Stadium funding + “open book” for Carisbrook

### ODT Online Tue, 27 Apr 2010
Private funding may top total
By David Loughrey
Private sector funding for the Forsyth Barr Stadium, being raised by the sale of seating products, could reach $10 million more than required by the Carisbrook Stadium Trust, but the future of any extra funding, if secured, is unclear.

Council chief executive Jim Harland said if all the seating products sold, it would give DVML a stronger cash flow. If that “very happy event” occurred, there could be discussion about whether the money could be used to pay off debt more quickly.

The council will begin public consultation on the future of Carisbrook with “a completely open book”, Mayor Peter Chin said yesterday.

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### ODT Online Tue, 27 Apr 2010
Countdown to kickoff
Key stakeholders brave the rain at the Forsyth Barr Stadium in Dunedin yesterday, marking today’s milestone of 500 days until the Rugby World Cup 2011 tournament begins in New Zealand.
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Post by Elizabeth Kerr

14 Comments

Filed under Architecture, Construction, CST, Design, DVML, Economics, Politics, Project management, Site, Sport, Stadiums, Urban design

14 responses to “Stadium funding + “open book” for Carisbrook

  1. Russell Garbutt

    Can anyone give a really cogent explanation why future revenue should be counted as a private contribution to construction?

    The best analogy I’ve read is that of a private house being built for rental purposes. If the prospective tenant pays 5 years up front and the owner uses this money to help pay for the house, then the owner hasn’t got the next 5 year’s income. Paying in advance for a seating package is no different. The money cannot sit in two places at once.

    Let us not confuse ourselves or allow ourselves to be confused. There appears to be little or no money raised for construction from the private sector, and there certainly isn’t any from what is supposed to be the prime users – professional rugby.

  2. Russell Garbutt

    And on the “open book” on the future of Carisbrook? Not one piece of clear evidence of any reason for the DCC to purchase Carisbrook using borrowed funds other than to bail out the ORFU. And certainly no evidence of the basis of the valuation supplied to support the purchase price that has been released to the ratepayers.

    I would suggest that the above imperative came first and now the DCC are hoping to come up with some ideas on what to do with the ground once the need to have it as an “insurance” for the late completion of the Awatea Street Stadium has passed.

    I haven’t seen any evidence to the contrary – has anyone else?

  3. Phil

    I’m still a little confused as to what happened to the $15 million donation received from central government last year. It seems to have just disappeared. Did that go into the Private Funding pot or not? And, if it did, is the amount of projected private funding then actually going to be $5 million short of the target amount, and not $10 million over? Or is central government’s donation on top of the reported figures? Meaning that the final expected figure raised will be $25 million over the target amount.

    How much private funding has been raised that does NOT, repeat NOT, include the grant from central government?

    How did I suddenly get so confused over such a simple question ?

  4. Anonymous

    But you can sell the seats twice.
    You sell a seat with the right to buy tickets for events. It is most unlikely that the same seat owner will want to attend every event. Therefore there will always be a proportion (probably quite large) of seats that have already been “sold” that can be “sold” again, for each event.

    This makes income modelling more complex, but nothing significantly more so than the airline industry.

    If the bankers are rugby fans, then that covers 10 events per year tops. The rest of the events catering to different audiences will bring in no less revenue than they would if the seats had not been presold.

    The bet is: the number of events that can be promoted and seats sold will bring in sufficient revenue to cover the interest on the loan. (Around $8 million pa….the 30K annual rugby attendance at average $20 per ticket is just under 10% of that so if the stadium isn’t multi-purpose it is deep trouble…but it is multi-purpose)

  5. James

    Can anyone give a really cogent explanation why future revenue should be counted as a private contribution to construction?

    I’ve gone over this before. But a brief re-cap. Firstly, your question implies you haven’t looked at the seating packages on offer.
    http://www.otagostadium.co.nz/member_corporate_club.php

    So:
    * Most of the packages have a “one off premium”, which is not future revenue, but a flat out private contribution.
    * The private funding works on a debt-funded model as well (so it pays off the capital cost over 20 years). This means that the one off premium at the start reduces the private funding ‘mortgage’. It’s also due during construction, further reducing the initial mortgage value.
    * The annual payment is due 3 months before the year starts and paid annually in advance, reducing interest costs relative to receiving money for the seat at each game.
    * The seats have ‘premium’ features, but the price for the premium features probably exceeds the price of providing them.

    Clearly then, selling the seats in advance is better than selling them on a game by game basis. However, I can’t tell you whether the funding tally only includes the difference between selling them in advance vs game by game, or the total value of the sold seats.

  6. Russell Garbutt

    It seems to me that there is absolutely no clarity at all with what comprises “private funding” for the new rugby stadium.

    At the moment, the level of private funding is a KPI for the DCC provided by the CST and it appears that there are enough questions over whether the information is even valid for this entire issue to become a lot more transparent than it already is.

    The suggestion that a “premium” should be counted as a contribution needs to be urgently quantified.

    Another factor that may need to be quantified is the current liability on the ORFU to provide corporate boxes at Carisbrook. If the ground is now in the ownership of the DCC, does the liability to continue to provide corporate boxes now fall upon the DCC – read ratepayer – to continue those contractual obligations to the end of the agreements? If this is the case, then where is this factored into the revenue streams of the new stadium? Does the ORFU pass this obligation to the CST who pass it to DVML or whatever other structure the DCC creates?

