Yn sgil y stori sydd wedi torri ar Newyddion 9 heno am y telerau rhyfedd rhwng S4C a Choleg y Drindod ynglyn a thaliadau rhent y naill i'r llall wedi i bencadlys y sianel symud i Gaerfyrddin, dyma gyhoeddi'r ddogfen mae stori'r BBC wedi ei seilio arni - glaniodd yn fy ebost innau hefyd.
Rwan mae'n siwr nad ydi bob dim sy'n ymddangos ar Flogmenai werth ei ddarllen - ond mae'r
ddogfen yma yn sicr werth ei darllen - mae'n ddadansoddiad trylwyr a fforensig o'r ddel ryfedd rhwng S4C a'r Drindod - ac mae'n ei gwneud yn gwbl, gwbl glir bod y telerau hyn o fantais sylweddol i'r Drindod ac o anfantais sylweddol i S4C. Os ydi'r ffigyrau mae'r ddogfen yn eu dyfynnu yn agos at fod yn gywir mae'n ymddangos bod y sianel wedi cymryd y cam hynod anarferol o dalu rhent masnachol flynyddoedd maith o flaen llaw, ac wedi cael telerau hynod anghystadleuol fel gwobr am eu caredigrwydd.
Y cwestiwn diddorol wrth gwrs ydi pam? Cyfrifoldeb ymddiriedolwyr S4C ydi amddiffyn buddiannau'r sianel. Ac eto mae'r telerau mae'r sianel wedi cytuno i gytundeb hollol unochrog - a hynny er mantais i'r Drindod ac er anfantais i S4C. Pam?
Byddwn yn dychwelyd at hyn oll eto - ond yn y cyfamser darllenwch y ddogfen, da chi.
S4C, University of Wales Trinity St David and ‘Yr Egin’
S4C’s proposed move to a new building (Yr Egin) on the University of Wales Trinity St David (UWTSD) campus in Carmarthen is surrounded by both controversy and mystery. The most mysterious element is S4C’s decision to handover £3 million pounds in a single upfront rentpayment to UWTSD as it moves into its new HQ. A sum that the BBC reported last week would cover 20 years of rent. The following will attempt to offer a factual analysis of the deal on the basis of publicly available information.
Evaluating the deal
The main problem faced in seeking to evaluate the arrangement between S4C and UWTSD is that both are (infamously) among the least transparent public bodies in Wales. Information is, therefore, at a premium. Nonetheless, a number of facts are now in the public domain and it is possible to make some calculations on their basis. But before we do so, it is important to note two key claims that S4C has repeatedly made about the nature of its proposed move to Yr Egin.
First it has claimed the move will be ‘cost neutral’. The basis of this claim has never been adequately explained. It is even less clear how (or, indeed, if) the channel’s arrangement with UWTSD represents value for money.(Even if the elision has been implicit in S4C’s public statements, cost neutral does not necessarily equate to value for money.)
Secondly, the channel’s leadership have claimed that their relationship with UWTSD in the context of ‘Yr Egin’ is simply that of a ‘tenant’ – albeit an ‘anchor tenant’.
The UWTSD perspective
S4C’s decision to handover £3M in a single, upfront rent payment at the start of its occupation of ‘Yr Egin’ to cover a 20 year period of rent represents unalloyed good news and a major financial benefit for UWTSD. It seems certain that the University would otherwise have had to borrow the money that S4C intends to handover and pay the attendant interest costs. One way to estimate the benefit is to use the interest rate on Cardiff University’s recent bond issue – ‘the lowest yielding higher education bond in UK history’ – namely 3.1%.On this basis, S4C’s initial payment of £3M will have been worth £4.03M to UWTSD by the end of the 20 year period. This is almost certainly a very significant underestimate of the true benefit to UWTSD.
S4C’s rent compared
From the perspective of S4C the benefits of the proposed arrangement are far less obvious. At £3M for 20 years, the channel will be paying the equivalent of an (inflation proofed) annual rent of £150K.
Does this sum represent value for money? Given the lack of transparency of the principal parties, the only way to seek to answer this question is to look at equivalent rental rates in the nearby area. Of particular relevance here is Y Llwyfan, a nearly-new building on the UWTSD campus that stands immediately adjacent to the proposed site for Yr Egin. This building houses offices – including headquarter offices – for a number of organisations, bodies and companies, the largest of which is the Coleg Cenedlaethol Cymraeg (CCC). A Freedom of Information request submitted to the CCC has yielded the following:
The Coleg Cenedlaethol Cymraeg (CCC) currently pays £25,939.20 in annual rent for its offices – the CCC’s main office – on the UWTSD campus; offices that are occupied by some 20 staff.
