What is the value of an REC?

[Racenut]

Just been considering how hard it is for a young drive to be 'picked up' by a V8 supercar team, is another option to set up your own?

Does anyone know (not guess) the value/cost of an REC in the current market? How much to buy? How much to lease?

[GTRMagic]

Originally Posted by Racenut

Just been considering how hard it is for a young drive to be 'picked up' by a V8 supercar team, is another option to set up your own?

Does anyone know (not guess) the value/cost of an REC in the current market? How much to buy? How much to lease?

The buy price of anything is what someone is prepared to pay. The sell price is related to firstly what it cost them in the first place, and whether the buy price is somewhere in line with that.

There would be very few RECs with a book value of less than the $1.5m mark where they were most recently sold. Some were resold for reportedly closer to $1.7m, and a couple at the $2m mark.

The REC offers the licence to play with the big boys & girls.. and the market has seen at or around the $1.5m value level for some time.

That the income for these RECs has fallen to zero (well zero cash, they do get free dry tyres) doesnt change the cost of ~$1.5m in the books of those holding them. So they likely arent for sale at a price lower than this.

A lease depends on who you might lease to. The lease reassigns the requirement to operate a car to the entity leasing the REC from the owner, such that the REC owner isnt required to front a car in the event of default by those leasing their REC.

Having said that, in a 2 year maximum leasing length, if an entity leases for the first year, and falls over before the end of the first year, it is said that the REC owner must front a car in the second year or stare down the barrel of the liquidated damages fines for round non-attendance.

Similarly, if the REC owner sells their REC, the lease may or may not be terminated, potentially leaving the team leasing the REC without a licence to ride...

The cost of a lease is a buyer & seller market too. Some are at the top end of the scale, at 35% of the value the REC on an annual basis, for each year of the lease. Others have been done for the the value of the REC income, back when it was $800k per annum. Others are free.. just to lock the REC up, and hold it until the next plans can be enacted.

How fast can you afford to go...

[Racenut]

Thanks GTR, on that basis owning an REC would be a good investment, where else could you get that sort of return.

If a young driver owned an REC that would make him/her quite attractive for some teams I would imagine.

[D.R.T.]

Originally Posted by Racenut

Thanks GTR, on that basis owning an REC would be a good investment, where else could you get that sort of return.

The value of the REC were built up over years of income derived from it.

The lack of income this year and next will no doubt reduce the value of them in the market.

The next tv deal will influence this as well.

[Tourer]

Originally Posted by D.R.T.

The value of the REC were built up over years of income derived from it.

The lack of income this year and next will no doubt reduce the value of them in the market.

The next tv deal will influence this as well.

Some truth in that but REC's (or the previous Franchise Agreements) were changing hands for a mill plus in the early noughties before many of the larger jumps in revenue.

There is value in the REC to people who want to be in the main game for various reasons plus an REC gives you the opportunity to be in the main game and develop strong sponsorship revenue which may well be a substantial earn.

Whether or not you actual do those sponsorship deals is of course another thing entirely.

[peckstar]

have any RECs been sold since the Archer take over?

A REC is worth considerable less as a result of that sale. Dropped by about a third

[Umai Naa]

The PMM RECs would've changed hands after the Archer takeover, but apparently a slae never took place. Just a couple of lease agreements.

Betty K purchased an SBR REC as part of the buyout, but the purchase price would be difficult to detirmine, if it was bought as a package deal.

[racer69]

Originally Posted by Racenut

Thanks GTR, on that basis owning an REC would be a good investment, where else could you get that sort of return.

If a young driver owned an REC that would make him/her quite attractive for some teams I would imagine.

Yes and no

While owning an REC guarentees you a place on the grid, you (or a team, depending on what deal you can do) still needs to come up with the budget to run the car after you've already forked out $1.5 million or so just to be eligible to compete.

The RECs will always have a value of some sort, particularly when they are as limited as they currently are and if you want to run in the series, you need to have one.

[fomoco]

what ever you want to pay for it

then have the $$$$ to be at the pointy end or lease it.

[TWRv12]

Ok, so if I splashed out $1.5 million, whats the min' it would cost to buy and run a car for a year?

Saving that what do get if you rent a REC?

