Flagging business interests in the US see the Glazers relying more and more on United, writes David Conn

THE ONLY significant business owned by the Glazer family besides Manchester United and the Tampa Bay Buccaneers has been severely hit by the recession and is carrying over half a billion dollars in debt.

An investigation carried out by the investment analyst Andy Green in conjunction with the Guardian and the BBC’s Panorama programme reveals for the first time the financial health of the family’s business interests in the US. It centres on First Allied Corporation, the Glazer company which owns and rents out shopping malls across the US. First Allied is registered in New York and Delaware, where private companies do not have to make their accounts public, but Green found publicly traded mortgages on 63 of the 64 shopping centres First Allied lists on its website.

The insight those mortgages provide into First Allied’s difficult financial position makes it clear that the Buccaneers and United – which is €866 million in debt as a result of the Glazers’ takeover – represent the family’s principal businesses and sources of cash, now and in the future. It makes clear that there is very little chance the family’s other businesses will contribute to clearing United’s debt, and raises the possibility that family members will need to continue drawing loans and consultancy fees from the club – they have done so to the tune of £27.6m so far – to finance their lifestyles.

Analysis of mortgage documentation has revealed that four First Allied shopping centres have recently fallen insolvent due to low occupancy. Receivers have been appointed to sell those malls in Columbus, Ohio; Denton County, Texas; Roswell, Georgia and Cobb County, Georgia.

The mortgages were almost all for loans taken out against the shopping centres with Lehman Brothers, the US investment bank which collapsed in 2008. Twenty-five were remortgages taken out in 2004, the year before the Glazers bought United. Those deals released €69m in equity, with a further €24m equity freed from remortgages in 2006 and 2007. A Glazer family spokesman declined to comment about whether this was how the family raised part of the €328m cash paid to buy United. The Glazers borrowed the other €675m to buy the club, €332m of it in high-interest “payments in kind” from hedge funds, and have made the club responsible for paying it all off.

The public trading of the mortgages means detailed financial information about the shopping centres is disclosed monthly by the trustees of the mortgage packages, Bank of America Merrill Lynch and Wells Fargo. The latest figures, to the end of last month, show that besides the four shopping malls which have gone into receivership and Lakeview Crossing now shown to be in default, 28 are on a “watchlist”, meaning the banks are concerned about whether the rental income will be enough to service the mortgages. Seventeen centres receive rent insufficient to cover the required mortgage repayments. The First Allied portfolio is heading for a major further challenge because the mortgages on 30 of the 63 centres are on interest only periods which end this year.

Centres elsewhere are enjoying full or almost-full occupancy and making a profit above their mortgage repayments. The analysis shows overall that the Glazers have €475m outstanding in mortgages, and the total rent First Allied received meant the company cleared €8.1m before tax last year. First Allied is still above water, therefore, but that total for earnings is nothing like the income required if the Glazers’ €244m, 14.25 per cent interest, “payment in kind” loans at United were to be repaid from this outside business.

“The picture of First Allied revealed by the mortgages shows that although we have always been told the Glazers are very successful, they do not have a business besides the Bucs and United – which they bought with debt – generating much money at all,” concludes Green.

The Glazers accept their property business has been badly affected by the economic downturn, although they point out that €8.1m does at least represent a profit in a sector which has seen spectacular collapses, in the US and here.

In the prospectus launched by the family in January to borrow €604m in bonds for United, First Allied Corporation was the only “principal outside business interest,” besides United and the Bucs, listed by any of Malcolm Glazer’s six children, all United directors.

Edward and Kevin Glazer said they were officers of First Allied; Avram, Joel and Bryan Glazer listed United and the Bucs, while Darcie Glazer-Kassewitz, Malcolm’s daughter, said she was co-president of the Glazer family’s charitable foundation, which is associated with the Bucs.

The absence of other businesses may explain why the Glazers remain so determined to hold on to United – they believe the club’s commercial income will continue to boom – despite the family’s deep unpopularity with supporters. The Glazer camp, supported by United’s manager Alex Ferguson and chief executive David Gill, have stressed in recent months that United is financially secure despite interest payable last year of €83m, and the total in interest, fees and charges since the takeover, of €555m.

The spokesman for the family pointed to United’s increased earnings – up to €336m last year – stressing that the club has generated substantial cash and its priority is to provide Ferguson with money to strengthen the squad.

These revelations highlight how much the family needs United fans to keep paying their money. Only by United remaining commercially successful can the family pay their debts, and earn a return from what was the world’s richest, debt-free club. Guardian Service