By Julian Dupont Director, Fitch Ratings.
As football’s popularity continues to grow, it may not only be the clubs’ fans cheering. The anticipated increase in new football stadiums across Europe over the next few years could also result in new investment opportunities for debt investors.
The key driver for these new builds stems from the proven and critical additional revenues football clubs can generate by building and owning a modern football stadium. This trend is further supported by a number of factors which have all risen in importance over recent years, which include:
• The recent change in ownership of key European football clubs to more business-oriented international owners, such as the recent purchase of a 20% stake in reigning Spanish champions Atlético de Madrid by wealthy Chinese business man Wang Jianlin;
• The recent Union of European Football Associations (UEFA) regulation with rules on financial fair play which effectively requires European football clubs to fund their spending with only their self-generated financial means; and
• The increasingly outdated stadiums — particularly in France and Italy where the potential for new stadiums may even be greater as the clubs typically do not own their stadiums but lease them from the city or the state.
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Often when the stadiums are not owned by the clubs, they tend to lack tailored investment and operational flexibility (for premium seats for example) which hinder the clubs (i.e. the tenants) from maximising their match-day revenues. Partly as a result, leagues in which the clubs do not own their stadium generate far less revenues than others. For instance, the 2012-13 match-day revenues generated in the top French and Italian football leagues represented only 11% of their clubs’ revenues compared to 23% for the English and German leagues.
In the UK, Arsenal Football Club epitomises this potential for “stadiumco” financing with the issuance in 2006 of GBP260m of bonds secured against the then new Emirates Stadium (and the club). The revenues generated by the Emirates Stadium considerably boosted Arsenal’s match-day revenues, which grew by around 105% to GBP90.6m in its first year of opening whilst seating capacity increased by less than 60%. The match-day revenues generated over 30% of Arsenal’s footballing revenues during the 2013-14 season.
Other examples include Turin-based Juventus and Bayern Munich. The German club Bayern Munich increased match-day revenues in 2005-06 by over 50% (estimation) to EUR52.1m with its new 70,000-seat Allianz Arena (increasing average attendance by over 25% to 67,000 despite no real increase in seating capacity), and in Italy, Juventus increased its match-day revenues in 2011-12 by around 175% to EUR31.8m with its new 41,000-seat stadium, becoming then the only Series A club to own its stadium.
Many projects are currently under way, the most notable ones being planned in Italy. AS Roma is looking to build a 52,500-seat stadium for around EUR300m (cost of the stadium alone). Planned to open in August 2016, the club would be moving out of the iconic but outdated state-owned 70,000-seat Stadio Olympico. Other projects are also emerging in Italy with Florence’s football club Fiorentina, which seeks to build a 40,000-seat stadium for around EUR300m. In England, Tottenham Hotspur also aims to build a new 56,000-seat stadium at an estimated total project development cost of around GBP400m.
In France, partly motivated by the hosting of the UEFA EURO 2016 tournament, some football stadiums have recently been refurbished but to date only the Olympique Lyonnais club has decided to build its own 58,000-seat stadium expected to open in early 2016 for a total project development cost of around EUR450m.
Given the increased need for financial investors to both diversify their investments and seek higher yields, football club financings are perceived as an attractive investment opportunity. Lately, this has been demonstrated in Italy with last year’s EUR230m refinancing of Inter Milan and the public announcement of a potential refinancing of AS Roma.
 Source: Deloitte Annual Review of Football Finance, June 2014
 Source: Company Filings
 Source: Deloitte Football Money League 2006 and 2007
 Source: Company Filings
Julian Dupont is a director at Fitch’s Corporate Rating Group. This article was originally posted on The Why Forum. Like this article? Lets connect, join our Facebook, LinkedIn or Twitter. #DialogueTalk