time, so a fairly solid thing to borrow against.
Leveraged buy-outs were en vogue prior to 2007 Then the credit crunch hit in the summer of 2007. It's quite possible the deal for Bartlett & Co to buy the club would not have happened if there had been a delay of a couple of months.
So Bartlett borrowed the money to buy the club off Adam Pearson by securing a loan on the KC Stadium with the backing of a prominent senior official on Hull City Council. Did not Pearson make a big show about only selling the club to 'trustworthy people' ? Seems to me that Adam Pearson doesn't come out of this very well at all.
It wasn't his decision, the money man wanted his money out and we only had one interested party, so the club was sold to him. I'm sure he made all the right noises, it's not like he had a bad reputation or any other reason for AP to doubt him.
It would appear Allam wants to find the mortgage was ultra vires and thus be able to undo it and get the council to pay up. Good luck to him if he can do it. It would revolve around the question of agency maybe and who had or didn't have the authority to agree anything (all down to the company's written terms). Still shocking the council let a public asset be abused for zero return to the city.
Isn't that effectively what happens when you buy a house? The security is the property you don't yet own.
Allam doesn't do his due diligence properly, doesn't read clauses in contracts properly and doesn't accept any legally binding clause he doesn't like shocker