    The whole problem with the new stadium and Carisbrook is that there is no transparency, no openness, nothing that provides confidence in trust.

    And that leads to suspicion and the perception that the DCC have not been acting in the best interests of the ratepayers.

  7. Calvin Oaten

    Russell:
    The corporate boxes are a very valid point. The current lessees presumably had signed up on the assumption that Carisbrook was the venue. Now that the rugby business is to move to the FB stadium in 2011 where does that leave the current box holders? Indeed, Malcolm Farry of the CST has made great claims about boxes sold in the new complex. Have these been offered to the Carisbrook incumbents? If so, what of the residual value of the leases in place? Could it be that some, or all may transfer their interest to the FB stadium with credits allowed against the remaining Carisbrook leases? If so, has the CST claimed full value credit for the Private Funding component of the construction? Or have they reduced the claim by the amounts credited? Of course the CST may have simply left it to the new owners, the DCC to compensate the current boxholders. That way if there was a transfer from one to the other, then Malcolm could legitimately claim full value. But this leaves unanswered whether the DCC has picked up the tab. Either way, it is another grey area no-one is rushing to clarify.

  8. James

    Thanks to MikeStk, we have some clarity around the private funding for FB Stadium.

    I haven’t checked these figures myself but he suggests:

    Open Club Reserve
    – 20 sets of 8-seat blocks – 160 seats – so $160,000 one time, $200,000 per year total
    – 18 sets of 12-seat blocks – 216 seats – so $216,000 one time, $270,000 per year total

    20 corporate boxes
    – $900,000 one time
    – $900,000 per year

    1400 lounge club memberships
    – $0 one time
    – $2,100,000 per year

    That equates to $3.47m per year for 10 years, renewable for another 10. Like the DCC’s contribution, the private equity is debt-funded. That is, it’s like a 20 year mortgage. $3.47m per year would pay off a $35m loan over $20 years.

    This leaves a $1.28m one-off payment during contruction, and the annual payments are due 3 months before the beginning of each year. That provides plenty of potential interest savings on the mortage, potentially enough to pay for their share of operating costs.

    Then there are the price not disclosed bits (naming rights, Founders Clubs), which could easily raise the total to $40m of the total cost build cost funded (plus the interest and operating costs for that portion of the stadium over 20 years).

  9. Russell Garbutt

    James, where did you get this 10-year thing renewable for another 10?

    My recollection is that the CST tried to sell 10-year packages, had no luck and so have sold 5-year packages which may be renewed.

    If few renew the packages, don’t all those figures come to nothing?

    If the Highlander’s franchise comes to a close and or Otago goes to the Second Division which are both possible based upon actual performances over the last 4 years, what do you think this will do for rugby revenue and for renewal of packages?

    The other issue is one of operational revenue. Are you aware of any single contract or agreement that has been concluded for on-going use of the stadium – not a room in it – for anything?

    • Elizabeth

      Russell – I believe there’s at least one interested wedding party in the offing to hire the venue. Not sure if they’re planning to bring in a rock band.

  10. James

    Hi Russell,

    The 10 year thing is contained in the link up thread, which I’ll repeat here:
    http://www.otagostadium.co.nz/member_corporate_club.php
    Corporate Suite 10 + 10
    Open Club Reserve 10 + 10
    You might be thinking of the Lounge Club Memberships, which are available either as 10, or a 5+5 arrangement.

    If few renew the packages, don’t all those figures come to nothing?
    Oh absolutely. All sorts of things could go wrong. Interest rates or operating costs or building costs could be higher than expected. Or they could be lower than expected.

    However, the question of yours I was answering was “Can anyone give a really cogent explanation why future revenue should be counted as a private contribution to construction?”. All I mean to illustrate is that future revenue could fund the construction and operating costs. Whether it will is a different question. You are welcome to look at those tea leaves and see disaster, and others may look at those same tea leaves and see success. Such a model has worked successfully elsewhere, including in Christchurch, but that is of course no guarantee that it will work in Dunedin.

  11. Russell Garbutt

    Not sure where this posting should go, but this seems the most appropriate thread.

    I see by tonight’s TV3 News that the new Melbourne rectangular stadium seating 30,000 is quoted as costing NZ$310m which equates in my books close enough to $10,000 per seat which is the figure that I have quoted for some time to be the “norm” based on actual expenditure for an unroofed stadium based on a number of actual constructions. Of course this figure was dismissed by Farry and his supporters on Council as “silly”. I think he said that we would do it the “southern way”.

    I’d love to be proved wrong by someone believeable, but until I am, it seems that we are going to end up with a stadium – with a roof – for about $180m (based upon 17,500 permanent seats) + the cost of the roof + the cost of re-routing SH88 + the cost of buying Carisbrook + plus the cost of all the essentials which are not part of the GMP + the cost of all those “blow-outs” in the budget around land acquisition etc etc.

    I am picking about $400m in total although MikeStk seems to have a good idea of running totals to date.

    Anyone like to argue convincingly otherwise?

  12. Phil

    Well, they did have to somehow pay for the high salaries for the Melbourne Storm. Maybe that’s our answer. Bump the build cost up and buy a winning team.

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