Fans watch during the round 1 Super Rugby Aotearoa match between the Blues and the Hurricanes at Eden Park on June 14, 2020 in Auckland. Photo / Getty Images.
Comment:
Delivering a fan-focused, future-proofed stadium for Auckland should not be mission impossible.
In my last column I noted that in delivering a new stadium for Auckland, there are proven ways that we – the ratepayers – wouldn't have to pay for it all.
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So let me outline the various approaches which would see the private sector get involved in developing and operating a new stadium in downtown Auckland, taking on much of the up-front cost and risk from Auckland Council and we, its ratepayers.
Firstly, let's revisit the fact that Auckland will need to spend hundreds of millions of ratepayer dollars on its existing stadiums in the next 10 years. As reported in the recent CCO Review, Eden Park has suggested an upgrade which would provide covered seating for 60,000 at a cost of $500 to $800 million. This would be on top of last year's funding bail-out by Auckland Council. Modernising Mt Smart Stadium could cost $350 million.
In total, that's somewhere between $350 million and a billion dollars being floated for stadium redevelopments – depending on where and how any stadium upgrades are allocated.
If we are going to spend anywhere near those amounts, wouldn't we want to make sure that whatever funding gets committed will deliver something special for Auckland that is world class, creates the largest economic benefit for Auckland, and has a long-term pay-off?
Secondly, stadium developments and operations across the world have taken a leap into the modern world of global capital and special-purpose financing in recent times.
Private equity operators have taken a strong interest in infrastructure, in general, and stadiums, specifically, as a means of investing up front in developments that have a long tail in terms of investment returns.
Perth's impressive new Optus Stadium was developed by private sector partners as a Design, Build, Finance and Maintain Project with the Western Australian Government, under a 25-year concession. Singapore's National Stadium, which features a retractable roof and an entire precinct development, was developed along similar lines.
Auckland itself has history with Spark Arena originally developed as a public-private partnership under a Build-Own-Operate-Transfer model. It will revert to Council ownership at the end of the current 40-year agreement.
These mechanisms still require a portion of funding from local council or government which, in this case we are going to have to spend anyway. But with such funding programmes, the full costs are not realised up front; risk is shared with the private sector; and the city gets a new, world-class facility, that it does not need to pay for up front or in full.
Even during Covid19, I have heard that major private equity players have expressed interest in investing in any new stadium infrastructure in Auckland. And if you think private equity might be hibernating because of Covid19, think again. Bain Capital recently agreed to buy the bankrupt Virgin Australia, even though the airline had debts of AU$7 billion.
In the United States, stadiums are funded, in large parts, through forward sales of memberships, corporate suite and seat licences.
Take, for example, a 20-year membership or seat licence for a new stadium. If that was valued at $50,000 and 10,000 seats were set aside. That is potentially $500 million in financing available towards a new facility before it is even opened. A 35,000 seated stadium would still leave 25,000 seats to be sold by the hirers such as the Blues, Warriors, All Blacks, concert promoters and others.
Major stadiums in the US and Australia also attract significant naming rights (think US Bank Stadium in Minneapolis; the new Sofi Stadium in Los Angeles; Allegiant Stadium in Las Vegas and Mercedes-Benz Stadium in Atlanta; ANZ Stadium and Bankwest Stadium in Sydney). These also contribute to development costs and the ongoing cashflow of new stadia.
Major global stadium management companies such as Live National and AEG Ogden manage multiple stadiums around the world and can also form part of the financial puzzle in reducing the development costs through tendering management rights. Both companies are already present in New Zealand.
These companies will often take an interest in a stadium project providing a shared equity-management model that limits costs to a stadium owner while ensuring a share of any revenue streams.
Finally, there are the development rights around a stadium that are attractive to property developers and private capital. Using a new downtown stadium as an example, the space around a stadium site can potentially benefit from the uplift in activity, making it attractive to property owners and developers who see greater value in investing and developing in that area.
The promoters of a new suggested waterfront stadium for Auckland had harnessed just such a model in their proposal, suggesting the rights to develop and benefit from the land area around the stadium and possibly the site of Eden Park, were valuable enough to offset their investment in building a new stadium for Auckland, with no additional investment required from Auckland Council.
Auckland has already benefited from these types of schemes. The 6.5-hectare Britomart precinct was developed by the Cooper and Company-backed Britomart Group, through a partnership with Council which saw Council and ratepayers benefit from the increased amenity of the area without having to pay for it.
Why couldn't some or all the models be applied to the development of a new stadium?
Just imagine – a brand new, purpose-built stadium located in the heart of Auckland creating significant economic development – that is funded and developed by the private sector, leveraging the public transport infrastructure currently being invested in and requiring only the same kinds of contribution from ratepayers that is already going to be absorbed keeping our existing, old stadiums running for another decade.
Will we grasp that opportunity – or will it be another visionary project that falls into the too-hard basket?
Josh Hazlewood grabbed four wickets for Australia’s red-hot pace attack.