Silverstone, the historic race track which hosts the British Formula One Grand Prix, is to be sold for little more than £10 million (R165 million), according to recently released documents. The sale price stands in stark contrast to the construction cost of purpose-built racing circuits: a new 5.6km track, which is set to rival Silverstone, is being built in Wales at a forecast cost of £250 million (R4.125 billion).
The Silverstone track is ultimately owned by the British Racing Drivers Club, a group of more than 800 senior motorsport figures currently including Formula One stars Jenson Button and Lewis Hamilton, which took over the lease of Silverstone from the Royal Automobile Club in 1952 and then bought the site's freehold from the Ministry of Defence in 1971. It now wants to distance itself from the track, which made a £3.3 million (R54 million) net loss in 2012.
In September it was confirmed that the BRDC was selling Silverstone when the club announced that Mepc, a property group owned by the BT pension fund, had paid £32 million (R528 million) for a 999-year lease on 280 acres of land surrounding the circuit. The BRDC also said it had agreed terms to sell a lease on Silverstone itself but did not confirm the sale price.
TERMS AGREED
However, although the deal for Silverstone has not yet closed, the terms were agreed on 8 August when the BRDC signed a conditional binding agreement to sell its circuit business, Silverstone Circuits Ltd, along with a separate lease of 467 acres of track-related land. As this took place before the BRDC's 2012 accounts had been filed, they needed to be adjusted to show the value of the circuit based on the sale price.
The accounts show that at 31 December 2012 the track, plant and machinery had a value of £10.8 million (R178 million). This is about a third of the amount that the BRDC spent on building a new pits and paddock complex, known as The Wing, which opened at the track two years ago. It was part of an upgrade which helped the BRDC land a 17-year contract to host the British Grand Prix from 2010.
ON-GOING VALUE
In a letter to BRDC members on 24 September, outgoing chairman Stuart Rolt said: “The revised value reflects the commercial value of the amounts offered for the business including upfront payments and the present value of future rental income.”
Although the value of the circuit is significantly less than the construction cost of the new onsite complex, a spokesperson for the BRDC said: “In fact, had the money not been spent to build The Wing and improve the circuit, there would have been no 17-year F1 contract, the circuit would have had no value, and the BRDC would not have been able to secure such a successful deal with Mepc, who were attracted by the on-going value of the Silverstone brand.”
Rolt said: “The value of an asset that has a locked purpose as a business - in Silverstone's case to be operated primarily as a motor racing circuit - is largely calculated from the profit that can be derived from it. Typically a multiple of annual profits will be used to generate a balance sheet value.”
Rolt said the sale price of Silverstone was driven down because the circuit was losing money.
“We made a net loss in the year; our circuit assets value reflects this.”
Although the identity of Silverstone's new owner has not been revealed, it is understood it wants to retain the existing circuit management. - The Independent