In addition to being located in offices adjacent to yr Egin, the CCC also provides a useful comparison for S4C in that the offices of both bodies will be used for broadly similar purposes. S4C’s technical operation will not be moving to Caerfyrddin but will rather be co-located with the BBC Wales in the latter’s new Cardiff headquarters. This means that the jobs being moved to Yr Egin will be focused on the channel’s commissioning, financing, communications and marketing, and internal governance activities. In other words, they will be desk-based similar to those at the CCC jobs.
But of course, the CCC staff contingent of 20 is smaller that S4C’s proposed 55 for the Egin site. So adjusting on a pro-rata basis, if S4C were paying rent to UWTSD on the same basis as CCC, they would be faced with an annual rental bill of £71,332.80. Over 20 years and adjusting for inflation on the basis of the OBR long-runestimate for inflation (2%), this would gives a total cost to S4C of £1.73M, or an annual average (of £87K per annum). Put in other terms: if S4C were paying rent to UWTSD on the same basis as the CCC, then even after adjusting for inflation,a £3M payment would cover 31 rather than 20 years of rent.
CCC pro rata
Average annual rental payment (over 20 years)
£150K (inflation protected)
£87K (inflation adjusted)
Total payment for 20 year period
Clearly, even if the CCC appears to provide a fair comparison for S4C’s requirements at Yr Egin, it is not an exact comparison. Nonetheless, the gap between what S4C is planning to pay and what a broadly equivalent tenant is already paying is very substantialindeed. On this basis, the Egin deal appears to represent very poor value for money for the channel.
The £3 million question
But ‘value for money’ and even ‘cost neutrality’ are called into further question once we take into account the origins of the £3M that S4C currently seems determined to handover to UWTSD. Whilst details are opaque, observers of the Egin deal have been led to believe that the £3M will be raised by selling S4C’s current headquarters in Cardiff. At any rate, there is no suggestion that the sum will be raised through borrowing. This means that an obvious alternative to paying £3M upfront would be to invest the sum and use the interest accruing to help pay the rent on the channel’s new headquarters.
As some indication of the figures involved, if S4C were paying rent on the same pro rata basis as CCC (i.e. at £71,332.80), a long-run rate of return of 2.4% paid on £3M would be sufficient to ensure that S4C could make it's first annual rent payment without any erosion of the principal sum.
At a long-run rate of return of 4% then the £3M would generate more than enough of an investment return (at £120K in the first year) both to pay rent at the ‘CCC rate’ of at £71,332.80 but also to add the remainder to the principal. Indeed, assuming that the rent paid increased at the annual rate of inflation (the OBR’s estimate is 2% p.a.), then at along-run rate of return of 4%, an endowmentof £3M would be enough to pay the rent for no fewer than 85 years.
Even paying rent at an initial and apparently excessive £150K, and taking into account subsequent rises in rent (at 2% per annum), then at long-run rate of return 4% per annum, S4C’s £3M would be enough to pay for 25 years worth of office space at Yr Egin.
In assessing the S4C/UWTSD deal much hinges on the assumptions made, not least about future interest rates and future rental inflation rates. Given the lack of transparency of the parties involved, we have no idea what (if any) calculations have been made by S4C about the various possible options for funding its new HQ, and on the basis of which assumptions.
But the only publicly available evidence suggests that, despite its willingness to pay 20 years of rent upfront and thus provide a very substantial financial benefit to UWTSD, S4C is preparing to pay well over the odds for its new home. Not only that, but once forgone interest payments are taken into account, S4C’s claim that its move to Yr Egin will be ‘cost neutral’ (even for S4C alone) must also be called into question. Rather its decision and apparent determination to handover £3M to UWTSD as upfront rent looks set to substantially erode the channel’s long term financial position, again to the benefit of UWTSD. If S4C is right in characterising its relationship with UWTSD as being simply that of ‘tenant’, then it is, by any standards, an astonishingly generous one. Given that the channel’s senior officials so regularly lament its financial position, it is a level of generosity that is hard to fathom and even harder to justify.