Well it's not really, the money from a sale would be invested in other areas which are income producing.
If it were my decision I'd be offloading the thing quick smart.
It remains a one-off pay out, and an income-producing investment remains the best option.
Let's be realistic here. The only asset the club has is that land, which thankfully has been DA approved. Nothing else to fall back on (least of all the Leagues Club) in the event of the club needing a source of income to finance its operations.
Let's say it yielded $110m from sale of completed residencies. Ten million instantly goes to pay off club debt, which probably will have grown substantially for the 5+ year period it takes to construct the project, plus interest on that debt. Club debt could realistically blow out another $5m (especially if we are still without sponsors) just for financing football club expenses, and more than likely it will involve borrowing against the new entity.
So say that reduces to less than $100 mil, say ~$90-$95m. Then you have construction costs and the real potential for cost overruns. I am not a builder but I know that in the last 12 months alone, some materials have gone up by a factor of 50%. Construction of this thing will cost big dough.
At any rate, assume they still netted $100m from this whole shebang. $100m in our hot little hands. Forget investing the whole amount. It costs $4m+ alone to pay for wages of a top 25 NRL squad, let alone the other costs of running the team and the ground for a season. I believe Zappia quoted something like over $8m a season. That amount of money won't guarantee the survival of the club on its lonesome over the next 10-20 years.
With interest able to be locked in so low now, we should be financing this thing with a mixture of long term debt and big investors (say a commercial property player if the shopping centre goes ahead). Sell the residencies with terms on the deeds relating to Woolooware Holdings received 10% of the sale of the residencies should any change in the legal interest in the property arise. Guaranteed income, for as long as it remains commercial property and also gets you the big capital income. Put in as much retail space as possible and impose Frank Lowe-esque retail tenancy agreements.
Pay off the debt at whatever rate is sustainable, and with sponsorships/club revenue plus the net of income from the development, potentially the club could be in a position of 100% ownership with certain income for a very long time.
