The £76.5m Chelsea hotel deal that Premier League refuses to sign off
It should have taken the Premier League ten days to approve Chelsea’s sale of two hotels to a sister company for £76.5million — but ten months after the deal was executed it has still not been signed off as being of “fair market value”.
The lengthy delay leaves uncertainty hanging over whether Chelsea have complied with the Profitability and Sustainability Rules (PSR) for the 2022-23 season. It also raises questions over whether the club have appealed against the Premier League’s valuation.
The most recent company accounts for the Hotel at Chelsea Ltd, signed by the director and Chelsea co-owner Behdad Eghbali, state that as of March 5 this year the assessment had not been concluded and that the outcome could have an impact on the value of the sale.
That is potentially very important for Chelsea, who need the £76.5million profit from the sale to ensure they club meet the league’s PSR limit of £105million losses over three years.
Should the Premier League insist the value of the sale should be lower, it is possible that could put Chelsea in breach. Given the time already taken over the assessment, any PSR breach for 2022-23 would now have to be dealt with next season.
This kind of transaction between associated parties is no longer permitted by the EFL, but the loophole has not been closed by the Premier League. However, it still needs to be satisfied that the value of the sale has not been inflated.
Premier League rules say its board “will conclude that fair market value assessment [and communicate its findings, including whether the board approves the relevant transaction, to the club] within ten clear working days … save where further time is required due to exceptional circumstances or the requirement for further information from the club in order to reach a conclusive decision”.
The most recent company accounts for the Hotel at Chelsea Ltd, signed by Eghbali, right, state that as of March 5 this year the assessment had not been concluded
One possible reason for the delay is that the Premier League has asked for more information from Chelsea, and that there has been a lengthy back-and-forth between the parties.
Another possibility is that the Premier League’s board has ruled that the sale was not for a fair market value and Chelsea have taken the case to an arbitration panel to make a decision. Both the club and the Premier League have declined to comment.
Kieran Maguire, a football finance author, said that a drop in the accepted value of the hotel sale could mean Chelsea breaching PSR for 2022-23. He added that he could understand why fans of clubs such as Everton and Nottingham Forest, who have been docked points for breaching PSR last season, were frustrated at the lack of transparency.
“There is no guidance or transparency from the Premier League around Chelsea and this is what is upsetting fans of other clubs,” he said. “Everyone wants a level playing field and that doesn’t seem to be the case.”
The Millennium and Copthorne Hotels and car parking were transferred from Chelsea FC Holdings Ltd to Blueco 22 Properties Ltd on June 29 last year, according to company accounts. Both are subsidiaries of Chelsea’s holding company Blueco 22 Ltd, and Eghbali, as well as Chelsea’s chairman, Todd Boehly, and club director, Jonathan Goldstein, are the only three directors of the property company.
The accounts of Hotel at Chelsea Ltd, a subsidiary of Chelsea FC Holdings Ltd, state that the conclusion of the Premier League’s assessment was still outstanding as of March 5 this year and “may result in a material change to the gain recognised in these financial statements”.
As previously reported by The Times, the accounts of Chelsea FC Holdings and of the Hotel at Chelsea Ltd only explain where £32.8million of the £76.5million profit comes from in relation to the sale of the hotels to Blueco 22 Properties Ltd — leaving questions around the remaining £43.7million.
The hotel company’s accounts also state it “will continue to operate the hotel on behalf of the new freeholder under a management arrangement”, which means Chelsea should benefit from the income.
Chelsea reported an annual loss of £89.9million for 2022-23, but it would have been £166.4million without the hotel deal. The club also reported a further £30.6million as “other operating income”, including recharging £17.1million in “litigation costs” to their holding company and a £12.5million settlement fee, though it is unclear what that was for.
Chelsea had the second-highest wage bill in the top flight in 2022-23, behind Manchester City, of £404million, though that sum is believed to include payoffs for sacking the managers Thomas Tuchel and Graham Potter. Despite the salary costs and losses, Boehly said he expects the club to comply with the Premier League’s financial rules “in the foreseeable future”.