Stadium and Sports Development - Business & Real Estate Strategies

1. 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

2. 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 Belgradeoffice - our partners in Serbia

3. 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 own • Sport is becoming an important part of the Mix in mixed use development destinations

4. 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.

5. 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 ……….

6. 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 infrastructureand community intervention • Liverpool FC – Approval of move to adjacent public park; updating road and transport system and regenerating the destination.

7. 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

8. 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

9. 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. • .

10. Key Variables & Strategies • Stadium Strategies • Get the Stadium business strategy right – size, components, premium operations, media & naming rights, non football income. • Retain future real estate incomes – don’t be tempted by simple land sale • Find intelligent funding & investment strategies - to balance risk & reward & engage the public sector • Think beyond the stadium into the wider destination - Add the destination synergy for long term real estate asset growth

11. 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.