Stadia Magazine Hard Times
The current market is forcing people to do things properly, which is beneficial in the long run.
It’s best to start with an indisputable fact – there are serious financial problems in the USA, with spillover to the UK and parts of Europe. Andrew Williams of the UK-based construction economists, Franklin Andrews, chose to put the situation in medical terms: “The USA has pneumonia,” he says. “The UK has a cold, which is probably worse than people realise. You can argue that the French are on their knees. Germany had a bad time but seems to be recovering, and the Italians – well, who knows how they feel?”
A colourful description, but things become a bit more confusing when you get to the critical questions: Are these global woes affecting the sports and entertainment facilities industry? Could they do so in the future? And the answer is… Yes. No. Maybe.
As Williams and several other industry experts explain, whether or not these economic bumps affect the venue business likely depends on the prism through which you’re viewing them.
For instance, global architectural giant HOK has more work than ever: “If you look around the world, the economy in many places is robust,” says HOK senior principal Earl Santee. “With the rise in oil prices, you find people hurting in the States, but it’s creating jobs in the Middle East. These aren’t just stadiums, either, but city style projects with multiple functions,” Santee continues.“Australia, New Zealand and the Pacific Rim countries present all kinds of opportunities. When you combine our London and Brisbane offices with the work we’re doing in the USA, we’ve never had so many things going on.”
That’s the good news.
The flip side of emerging markets in China, Dubai and elsewhere is that business is dicey – to say the least – in the United States and western Europe. Virtually everyone agrees that funding is harder to find, that volatility in steel prices has made guaranteeing construction costs almost impossible, and that it’s hard topredict how revenue will be affected in the long term.
“The big thing is that there are fewer sources of funding than 12 months ago,” says Andrew Hampel of ISG, a joint venture company created by IMG to handle its venue marketing business. “There’s a dearth of available debt. Banks are sophisticated in their approach to projects and they’re being tougher in the sense that they want to see guaranteed revenue based on a realistic model.”
Ian Dixon, managing director of Ambac – the assurance company that negotiated the 25-year bond issue for Arsenal’s Emirates Stadium – also noted that even where money might be available, it’s likely to be more expensive. “The sub-prime crisis in the USA has affected everyone,” Dixon says. “Raising debt is now is a big issue. Can you raise debt for a proposed venue? Yes, but it’ll cost a lot
more money. Refinancing also has become difficult because capital markets simply aren’t active.”
Dixon notes that Arsenal’s success with Emirates – locking in a good rate and then knocking down the interest rate by refinancing – probably wouldn’t have been possible in today’s financial climate. “Let’s just say our timing was very, very fortunate,” he says.
Steve Cameron is sports editor of the Merced Sun Star and a regular Stadia contributor
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Article published by kind permission of Stadia, July 2008