Larry Cyrlin, Peter Dorfman, Hannah Gordon and Jerry Parisi with moderator Alan Hoffman on the finance panel Tuesday at the VenuesNow Conference.
While public funding continues to become less of a factor in facility development, bank lenders and institutional investors, familiar with the successful track record of sports and entertainment venues and buoyed by a good economy, are eager to do business.
“As a bank, we’re in the business of taking risks,” said Peter Dorfman, managing director of the Sports & Entertainment Specialty Group at SunTrust and a panel member Tuesday for “Capital Ideas: Private Placement in Sports and Live Entertainment Venues” at the VenuesNow Conference in New York City.
Sports stadiums and arenas with tenant teams provide a variety of revenue streams that can be pledged as assets toward the financing, including premium seating and suite income, seat licenses, sponsorships, concessions, merchandise and parking, said Jerry Parisi, managing director of the Sports Finance Group at MUFG.
Smaller buildings, with their smaller revenue streams, aren’t necessary cut out of the process, as Larry Cyrlin, head of infrastructure finance for the Americas at Citi, pointed out. “As we think about smaller venues … if you’re playing an important role in a smaller market where there is still a good advertising base and confidence in long-term naming rights,” then a deal will look more feasible to potential lenders, he said.
Moderator Alan Hoffman, co-chair of Project Finance at Winston & Strawn, asked Parisi how hard it is for a bank to assess contractually obligated income before construction has been completed.
“It’s a situation-by-situation analysis,” Parisi said. As an example, he used a team with a parking lot across the street from its stadium that planned to build a new stadium on the parking. “Then you’re dealing with an existing fan base, with an existing list of entities that license the suites, a consistent naming-rights partner and so forth.” In that situation, the potential should have a good handle on the potential income across the street.
Dorfman said much of his group’s analysis of stadium construction financing “is financial and quantitative in nature,” but that’s only part of the story. “We look at the project team that’s involved precompletion. … We spend a lot of time understanding how the building will be operated,” he said.
Why is it so hard to secure public funding for a project? “Stadiums are infrastructure projects,” said Hannah Gordon, chief administrative officer and general counsel for the NFL’s San Francisco 49ers. “They happen to be sexier infrastructure projects, but that also means they have a bigger bull’s-eye on them. So they tend to also become more political than a power plant or a sewage waste water plant.”