The British Grand Prix "was the first race on the Formula One calendar in 1950 and attracts the biggest crowds today with 140,000 spectators," according to Christian Sylt for FORBES. So "how have the organizers of the race got into so much financial difficulty that they have been driven to sell the track where it takes place?"
Silverstone, the home of the British Grand Prix, "is owned by the British Racing Drivers Club (BRDC), a group of 850 racing luminaries," who last week invited its members to Silverstone to discuss selling a long lease of the track to luxury car manufacturer Jaguar Land Rover.
According to a source at the meeting, around 110 members "were present and a show of hands suggested that they would be in favour of selling the lease on Silverstone." The process "appears to be motoring ahead and there is good reason for this." The BRDC had $40.7M of cash in the bank just 10 years ago "but a series of related decisions led to it being burned up." They "can all be traced back to one event." The BRDC’s problems began in '08 "when it came to light that rival British track Donington had snatched from Silverstone the right to host the British Grand Prix and had signed a 17-year contract beginning in 2010." Despite the fanfare, the plan to move the British Grand Prix to Donington "soon hit the buffers after its financier pulled out during the economic downturn." F1 CEO Bernie Ecclestone "had given the race organisers an ultimatum to produce a bank guarantee."
It left the British Grand Prix in limbo but the BRDC "stepped into the breach and took over the 17-year deal to host the race from 2010." Donington "committed to fully upgrading its facilities." Silverstone "also required significant upgrades" and Ecclestone insisted that it carry out the work in order to get the British Grand Prix contract.
The BRDC "decided to build a striking new pit and paddock complex known as 'The Wing.'" Construction of The Wing was funded with a $17.8M loan from British bank Lloyds as well as $17.3M "borrowed from the local council." The construction depleted the BRDC’s cash reserves by $25.4M and at the same time "the increase in debt boosted interest payments" which came to $4.4M by '12. To pay off the debt, in '13 the BRDC "sold a 999-year lease on 280 acres of land surrounding Silverstone." Although "this helped to clear the BRDC’s debt load it also had other consequences."
Firstly, it led to the BRDC losing $1.7M of rental income from the land "which put further pressure on the company’s margins." In addition to reducing rental income, selling the land around Silverstone "weakened the BRDC’s balance sheet." As every year goes by, the pressure on Silverstone "increases because the price of its F1 race hosting fee rises by 5% annually" (FORBES, 3/1).
