Jade Stadium Redevelopment Request for Council Support

Transcription

1 Jade Stadium Redevelopment Request for Council Support Page 1 of 8

2 Introduction Jade Stadium Limited (JSL) has developed a concept and business plan for the further development of Jade Stadium. The estimated capital cost of the redevelopment is $60 million. Management believe that $40 million can be funded from existing and future Jade Stadium cashflows. This leaves a funding gap of $20 million. Council support is requested to address this funding gap. Jade Stadium - The Story So Far Lancaster Park (now known as Jade Stadium) has a history dating back to the 19 th century as a centre for sporting and community events in Christchurch. Lancaster Park was formed in 1880 by the Canterbury Cricket and Athletic Sports Company Ltd. Lancaster Park Limited was registered in 1911 by the Canterbury Cricket Association and Canterbury Rugby Union. Lancaster Park Limited ran into financial difficulties. In 1919 The Victory Park Board Act vested the ownership of the land in the Crown and the management of the Park in the Victory Park Board (VPB), which comprised six representatives of the principal users Rugby and Cricket, plus two others. Over the years Lancaster Park has been the home of Canterbury Rugby and Cricket, but has also played host to a variety of events including tennis, ballooning, swimming, horse racing, athletics, hockey, soccer, rugby league, concerts and evangelical gatherings. Bicycle racing in the 1890s Cricket Test Melbourne v Canterbury 1906 All Blacks v British Isles 1957 Historically, under VPB control, the addition or upgrade of facilities can be commonly traced to the eras when Canterbury Rugby and Cricket had periods of success. In recent years development of Jade Stadium has included: The construction of the Hadlee Stand in 1995 at a cost of $5.2 million, funded partly from reserves with the balance funded by way of a loan from the builder. The installation of sports lighting in 1996 to provide for night rugby and cricket, at a cost of $2.7 million. This was funded with a $0.5 million grant from Lottery Grants and $0.6 million from the Community Trust, with the balance funded by debt. VPB got into financial difficulties servicing the Hadlee Stand and the sports lighting loans. As a consequence Christchurch City Council established Jade Stadium Limited (JSL) in 1998 as a Council Controlled Trading Organisation with $4 million in capital. JSL was given a management contract of the stadium by the VPB. JSL advanced a loan to VPB to refinance the loans on the Hadlee Stand and sports lighting. In 1998 JSL began planning for the redevelopment of the standing embankment on the west side of Jade Stadium with more modern facilities. It took two years to finalise a sustainable business case for the redevelopment. The redevelopment involved: The increase in capacity from 14,000 seated and 18,000 standing to a 36,500 all seated stadium. The development of the southern 6,700 seat Tui Stand at a cost of $4 million. The development of the 17,000 seat Paul Kelly Motor Company Stand at a cost of $38 million. Replacement of the old scoreboard with a $2.5 million replay screen. Page 2 of 8

