Hampton Downs officially in trouble

[Hitcher]

For heaven's sake. Don't put a cent into the current operation. Anybody with a serious interest in having a stake in Hampton Downs would be best to wait and negotiate with the receivers once the current overcapitalised operation has been wound up.

[Zedder]

For heaven's sake. Don't put a cent into the current operation. Anybody with a serious interest in having a stake in Hampton Downs would be best to wait and negotiate with the receivers once the current overcapitalised operation has been wound up.

There is no hard evidence currently about HD being in financial trouble though. In fact, some sources point to their problem as being one of exclusion from the "closed circle" of NZ motor racing.

[steveyb]

True enough, but at the end of the day when you 'go public' you are selling your company, you no longer own it, or at least the shares in it that you do not retain.
If business for a company like Mainfreight was so good, the original owners would have been able to fund it through debt equity, which is generally the most tax efficient manner in which to fund expansion (obviously to a point). By 'going public' the owners sold their company, hopefully made a neat return on their original position and either remained with the company as directors or employees (I have no idea if this is so) or left it to someone else to take the reigns.
Mainfreight is an example of a good company.
But there are plenty of examples of companies being dressed as purses when they are in fact sows ears and being sold to the market by 'going public'. Facebook is an example of that. Many $ being promised, but the reality struck home after the IPO when investors discovered how difficult it is to actually monetise some internet businesses, especially free service based business. Mighty River Power might just be another.
But Hampton Downs is land, bricks and mortar with considerable value in land and buildings if nothing else. Not enough to pay down the debt and certainly not enough to cover the costs of rehabilitation should the place be shut down.
The on-going business proposition of a motor racing circuit in NZ at the level of investment that has been put in place must be questionable. At the level of say Ruapuna it would be much better, but then we wouldn't be that interested in going there then would we.

As much as we would like it to continue, just one person on here tell us now that they would invest in HD if they were a high net worth individual (or group of individuals) looking for a sound investment (NOTE: investment, not just to purchase a plot of land that has some road and houses on). An investment returns value to the investor, at some time in the future, maybe next year, maybe ten years, but that's what an investment does.
Just one.

It's a lot like the Wellington Phoenix in many ways I think. It is generally a loss making business operation, but it returns value to stakeholders in many different ways. Wellnix have already halved the losses being made and bought new players at the same time and are committed to lifting the profile of football in Wellington and NZ and providing a pathway for NZ youth into professional sport. Maybe new investors/owners can do the same with HD by reducing the debt load and not being worried about taking a dividend for some time to come?
Fingers crossed.

[steveyb]

For heaven's sake. Don't put a cent into the current operation. Anybody with a serious interest in having a stake in Hampton Downs would be best to wait and negotiate with the receivers once the current overcapitalised operation has been wound up.

You mean undercapitalised.

From a hard cold business viewpoint you are of course dead right. But (and this is purely hypothetical) should the current operation be forced into receivership, there is no guarantee that the receivers would want to do anything but plow it under and turn it into a business park or subdivision or back into a farm (not that any might be successful) and cut their losses.

I think that receivership (and again, as stated above there is no real evidence that they are in real trouble and I certainly put my hand up for overstating that), would be a real shame for what is, and can be, a fantastic sporting and training and events facility. The re-investment in Pukekohe is certain to be a catalyst in this announcement and certainly can't do their business case any good at all. It is pretty unfair that one day everyone said Puke is dead (they did actually say that) and then turn around and say nup, we're spending more and it's all go again. But as they say, the market is blind and fairness is irrelevant. Whatever makes the best business case will win in the end, the market will dictate the outcome. I think that this is a really good case study for that actually. I wonder if there is any recourse to the law here?

Where will we end up going once we have the choice in the AKL region? You can bet your bottom dollar that Pukekohe will undercut HD rates and offer incentives to get events, classes and clubs back there. Various clubs and classes that have run at Puke for ever will just go back there because they want to and so on. V8 Supercars already going there, so they might well recover 25+% of their investment in one year!

But the simple fact that HD owners have gone to the market means that they need more money, or have been told to go and find more money, for whatever reasons.

[Hitcher]

You mean undercapitalised.

No I don't. Putting more capital into this business won't help. Well, not if those "investors" want a commercial return on their investment. Hampton Downs' owners are looking for a sugar daddy, not an investor.

If its value was reduced, then the owners wouldn't have to borrow money to service their debt. That must mean that it is currently overcapitalised?

