Date: 20th October 2008 at 5:18pm
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I have noticed on some rival sites some gleefully forecasting financial meltdown and repeating stories of property problems undermining the club. Given the economic turmoil and rapidly depreciating property prices speculation that Arsenal are running into problems with the financing of the Highbury Square development is understandable. I was pleased to see that the club has moved to quash this speculation with a report in the Everton matchday programme that is now repeated on the clubs website.

Simply for the education, and possible disappointment of those fans from clubs that might wish to believe the negative gossip I make no apology for repeating the facts of what I suppose should be a peripheral topic in terms of football. Boring as it is, it is also part of a key period in the clubs development and it is difficult to ignore the enormous impact it has had on the club over the last 5 years and more. It may also be interesting to those supporters of the club who retain an interest in the background to the clubs long-term health.

Acting managing director Ken Friar tells us that so far completed sales exceed 90 of the 680 apartments the Highbury Square development will ultimately provide which has raised £39m, up £21m on the previous figure of £18m reported for August. A total of 598 of the apartments have been presold and to date, contrary to rumours, only 2 buyers have withdrawn and those some 6 months ago. Friar claims that an independent valuation still puts the current market prices of the apartments above the prices contracted by purchasers and so doesn`t envisage any significant defaults.

The club were careful to construct the property development in a separate company outside the football club to ring fence the risk. There are still 57 of the apartments unsold with another 25 still to become available and these appear to be sticking. This still represents some £30m or so of revenue which may not be fully realised until the property market stabilises which could take another couple of years. At least one estate agent is offering apartments in the development for rent and this may be a short term source of additional funding until the market turns upwards.

But assuming the 500 plus pre-sold apartments for which sales are still to be completed are completed on schedule, by the summer of next year much of the short term debt, taken out to complete the property developments, should be lifted from the clubs balance sheet within the current financial year.

The club has been careful not to count their chickens before they hatch and had not budgeted for, or pre-spent any profit that might accrue when the development is completed. With the present economic gloom this is cautious but in the circumstances prescient business management. Though the first priority is to cover it`s costs if, as still seems likely, this does still yield a decent profit Friar says the club can then use the income in different ways, saying “?we have not budgeted for the profit and this allows the Board to be flexible over its use as the money has not been earmarked for anything in particular. In that sense it will be a bonus. We have options available to us, for example, profits could be used to reduce the stadium debt or to strengthen the team if the manager wishes.”

Though the stadium was completed and opened 2 seasons ago the developments surrounding the financing of the stadium and these connected property developments has continued to impact on the clubs business and only now on a decreasing scale. In the current economic climate little can be taken for granted but if the club do get through this period without getting their fingers burnt then it will have been a triumph for common sense and sound prudent business.

Arsenal as a club has a reputation for being cautious with finances and not spending what it doesn`t have. Thankfully, it appears that they have applied those same cautious principles to this development.

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