Manchester City Council has received just under £3m from an arrangement that entitles it to a share of the “super-profits” generated by developments built on its land by Manchester City’s owners, and the authority expects a further payment soon. The council says the wider regeneration has been worth £1.25bn to the city.
The overage deal was struck in 2014. It provides for the council to receive payments when profits made by Abu Dhabi United Group (ADUG) on schemes in Ancoats and New Islington rise above a set threshold. Overage arrangements are common between public authorities and private developers, and are designed to ensure the authority takes a share of the uplift when land it owns becomes more valuable because of development or because it is sold.
ADUG, which is owned by Sheikh Mansour bin Zayed Al Nahyan — a senior member of the Abu Dhabi ruling family and the UAE’s current vice president and deputy prime minister — bought Manchester City in a £200m deal in 2008. Over the following decade the club won the first three of eight Premier League titles, and ADUG and the council became partners in a company called Manchester Life.
Under the partnership, ADUG was able to lease council-owned development sites across east Manchester, close to the club’s stadium. In 2018 the Premier League began investigating the club’s financial dealings and, last week, announced the club had been found guilty of 115 charges, including some relating to a so-called disguised funding scheme said to have involved the owners topping up sponsorship and commercial deals with more than £800m of their own money. The club continues to deny any wrongdoing and has until 2 October to submit an appeal. The case has brought the council’s relationship with ADUG under renewed scrutiny.
Prof Adam Leaver of the University of Sheffield, a co-author of a 2022 report into that relationship, said commercial secrecy around the arrangements made it difficult to judge whether the council had secured the best value it could. He pointed to the difficulty of seeing how much profit had been remitted to ADUG from connected companies registered in Jersey, where there is far less transparency over corporate finances. “So we can’t compare how much profit was received by the council relative to their ADUG partner,” he said. The terms of the overage agreement were also kept from public view, he added, meaning it is not possible to know how much profit ADUG had to make before it was obliged to hand the council a share.
According to Leaver’s 2022 Manchester Offshored report, about 10 acres of land were transferred into Manchester Life’s control, and about £112m of property sales had been made by companies ultimately owned in Abu Dhabi.
In July this year the council disclosed that reviews of how it managed and monitored overage deals with developers had found “weaknesses in documentation, monitoring and assurance, particularly around historic overage arrangements”. Leaver said: “It’s unclear what prompted this concern with overage, but it doesn’t look great.”
The council said the deals had been made in the wake of the credit crunch and the 2008 financial crash, when there was “very little market interest in the area”. A spokesman added that “each parcel of land was valued by independent experts… and the best overall deal was achieved for each site”.
Leaver disputes the suggestion that the area held little appeal at the time. He said development in Manchester “dwindled until around 2012” but that the market “picked up from 2013 onwards”, around the point the Manchester Life partnership was formed. He cited “significant investment” in 2014 and 2015, a “growing new population in Ancoats”, the Royal Mills project, the Ice Plant development and the regeneration of Cutting Room Square. “Small trendy businesses were also in the process of moving into the area, indicating that gentrification was already under way in Ancoats as a natural spillover from the successful regeneration of the Northern Quarter, before the Manchester Life agreement was sealed,” he said, adding that land values were rising and developers were “beginning to rediscover profitable opportunities and take more risk following the financial crisis”.
The original Manchester Life plan envisaged more than 6,000 homes built with investment of up to £1bn over a decade. So far the schemes have delivered about 1,500 homes, across nine sites, within what the council calls a “£1.25bn programme of regeneration”. It is not clear whether the gap between the original plan and the outcome has had any impact on how much the council stood to receive from the overage deal.
The council says it has calculated that its overall payment equates to about “£26,000 per home… representing an above-market return for land that had failed to attract market interest since the 2008 financial crisis”. A spokesman said the programme included 1,500 new homes, with hundreds more on site, the preservation of two historic mills, 30,000 sq ft of commercial space attracting independent businesses and thousands of new residents. He described the regeneration of Ancoats and New Islington as “an internationally recognised success story”, noting that Ancoats had been named one of the best places to live globally, and said more than 3,400 homes had since been completed in the area by a range of developers, including homes for social rent and affordable tenures.
Sir Richard Leese, who led the council when the deals were agreed and is now honorary president of Manchester City, told the BBC that “the investment from Abu Dhabi is what created the value”. Leaver said his own conversations suggested that was not the case, and that there had been quite a bit of interest in developing the land.
The fallout from the Premier League case has prompted concern that wider UAE investment in UK projects could suffer, with Bloomberg reporting that Emirates officials had warned it “could have an influence on the bilateral state relationship”. Before that warning, Prime Minister Andy Burnham, who was metropolitan mayor of Manchester from 2017 until entering Downing Street this summer, said he would be “really concerned” if ADUG were to pull out of Manchester over the Premier League investigation. The intervention drew criticism from political opponents, with shadow sports minister Louie French reported to have accused Burnham of “publicly backing the owners”.
Burnham has now said he will publish details of all his dealings with Manchester City and ADUG during his time in charge in Manchester. “I’ve been asked by the leader of the opposition to publish details of my meetings, which I’m happy to do and I’m going to,” he said. “I will quite clearly put out there everything that I have done working with them in my previous role as Mayor of Greater Manchester.”