[fomoco]

Originally Posted by TWRv12

Ok, so if I splashed out $1.5 million, whats the min' it would cost to buy and run a car for a year?

Saving that what do get if you rent a REC?

not much change from $7 mil to run a team:

Base /workshop ( staff, everyday costs, )
Transporter ( fuel tyres etc)
Crew ( wages , accomodation etc )
Engineer ( poach one or develop one)
Driver (hopefully can pay)
Spares (budget for 1 mill + , two bad smashes can be costly)
promo stuff(sponsor should cover that)
travel, etc etc

leasing it, garenteed income , not a huge outlay to race, just have to choose what is better for the bank balance

[mayhem]

With the amount of sponsors (and in some case pay-drivers) walking away at years end (HiFlex, Irwin, Fujitsu, HHA etc), and the obligations associated with a REC, won't some teams in particular have their backs to the wall to run in 2014? And if that's the case, surely that reduces the price of a REC on the open market? Or am I missing something?

[GTRMagic]

Originally Posted by mayhem

With the amount of sponsors (and in some case pay-drivers) walking away at years end (HiFlex, Irwin, Fujitsu, HHA etc), and the obligations associated with a REC, won't some teams in particular have their backs to the wall to run in 2014? And if that's the case, surely that reduces the price of a REC on the open market? Or am I missing something?

Only if those RECs for sale have sponsors leaving.

Three of the 4 operations you describe are family owned, and have access to monies other that strictly commercial backing...

While a fire sale may occur when a REC holder doesnt have the budget to run a car, and an opportunistic purchaser may offer a lower number to remove the risk associated with not turning up..

[tandino]

Why the two year limit for leasing an REC?

[GTRMagic]

Originally Posted by tandino

Why the two year limit for leasing an REC?

To remove the financial speculators from buying up the RECs and leasing them out at top rates... and arguably not contributing anything to the sport in the process

[Racenut]

It could be a good strategy for some of the 'older' drivers like Russell Ingall and Greg Murphy to prolong their career. It would certainly make them more attractive.

[twinwebbers]

Originally Posted by Racenut

It could be a good strategy for some of the 'older' drivers like Russell Ingall and Greg Murphy to prolong their career. It would certainly make them more attractive.

Perhaps a good idea for some of the younger drivers to consider doing that now. But when your close to retirement would you consider 'paying' $1.5 million to prolong your career?

[GTRMagic]

Originally Posted by twinwebbers

Perhaps a good idea for some of the younger drivers to consider doing that now. But when your close to retirement would you consider 'paying' $1.5 million to prolong your career?

If a REC can be resold for at or around the purchase price, and the REC holder has earned an income from holding the REC (which is said to be on track for 2014...), then its not a bad place to land some investment dollars...

[tandino]

Originally Posted by GTRMagic

To remove the financial speculators from buying up the RECs and leasing them out at top rates... and arguably not contributing anything to the sport in the process

Fair enough. Sounds pretty logical.

[GTRMagic]

Wonder if This Article may just have increased the value of the existing REC's

[Mixer]

Originally Posted by GTRMagic

Wonder if This Article may just have increased the value of the existing REC's

So RBR gets a REC and what happens to the 2 that are being absorbed? Does V8SA just pay out a "market rate" to the owner?

[Gaz170]

Who is currently in the market for a REC.
SBR - need one to replace the leased TP DJR rec.
888 - need one for SVG

anyone else?

[GTRMagic]

Originally Posted by Gaz170

Who is currently in the market for a REC.
SBR - need one to replace the leased TP DJR rec.
888 - need one for SVG

anyone else?

There was noise around Eggleston Motorsport wanting to move up to the main game in a customer 888-mobile...

[Umai Naa]

Do you think with enough interest, and evidence of solid business plans outlining strong financial support, that V8SC might just free up more than one stagnent REC?

[Mixer]

Originally Posted by Umai Naa

Do you think with enough interest, and evidence of solid business plans outlining strong financial support, that V8SC might just free up more than one stagnent REC?

I haven't really seen enough external sponsorship to think they would have enough for a credible Main Game team but you never know.

Of course the real money behind that team is not insignificant in itself.

We've seen a few property developers come and go from the sport.... Mostly go!