Stadium and Sports Development - Business & Real Estate Strategies
Presentation by Richard Tibbott
Head of Colliers International Consulting - London, Boston & Hong Kong “Sports Infrastructure in Serbia – the European Investment Cycle”
A Danas Conference 10 May 2010
Colliers – Development Solutions for Sport
English Premiership clubs – football, the wider economy & destinations Wembley, O2 Arena London & Croke Park Dublin; Cardiff & Manchester Sports Cities real estate destinations English National Football Centre - Academy, hotels, sports science & sports medicine Sports Resorts – urban fringe, mountain & four season activity Commercial Fitness & sports Centres – an investment portfolio asset class Specialised sports developments - Horse & motor racing, white water, Ice Hockey, Extreme Sports . Community Sports Centres privatised with new private investment Major events – London 2012, Vancouver 2010, Sochi 2014, Euro 2012 Warsaw, FIFA England 2018
Development Solutions Explore – Advise – Deliver
Real Estate, Funding and Economics Partnering with Colliers 484 offices in 61 Countries Jovica Jakovac & Colliers International Belgrade office - our partners in Serbia
Colliers - Specialising in Real Estate Destinations
Land + Money + Occupier needs = standard real estate Project Multi use – several uses and little synergy
Colliers bring money and people to places to create destinations
Mixed Use has synergetic uses and the whole is greater than the sum of the parts
Land + Creative Synergy (Occupiers, + Consumers + Brand) + Money (creative funding) = Destination = High Value Real Estate Investment
Sport is a strong destination driver but not yet a mainstream real estate asset class – so sport remains difficult to finance on its ownSport is becoming an important part of the Mix in mixed use development destinations
Stadium Capital investment -
Massive range of capital costs of stadium projects and very erratic costs forecasts and outcomes
“If you could do it again what would you change?” “We built it too big” Biggest issue is capacity – Find the sweet spot of scale & capex – if you build too big you lose your waiting list scarcity and your premium prices
Do the financial modelling & real estate strategies before finalising design; get an expert verification and independent real estate appraisal
Projects that get out of control - Most of the errors made at the outset and these are the most difficult ones to fix.
What is the best way to fund Stadiums?
Traditional Model – get the public sector to build and own it and the FC runs the club Financial survival by FC director funding; Football was never a serious business - operated in an amateur way;FIFA prevents borrowing based on players values as collateral; So when progressive FCs want to build a stronger balance sheet – so they can grow and progress in a changed economy, they create and own assets - stadium property and branded retail
Modern Development Models
Its still possible to have a partnership arrangement with the Public Sector But also the Football Club can create a development with private funds.
Some examples and what can be learned from each approach ……….
Partnership with the Public Sector
Direct Investment and provision of the site – example Hull KC Stadium – funded by public asset sale; Justified as an economic regeneration strategy; Benefits secured by strong community programmes and by Football & Rugby Clubs ground share
Single Purpose Vehicle (SPV) funding & provision of the site & development gain – example Liberty Stadium Swansea - Public sector provides a new site for stadium, supermarket & box retail zoning & retail developer provides profit share; sale of old stadium site for high value housing; SPV share holding includes local authority and FC and Rugby Club; FC / RFC lease income balances residual debt payments of the SPV.
Every modern stadium development needs a helpful public sector – zoning and infrastructure and community intervention Liverpool FC – Approval of move to adjacent public park; updating road and transport system and regenerating the destination.
Private Sector Stadium Funding strategy
Brilliant examples in Europe – Holland, Germany & UK but not a lot to be learned from the USA – their buildings are too big / uneconomic since they don’t have the commercial risk of relegation and their “player draft” system is a peculiar form of sports socialism; US professional investor impact on English Premier league is not good – Manchester United and Liverpool purchased with bias to debt funds and paid for by annual club profits resulting in a drop in playing standard; FIFA now very worried and will seek to cap total FC debt Some Examples Simple Land Sale – Aston Villa FC & Supermarket land 20 years ago & rescue of Portsmouth FC in 2010 - but you only do this once and what about capital renewal?
Development Gain – Majewski Stadium Reading W London – funding and shared infrastructure with the Reading Business Park – Stadium is debt free and faces the future positively and car parking is joint – but Shopping / Stadium combinations not highly regarded by real estate investors
Private Sector Stadium Funding strategy
More Examples Football Club does Development itself on its land & retains more profit Chelsea FC 2 Hotels, conference centre, Tourism Attraction, Residential, retail and F&B but except for conferences and hotel, not very successful on non - match days. Arsenal – the best example of changing the operating model to focus on corporate & premium seating income; but funding by premium residential on old ground concurrent with housing market slump. FC exposure to more real estate project risk
Football Club finds destination synergy in its own site and by exploiting its consumer brand – Manchester City - sports city – fitness, hotel, medicine & health, retail, media partner, brand showcases, leisure, entertainment night time economy, premium league park. Potential high value and ongoing revenue stream but a large scale destination investment and needs supportive public sector.
Funding Cocktail – many variations possible for each circumstance. Main principles are to “avoid selling the family silver!” and make sure the brand produces real
estate value
Public / Private Sector Stadium Funding strategy
The stadium as a major regeneration initiative – a major stadium can help social and economic regeneration and development of a new city district – examples Baltimore, Cardiff, Sunderland FC Stadium of Light - Original site sold for housing and “brownfield” site provided on a long lease at low cost because Council wanted to regenerate part of the City where nothing else would have happened - now large scale destination is being created around the stadium – new real estate income stream for the FC and jobs & enterprises based on the positive FC brand.
Public Private partnerships can create a stadium & positive economy - but how do we find the money up front for the stadium to start the regeneration ? Bond funding / Tax Increment Financing (TiF) – eg Bell Stadium San Francisco – a 20 year bond issued by the public sector repaid from growth in real estate values and revenue flow from surrounding property values and taxes. Usually a FC can’t offer a bond without a Public Sector guarantee but with a football club and its positive brand, and a high quality private developer partner, a Joint Venture deal can be done. This is a very good way of financing transport infrastructure – metro extension, roads and car parking that are essential for a stadium. .
Key Variables & Strategies
Stadium Strategies
1. Get the Stadium business strategy right – size, components, premium operations, media & naming rights, non football income.
2. Retain future real estate incomes – don’t be tempted by simple land sale
3. Find intelligent funding & investment strategies - to balance risk & reward & engage the public sector
4. Think beyond the stadium into the wider destination - Add the destination synergy for long term real estate asset growth
The Football Association – St George’s Park
National Football Centre
Enabling works and outdoor pitches already complete, but project halted as a result of cost escalation on the Wembley Stadium project Academy Sports science Hotels & sports resort Sports Hospital Colliers restructured project to create viable project FA activity provides high occupancy and earnings Operator management contracts Long term profits streams from hotels, hospital and Academy provide investment used to finance the development £350m total development value.