[steveyb]

You mean if the debt was written off? How can it's 'value' be reduced unless there are write-downs to land/building/plant book values?
Which in turn means that they will be even less able to get capital because their gearing will be too high.

If the owners have borrowed $10, they need to repay $10 + interest over an agreed time scale, or call in the receivers and recover what 'value' they can.
I can't see anyone with a lien on the business/assets wanting to write down their lien.
If new assets need creating/purchasing (e.g. track extension) in order to generate more revenues, the only way to do that is by buying them, with capital.
I think however, that the level of revenues currently being received might indeed be maxed out. Unless they think really outside the square, how many more trackdays/racedays/training days can they sell? How much higher can the charge out rate go? Most of us already bring our EZi-Ups and sandbags rather than rent garages. That is how we roll in NZ.

As for a sugar-daddy, I am not sure I necessarily disagree with you, but I am willing to cut them some slack for now and hope that they can find a good solution. And why not look for a sugar daddy? If someone wants to buy in, they will, but with their eyes wide open I am sure.

But I can't say that I as an individual have helped them much. I have paid for three Cali Supebike School students for two days each, two days in a gge (other days under an EZi-Up), three rider entries and some food and drinks. Not much help there on my part.

[Zedder]

You mean undercapitalised.

From a hard cold business viewpoint you are of course dead right. But (and this is purely hypothetical) should the current operation be forced into receivership, there is no guarantee that the receivers would want to do anything but plow it under and turn it into a business park or subdivision or back into a farm (not that any might be successful) and cut their losses.

I think that receivership (and again, as stated above there is no real evidence that they are in real trouble and I certainly put my hand up for overstating that), would be a real shame for what is, and can be, a fantastic sporting and training and events facility. The re-investment in Pukekohe is certain to be a catalyst in this announcement and certainly can't do their business case any good at all. It is pretty unfair that one day everyone said Puke is dead (they did actually say that) and then turn around and say nup, we're spending more and it's all go again. But as they say, the market is blind and fairness is irrelevant. Whatever makes the best business case will win in the end, the market will dictate the outcome. I think that this is a really good case study for that actually. I wonder if there is any recourse to the law here?

Where will we end up going once we have the choice in the AKL region? You can bet your bottom dollar that Pukekohe will undercut HD rates and offer incentives to get events, classes and clubs back there. Various clubs and classes that have run at Puke for ever will just go back there because they want to and so on. V8 Supercars already going there, so they might well recover 25+% of their investment in one year!

But the simple fact that HD owners have gone to the market means that they need more money, or have been told to go and find more money, for whatever reasons.

You're right, they do want more money, which means they are undercapitalised. They want to "tidy things up" because they haven't got the support of Motorsport NZ like the other car clubs have.

Incidently, those clubs are losing confidence in Motorsport NZ and can't see where their $1million per annum fees go so if the HD guys are sensible they're probably targetting them. And if Tony Quinn comes back with a better offer as well it's all good.

[steveyb]

Yeah I know, man if we think the politics in Motorcycling NZ (witness the Classic register thread) are tough, it ain't nothin compared to the Motorsport NZ stuff (and to think I nearly applied for a job with motorsport nz last year!! Went to the offices to chat and it was like a damned mausaleum!!)
Even within the clubs and classes the politics are heavy.
Is it a case of the tall poppy cutting its petals off to spite its stamen??? or something like that.
If HD management are being effectively snubbed by MSNZ it is hard to see it cos they have many high profile events and classes there. But nothing would surprise me.

Why am I belting on about this? I find studying business start-ups intensely interesting and of course being into motorsport this is even more interesting. Starting a highly capital-dense business in NZ is just almost impossible. It is just so difficult that I wonder why anyone actually does it.

[300weatherby]

interesting to learn from the stuff piece that the investment is $70m. If memory serves the white elephant that is the dunedin stadium was $100M.

I agree with you entirely as regards the eggballers. the thing that gets me is this: they use, and expect to have built for them, costly infrastructure by the public. They then expect that same public to pay top dollar to use it, while any profits made by the private, for-profit entities that control that eggball are held by the eggballers. So it is publicly funded and profits are private. Then when it goes horribly wrong like it has in dunedin, the public are asked to help out. I am not sure who rescued Otago rugby from liquidation (was it private or public money, or the NZRFU?) but I think thats a case study of what not to do.