3 The stadium redevelopment was completed in March 2002 on budget. The total $44 million of the project was funded by debt arranged through the Council group. The business case was predicated on the increased operating cashflow available to Jade Stadium from user rentals, sale of corporate suites, clubs seats and reserves, naming rights, catering royalties and a $2 per adult stadium development levy on tickets. In addition Jade Stadium benefited from being part of the Council tax group with tax subvention payments to JSL from other Council trading organisations assisting cashflow in early years. This was forecast to produce an increase in operating cashflows (before interest, depreciation and capital expenditure) of approximately $4 million per annum, sufficient to pay loan interest and repay the loans over a period of 17 years. JSL has delivered on the business case and debt repayments are on track. Council provided the loans at commercial rates and interest and repayments have been met by JSL according to the agreed formula. It was originally hoped that some funding may have been available from the Lottery Grants Board and the Community Trust. However none was ever received. Under Jade Stadium Limited management, Jade Stadium has been brought back to a sound financial situation and facilities improved for the community and stakeholders. In late 2005 the management of Jade Stadium was transferred to Vbase, Council s venue management company, bringing Christchurch s key venues (Christchurch Town Hall for Performing Arts, Christchurch Convention Centre, Westpac Arena and Jade Stadium) under one management. With VPB s agreement, the VPB is planned to be wound up (by Act of Parliament), with the grounds to be transferred to Christchurch City Council as a reserve and the facilities to be transferred to Jade Stadium Limited. The statutory steps for this are currently being finalised and the Christchurch City Council (Lancaster Park) Land Vesting Bill will go to government in April It is important to acknowledge the associated contractual obligation this presents for JSL with the Canterbury Cricket Association (CCA). In exchange for CCA agreeing to forego their historical Jade Stadium ground access rights for domestic cricket, JSL is required to work with the CCA to establish a new, alternate to Jade Stadium, playing home for domestic first class and international test match cricket. Project First Class is underway and it is likely that a proposal will be bought to Council later this year. As at today JSL is running to plan. Other Stadia During the period of Jade Stadium s rejuvenation other stadium development has occurred in New Zealand. By contrast these developments have often required significant local authority funding or bail out. North Harbour Stadium, Albany: North Harbour Stadium was developed in 1997 at a cost of $41 million on a green field site in Albany with a capacity of 19,000 in a stand with a further 6,000 on grass embankments. It is operated by a Trust. It was originally funded $6 million by local government and $4 million from Lottery Grants, with the balance in debt. The North Shore City Council has recently moved to bail out North Harbour Stadium with a $30 million no interest loan. In August this year Council also made provision for the non recovery of all existing and future loans to the Trust. Eden Park, Auckland: Eden Park is operated by the Eden Park Trust Board (EPTB) and has operated viably to date. EPTB has recently developed plans to increase the capacity of Eden Park from 48,000 to 60,000 for the Rugby World Cup (RWC) final in Page 3 of 8

4 Initially these were based on a $320-$385 million redevelopment proposal expected to be funded $42.5 million from additional Eden Park cashflows; $17.5 million from debt; $20 million from Trust grants; $30 million from Rugby New Zealand 2011 Limited (understood to be the RWC 2011 bid commitments of $10 million from NZRU and $20 million from Central Government); $50 million from Auckland City Council; $50 million from Lottery Grants; and $175 million from Central Government and related sources. However the Government has recently announced their support for a $170-$190 million upgrade of Eden Park including the development of one new stand, bringing the permanent capacity of Eden Park to between 40,000 and 50,000. The development of temporary facilities for the RWC2011 will take the capacity for that tournament to 60,000 plus. Funding of this proposal is still not clear but statements by the Minister of Sports and Recreation indicates funding is expected from the sale of suites and naming rights, Lottery Grants, ASB Trust, Rugby New Zealand 2011 Ltd, Auckland City Council and possibly the Auckland Regional Council, with a significant level of funding support still to be sought from Government. Mt Smart Stadium, Auckland: Mt Smart is owned and operated by the Auckland Regional Council. As a result of a $23 million new stand development in 2004, Mt Smart now has a capacity of 25,000. Additional ongoing ARC funding support has been required as Mt Smart did not deliver on the new stand development business case. Waikato Stadium, Hamilton: Waikato Stadium was redeveloped in 2001 to a capacity of 26,350 (of which 5,000 are standing) at a cost of $40 million. The Stadium was original owned by Waikato Rugby but Hamilton City Council assumed control in It is understood this was due to financial issues. Westpac Trust Stadium, Wellington: Westpac Trust Stadium was developed on a green field site at a cost of $130 million in The stadium is operated by a charitable trust and was funded by $40 million in no interest non recourse loans from the Wellington City Council and Wellington Regional Council, 15 year prepaid sales of corporate facilities, a $4 million grant from Lottery Grants Board and sponsorship with the balance funded by debt. Jade Stadium - The Next Chapter The Rugby World Cup 2011 has provided the impetus for the redevelopment of the aging Number 1-3 Stands (dating from the 1960s) on the east side of Jade Stadium. The stands are nearing the end of their economic and structural life. In assessing the appropriate development for Jade Stadium, JSL has primarily considered the long term needs for Christchurch, and secondarily considered the RWC 2011 requirements, in order to get the right mix between optimising the RWC opportunity and the future requirements of the growing city. The forecast capital cost of replacing these 11,000 seats in the Number 1-3 Stands with a new approximately 17,000 seat stand (similar to the Paul Kelly Motor Company Stand) is estimated at $60 million, including the new stand ($53 million), a new replay screen ($3 million) and an upgrade of the playing surface ($4 million). This will bring the capacity of the stadium to between 40,000 and 45,000 seated, with the potential to increase to beyond 50,000 seated and standing for large events (by the removal of seating on the northern and southern ends of the ground and the conversion of this space to temporary standing terraces and construction of a temporary stand above the Tui Stand). The proposed timeline is for completion in December 2009 in time for the RWC2011. Page 4 of 8

