David Conn: New owners of Vicarage Road revealed as Watford wither

Acting chairman blames bankruptcy of ITV Digital and transfer slump for sale of ground to property company

When Watford shocked their supporters last month by announcing they had sold their Vicarage Road ground and were renting it back, many fans suspected the involvement of the property developer Nigel Wray, owner of Watford's tenants, Saracens Rugby Club, cousin of the acting chairman, Haig Oundjian, and for three years a Watford director himself. The club's announcement that the deal, done on 17 July, was to a "third party, unrelated to the company or any of its directors", only deepened their suspicions, particularly as it came out the same day, 5 August, that Wray resigned from the Watford board.

Watford have since refused to say who the purchaser is, but I can reveal it is a London-based property company, the CGIS Group. Nigel Wray is not involved with the company, but there is a curious trail of connections with him. CGIS was formerly called Burford, after it bought, in October 2001, a raft of properties from another company, also called Burford Group. That company was for some years Nigel Wray's property development vehicle until March 2001, when Wray sold his shares in a near £500m management buy-out, and resigned as a director. The only link between CGIS and Wray is that Nick Leslau, Wray's former property development partner, who, with Wray and others, conducted the ill-fated takeover of Nottingham Forest five years ago, appears as a minor shareholder in CGIS.

Sources at Burford said yesterday that the connections were "complete coincidence" and Oundjian said categorically that Wray has no connection with CGIS. He described the sale as a last resort following the collapse of ITV Digital, and said that the buyer wanted to remain anonymous. "I'm bound by confidentiality. The purchaser is a UK company, but it's not my cousin," he said.

"Watford in crisis" is not a headline you would have expected to see when their chairman, Elton John, and the manager, Graham Taylor, were exploring the heights of the old First Division in the 1980s, but Watford are in trouble. As recently as 2000, they were in the Premiership under Taylor in his second spell, promising no extravagant spending which could burden their future, although he did sign several expensive players. Not even a year ago, the pop star chairman – officially named in Companies House documentation as Sir Elton Hercules John – was hailing a successful £4m Stock Market flotation, which he said would make the club secure at Vicarage Road, and lead to the grand redevelopment of the ground.

Watford then bought the Vicarage Road freehold in January 2002 only to sell it less than six months later. They paid £750,000 to end almost exactly 80 years of being tenants of Benskins, local brewers who financed the building of the ground in 1922 and owned the right to sell their own beer. But now, following the failure of a £12m gamble on glamour manager Gianluca Vialli taking them straight back to the Premiership, then the collapse of ITV Digital, Watford have sold Vicarage Road. They received £6m for it, paid Benskins £500,000, and are at risk of losing it if they fail to meet rental payments which start this year at £630,000.

Oundjian, the former ice skating champion who took over Watford five years ago and is the acting chairman following Sir Elton's resignation, said they had no choice: "We lost the ITV Digital money, that derailed the transfer market, and also meant banks will not lend to football clubs. We couldn't get a mortgage, or a loan. In the end we had to sell the ground. It's a nightmare."

Watford fans this week became the 63rd set of supporters nationally to form a trust, with Graham Taylor their honorary president and an explicit aim to "ensure football continues to be played at Vicarage Road". Peter Fincham, a founder member, said: "We are essentially a small, community-based club, and we've always been prudent. What has happened has put the very existence of the club in considerable jeopardy, and we as fans have to play our part if the future is to be brighter."

Oundjian has directed his own fury at the League itself, whose senior management he claims should have secured guarantees from Carlton and Granada when the League signed the £315m three-year deal with their joint venture, ITV Digital, in 2000. He also takes issue with the currently protected status of players' contracts, and said clubs had to be allowed, in these circumstances, to agree wage reductions to their pre-ITV Digital levels.

"No First Division club would have signed the increased players' contracts if we had known the deal was not secure, but we were never told," he said. "The national game is in crisis as a result and we can't be left to shoulder the whole burden."