Dave Cull was elected in Dunedin pretty much due to his opposition to the stadium. the problem is, the poor fuckers are stuck with it, and the only thing they can do is gouge their ratepayers to fund it. And I see they are going to make a capital loss on the sale of Carisbrook to Calder Stewart. Awesome business dealings guys, just awesome.

A little off topic maybe, but I (among many ) will forever hate the mfking council that decided to sell an iconic piece of NZ and Otago history (that was usefull and in good working order) to see it destoyed in pursuit of the developers dollar, imagine the wailing and carry on if they tried to sell some dump of a shiitty old marei......

[DEATH_INC.]

Hampton was doomed from the start. It was invented by a bunch of F5000 guys without the proper finances to see it through, spent it in places where there wasn't sufficient recovery, and also failed to generate the $$$$ they thought they could.
It had a heap of uphill battles which can't have been researched properly before it started, including fighting the ltsa.
The idea was great, the execution wasn't.
As a note, they were made an offer for the place that was within a few thou of their asking price...and turned it down.

[DEATH_INC.]

A little off topic maybe, but I (among many ) will forever hate the mfking council that decided to sell an iconic piece of NZ and Otago history (that was usefull and in good working order) to see it destoyed in pursuit of the developers dollar, imagine the wailing and carry on if they tried to sell some dump of a shiitty old marei......

Yeh...remember Baypark?

[roogazza]

There is no hard evidence currently about HD being in financial trouble though. In fact, some sources point to their problem as being one of exclusion from the "closed circle" of NZ motor racing.

If that is the case it might be the death Nell and I suppose Puke will be trucking on, long after the grass is poking thru the HD surface.
How can they survive without Motosport NZ ?

[slowpoke]

Hampton was doomed from the start. It was invented by a bunch of F5000 guys without the proper finances to see it through, spent it in places where there wasn't sufficient recovery, and also failed to generate the $$$$ they thought they could.
It had a heap of uphill battles which can't have been researched properly before it started, including fighting the ltsa.
The idea was great, the execution wasn't.
As a note, they were made an offer for the place that was within a few thou of their asking price...and turned it down.

Harsh bro', you haven't mentioned a lil' inconvenience called the GFC that effectively torched EVERYBODY'S business plan and redefined a whole generation's worst case economic scenario. The HD developers are no different to 99.9% of us in being caught with plummeting property values and revenue.

No way can you envisage every difficulty with a project of this size, (you can't even do it building a simple house, that's why there's always a contingency figure) and given the duration of the project no way can you predict which way the bureaucratic (both local government and motorsport) winds will blow upon completion. Puke has been in it's supposed death throes for years, who'd have predicted a redevelopment there? Who could predict the Hamilton debacle souring the public's perception of investment in motorsport?

So what if they turned down an offer. If it didn't make economic or personal sense that's their right isn't it? And given all the above the place is still afloat, while many other buisnesses have gone to the wall so I'd say that a "bunch of F5000 guys without the proper finances to see it through" haven't done too bad. Doomed from the start? WTF? I don't even like the place but I can see the potential, and given slightly different circumstances we'd be raving about a world class facility.

[BoristheBiter]

No way can you envisage every difficulty with a project of this size, (you can't even do it building a simple house, that's why there's always a contingency figure) and given the duration of the project no way can you predict which way the bureaucratic (both local government and motorsport) winds will blow upon completion. Puke has been in it's supposed death throes for years, who'd have predicted a redevelopment there? Who could predict the Hamilton debacle souring the public's perception of investment in motorsport?

If you can't then you will pay someone that can or you will have no end of problems.

For starters the track;
who designed it and didn't check with the local boards as to what they would be allowed to do?
Who thought that the placement of the start/finish straight was a good one?
Who designed what the track would made on/with and to what standard and what if the track failed?

These are 3 easy questions that they seemed to over looked that have cost them a lot of money that I would guess was marked for something else.

It looks to me as if they didn't do their due diligence correctly and it has bitten them big time.

[Zedder]

If that is the case it might be the death Nell and I suppose Puke will be trucking on, long after the grass is poking thru the HD surface.
How can they survive without Motosport NZ ?

If HD got the same shareholding deal in the Motorsport NZ subsiary company as the Manfield, Ruapuna,Teretonga and Pukekohe tracks, it would certainly boost them a lot.

Currently though, they appear to be getting a bit of a "chuck the dog a bone" deal and this is where it starts to get messy. Motorsport NZ say HD never asked for a shareholding while HD say some of the the rules Motorsport NZ impose are anti-business and they can't work with them.