5 Significant efforts have been made by Jade Stadium s planning team to integrate the new stadium redevelopment into the neighbourhood by removing the existing fenced boundaries on Wilsons Road and opening this area up to the public in widened footpaths and other open areas, and by opening up the green area behind the Tui Stand as an open public park. It is hoped that the east side redevelopment with these features, and potentially a modern office building, will provide an impetus to local area rejuvenation. A sustainable business case for this redevelopment is harder to achieve than the earlier west side development as in this case seats are being replaced with seats (as opposed to seats replacing a standing embankment previously). This means the potential revenue upside from the development for users (Rugby and Cricket) and the stadium, is less. The business model is based on a similar approach to the earlier successful development funding, which was founded on developing sustainable incremental cashflows to fund the repayment of the maximum level of funding debt over a reasonable term. Jade Stadium currently has an annual operating cashflow before interest and debt repayment of approximately $4.6 million per annum from a variety of sources including event rentals, catering royalties, sale of naming rights, sale of signage and sale of corporate and club facilities. The current cashflow is sufficient to repay down the existing $32 million loan over a ten year term. The east side redevelopment business case estimates that post development the annual operating cashflow before interest and debt repayment will increase to approximately $7.4 million as a result of increases in event rentals, stadium development levies, catering royalties, naming rights and signage income, income from premium and club facilities in the new stand, and refinancing the existing debt over the same term as the new debt. The business case is predicated on the total stadium operating cashflows being used to fund interest and debt repayment (including refinancing the existing debt) over a 20 year term. This provides the opportunity to fund an additional $40 million of debt (on top of the existing residual west side development debt). Therefore as the business case currently stands, subject to achievement of planned revenue increases, potentially $40 million of the $60 million total capital cost is funded, leaving a current funding gap of $20 million. Jade Stadium Board and management are considering a number of options to address this funding gap, including: Applications for grant and/or sponsorship funding of specific assets (turf and replay screen). Seeking to over achieve against the business plan. Development of an associated office facility adjoining the new stand. At 90% occupancy and a market rental of $230 per square metre, the office development has the potential to fund $3 million of the stadium development funding gap in addition to its own $26 million incremental cost. However, following an independent market assessment which included details of all major confirmed city fringe commercial office developments, the Jade Stadium Board has decided there is insufficient tenancy certainty to proceed with this investment. Support from Central and Local Government. Economic Benefit of Jade Stadium Fixtures and events held at Jade Stadium generate direct economic benefit for the city and the community through the hospitality, accommodation and merchandising sectors, as well as the revenue and jobs created to service the events, such as catering and security staff. These direct benefits flow through the community and result in further indirect economic impacts arising from increased spending by businesses as they buy additional inputs to meet the increased visitor demand. There is also a further ripple effect of increased employment and spending by households who have more disposable income. Two recent studies indicate the economic benefit of Jade Stadium - an APR Consultants analysis of the 2005 Lions test in Christchurch and the Horwath Asia Pacific assessment of the RWC The analysis prepared by APR Consultants for Christchurch City Council of the economic impact and visitor activity associated with the All Black / Lions test match held in Christchurch on 25 June 2005 at Jade Stadium estimated that the event: Page 5 of 8