On Thursday, Oundjian, a prime mover in the First Division "review panel", with Theo Paphitis, Millwall's chairman, and the League directors, met the Premier League for talks about a more equal share of the Premiership's own, intact, £1.5bn TV deal. Internally, the First Division clubs are demanding 80 per cent of the League's new, smaller TV deal with BSkyB and for Second and Third Division clubs to give up all influence by ceding 75 per cent of League votes to the First Division clubs. There is a persistent threat of breakaway, but the First Division clubs currently accept they have nowhere to go.

This penury and politics were hardly the stuff of Oundjian's dreams when he glided into Watford in 1997, part of a group paying £5m to buy the club from the previous owner, Jack Petchey. Football then seemed to offer windfalls for investors who could buy clubs cheap, fatten them with television money and Premiership commercialism, then float on the Stock Market. Oundjian, a Canadian who says he made his money in textiles and floor coverings, has held the Watford shares, now 39 per cent, offshore in an Isle of Man company, Penguin Overseas Associates.

There have long been rumours, particularly since Saracens moved in to groundshare at Vicarage Road, that Wray's money was behind Penguin, but Oundjian said that this is untrue. He had decided to buy Watford and Wray, a rugby fan, to buy Saracens, and try to merge them, but the idea had proved too unpopular with fans. Oundjian said their motivation was primarily the community and educational potential of the sporting clubs, and Watford have built a well-regarded community programme and are committed to maintaining it.

Penguin, he said, is his own family trust. Oundjian is a Canadian citizen, here on temporary residence, who intends to return to Canada and so is likely to be exempt from paying capital gains tax should he sell his Watford stake in the future. He takes no salary out of Watford, but a company of which he is a director and owns nearly half the shares, Corporate Couture, was paid close to £100,000 last year for making Watford's kit.

In 1997, Nigel Wray took part, with Nick Leslau, and the bank Singer & Friedlander, of which Wray was a director, in a takeover of Nottingham Forest, installing as the chairman Irving Scholar, a Tottenham fan and former Spurs chairman. But Forest slumped and in subsequent litigation brought by Scholar against Forest, which he lost, the judge, Mr Justice Hart, said: "The board was seen by the fans as a collection of out-of-town investors who had invested for narrow financial motives and who did not have the proper degree of enthusiasm for the club... Neither Mr Wray nor Mr Leslau were natural fans of the game of football."

Wray subsequently reduced his stake in Forest, then in April 1999 resigned from the board. Three months later, he became a director of Watford.

They were fondly welcomed back to the Premiership in 1999-2000, but last year, after they failed to rebound back up, used the flotation money to finance a push for promotion and the purchase of Vicarage Road. They raised £4.9m, including more than £2m from fans, who had been asked to invest in the club's future security. Sir Elton, in August 2001, then unveiled plans for the £7.5m development of the East Stand and, the great coup, Vialli as manager.

Players were rapidly signed on near-Premiership wages to try to take the club to the financial promised land. Along with Ramon Vega, said to be paid nearly £20,000 per week, came, among others, the South African Pierre Issa, Stephen Hughes from Everton and Marcus Gayle from Rangers (reportedly £13,000 each per week), Filippo Galli from Brescia, Stephen Glass from Newcastle and Patrick Blondeau from Marseilles (all on a reported £10,000 per week).

With Vialli apparently on over £500,000 a year, Watford's wage bill leapt from £8.2m to £12m. Oundjian admits it was a gamble but said the directors were prepared to cover it, until Carlton and Granada pulled the plug. "A club makes £30m in TV money alone by being promoted. We were budgeting for a loss of £2m to try to make it. The collapse of ITV Digital has been the disaster," he said.

For all the soap opera, Watford is only a typical First Division case, if severe. With Football League clubs facing shortfalls and banks wary of lending to them, many more may well turn to flogging their historic grounds as the only way to raise any short-term cash.

davidconn@freeuk.com