6 Attracted nearly 14,000 supporters from the United Kingdom to Christchurch for the test, of which over 10,600 were considered to be incremental (that is, they came because of the test, and would not have been in Christchurch otherwise). On average they stayed four days in Christchurch, spending over $2,100 each on accommodation, food and beverage, tickets, sightseeing, shopping and travel, resulting in a total spend of $28.1 million. With the indirect and induced flow on impacts of that direct expenditure, the total expenditure impact was estimated to be $41.9 million. In addition APR estimated that 5,300 New Zealanders from outside of Christchurch attended the test match, generating total expenditure of $7.4 million. The assessment prepared by Horwath Asia Pacific Limited and Market Economics for the Rugby World Cup 2011 Establishment Board estimated that RWC 2011 could: Attract 66,000 international supporters, 2,500 international media and 2,500 corporate/vip guests to New Zealand. Act as a catalyst for significant tourist activity, which drives economic impact. It estimates the national direct expenditure of RWC 2011 to be $476 million, increasing to $1.15 billion when flow on expenditure is taken into account. Horwath estimated that this will generate $204 million in direct value added or direct contribution to GDP, $180 million in indirect value added from the flow on increase in business activity; $122 million in induced value added from the spending of the extra household income generated by the additional business activity, and an additional $112 million of taxation revenue. Auckland would be the major beneficiary of the economic benefit, but $214 million direct expenditure and $267 million of net value added would be spread across the rest of the country. The redeveloped Jade Stadium will be well positioned to play a major role in Rugby World Cup As the second largest stadium in New Zealand, it would reasonably be expected that Christchurch and Jade Stadium s involvement in the tournament would be second only to Auckland and the primary focus of the tournament in the South Island. The allocation of games is still subject to finalisation by Rugby New Zealand 2011 Ltd in This means that, with Jade Stadium s redevelopment, Christchurch would be well placed to economically benefit from RWC As well as the significant economic impacts that will arise from major rugby events, there is the potential for a range of other positive economic impacts to be realised from other sports and events that could be staged at Jade Stadium, which will in turn boost the Christchurch tourism industry, attracting both domestic and international visitors to Christchurch, and raising the profile of Christchurch as a tourist destination. In particular Jade Stadium is expected to play a leading role in Cricket World Cup 2015 which New Zealand will co host with Australia. Proposal to Christchurch City Council JSL is seeking Christchurch City Council s support for the further development of Jade Stadium. The assistance required includes: Access to $40 million debt through the Council borrowing group, at the normal margin above Christchurch City Holdings Limited borrowing rate. Work with JSL to secure $20 million of other limited recourse, no interest funding from central government, the Lotteries Commission or other sources. Underwrite the $20 million current funding shortfall so that the development can proceed as per the critical path leading up to RWC Council approval of debt funding and underwrite of the current funding gap is required by 30 April 2007 for the project to proceed to the final design and tendering stages. The majority of the debt funding drawdown will be in the 2009 and 2010 years. Other funding is required as set in the indicative funding drawdown schedule below. Page 6 of 8

7 Debt Funding Other Funding Total Financial Year $000 $000 $ June 2007 $1,300 $700 $2, June 2008 $6,700 $3,300 $10, June 2009 $21,400 $10,600 $32, June 2010 $10,600 $5,400 $16,000 Total $40,000 $20,000 $60,000 In addition Council support is also requested for: Key Partner Support Canterbury Rugby Football Union (CRFU) To access the land required to construct the new stand it is necessary for CRFU to relocate from their current administrative head quarter premises. To facilitate this, Council agreement and financial support is requested for CRFU s proposal to relocate CRFU administration and training headquarters and facilities from Stevens Street and Rugby Park to QEII Park. While partly necessary for Jade Stadium redevelopment, it is believed this move would also strongly support and endorse the positioning of QEII Park as a regional (and potentially national) high performance training centre. In exchange for this support it is suggested that Council negotiate with the CRFU the placement of brand Christchurch on the fringe of the playing surface at Jade Stadium for all rugby matches and in a position that optimises global television exposure. JSL is working with CRFU in the development of this proposal to Council. Canterbury Cricket Association (CCA) JSL signed an access agreement with CCA in 2006 to set out the understandings of both parties related to Jade Stadium and to facilitate CCA s support of the dissolution of the Victory Park Act. The access agreement provides for cricket s access to Jade Stadium for key matches, with a protocol for preferred access during a priority rights period. Part of the access agreement requires JSL s support for the development of an alternative first class cricket venue, to International Cricket Council (ICC) standards, that will be the playing and training home for CCA in Christchurch. A business case is currently being completed and will be put to Council later this year. Council consideration of this proposal is requested. Match Allocation Support Council support is requested for the following objectives, which are designed to support the overall RWC 2011 event objectives for New Zealand while also maximising Christchurch s involvement and the economic benefit for Christchurch. The match allocation objectives are: To play a leading role, second only to Auckland; To optimise social and economic benefit to our region; To leave a great, commercially sound stadium legacy; To support the tournament and event opportunity as a whole and do what is best for New Zealand first and Christchurch second. Landscaping the Surrounding Area Jade Stadium is proposing to develop the Wilsons Road and Stevens Street land adjoining the new East Stand by opening up public access beyond the current fenced boundary line up to the edge of the new stadium. Council support is requested to deliver streetscaping in the areas immediately beyond the stadium boundaries and up to the new security line of the stadium with land that is effectively gifted to the community through enhanced, wider footpaths and other open spaces. The treatment of land both inside and outside the ownership boundary would remain consistent. This will also enable land on the corner of Page 7 of 8

8 Wilson s Road and Lismore Street to become a small community park, to be known as Lancaster Park. The cost of this is estimated to be in the order of $1.5 million in The Stadium Walk Summary Jade Stadium is also planning to facilitate the linking of Jade Stadium with the central city by way of a Stadium Walk. This is planned to illustrate the proximity of the Stadium to the city, encourage patronage of central city businesses before and after events, reduce traffic and parking around the stadium and neighbouring area, and encourage use of public transport and central city parking facilities for events. Council is requested to support and deliver on the streetscaping and traffic management that is required to develop the The Stadium Walk concept linking the central city with Jade Stadium. JSL and Christchurch, having faced a once in year replacement issue on the East Side of Jade Stadium, is fortunate that this can be undertaken in the wider economic and social context that the Rugby World Cup 2011 provides. Experience in other centres indicates that with major infrastructural assets such as stadia it is inevitable that some public contribution will be necessary. Jade Stadium only became public owned in 1998 and has since that time received only limited public funding support, particularly when compared to other New Zealand stadia. Council structured Jade Stadium Limited on a commercial model to give the company a strong incentive to achieve what was a tight business case. Jade Stadium has achieved this. Whilst the same commercial approach will be applied to this next stage of Jade Stadium s development, it will not be possible to fund it from purely commercial operations. Jade Stadium Limited believes the business case as outlined is realistic and that the business can fund $40 million of the total $60 million cost, despite the fact that it is only five years since the west side of Jade Stadium was redeveloped. However to proceed Jade Stadium needs approval to borrow $40 million at commercial rates and provision of an immediate underwrite of the $20 million funding gap so that the development can proceed and meet critical path milestones. Council s active support in securing funding from Central Government, Lotteries Commission and other sources will be important. At the level of Council support proposed Christchurch will achieve a stadium of international quality, with the associated economic benefits, for a relatively low Local Government investment. Council approval of debt funding and underwrite of the current funding gap is required by 30 April Bryan Pearson Chief Executive Vbase, Managers of Jade Stadium 1 March 2007 Page 8 of 8