Sports construction is going through economic uncertainty

ARLINGTON HEIGHTS, Ill. (AP) – The massive grandstand at Arlington International Racecourse casts an eerie shadow as the sun sets on a weekday evening. It sits dormant on a tract of land that could be transformed substantially.

With the galloping horses long gone, the Chicago Bears see 326 acres of opportunity. Even the Buffalo Bills are planning a new home. Same for baseball’s Tennessee Titans and Kansas City Royals. Major League Soccer’s Inter Miami is working on its new headquarters, and so on.

When it comes to sports construction, today’s economic uncertainty is nothing compared to tomorrow’s lucrative promise. Interest rates, inflation and supply chain issues are affecting the plans, according to construction and financing experts, but they haven’t been in the way.

“The best time to build is now, not two years from now,” said Dan Wacker, director of preconstruction for Mortenson’s sports and entertainment division, who counts US Bank Stadium in Minneapolis and the US Bank Stadium among his recent major projects. ‘Allegiant Stadium in Las Vegas. . “If you can make it happen.”

The key to any development is understanding what the market can take when it comes to spending, which already factors in for inflation — “a manageable risk factor,” according to Scott Zolke, a lawyer with extensive sports experience who represents the Bills in stadium talks.

“One of the things that we ran out of in our Buffalo analysis was ‘What if?’” he said.

“What about inflation? What if we go into a recession? What if… the supply chain is completely turned upside down?” Zolke added. “You look at the best, worst and average scenarios, you do your own comparisons… and then you say, is it worth it?”

The teams continue to say yes during what looks like a massive period for large construction projects. Even in the midst of an inflation easing attempt in October, the Federal Reserve will likely continue to raise interest rates to cool the economy.

While the teams are taking into account the current economic climate, it hasn’t been a problem.

“I haven’t yet seen decisions about whether or not to do a project change because of cost,” said Bill Mulvihill, chief executive officer and head of the Sports Finance Group at US Bank, which helped finance the Los Angeles Rams . SoFi Stadium. “It’s just changing how we’re going to finance it, how much it’s going to cost rather than changing, are we going to do it or not?”

The Bears want to transform the Arlington Heights site, once a thoroughbred racing jewel, into a different kind of jewel, anchored in an enclosed stadium full of year-round activity, contemplating an agreement with Churchill Downs Inc. for the land purchase. through.

They plan restaurants, shops and more on a parcel of land about 30 miles northwest of their longtime home in Soldier Field, all for about $5 billion, with help from taxpayers.

They’re not the only team with their sights set on new digs. The Bills are finalizing a deal with the state and county governments to build a $1.4 billion stadium, and the Titans recently lined up the latest funding for an estimated $2.1 billion dome home.

In Buffalo, it took years of prodding, relocation fears, numerous studies, a change of ownership and delays caused by the COVID-19 pandemic to finally come to the conclusion that the Bills needed a new facility to replace the stadium that so they called home. 1973.

For the most part, when it comes to new stadiums and ballparks, owners are playing the long game, knowing they figure to profit even if prices are a bit haywire at the moment.

Material costs have increased 35.7% since January 2020, according to the National Association of Homebuilders. Concrete went from a 30-year low in 2009 to the biggest jump and highest price this year since 1989.

Supply chain issues have led to a juggling game when it comes to choosing materials. When steel is in short supply, for example, there has been a rush for concrete. That in turn has led to supply and demand issues there, said Logan Gerken, vice president and general manager of Mortenson’s sports and entertainment division.

If the teams are scaling back the design, they’re doing it in ways fans probably won’t notice, like fewer TVs in suites, Mulvihill said. But when it comes to large items? They aren’t sacrificing a retractable roof for a fixed roof or no roof at all just to save money.

“If a year ago they thought they needed a retractable roof, I think they’ll build with a retractable roof and just take the cost increases and figure out how to finance them,” Mulvihill said.

Although the framework of the Bills’ deal calls for what was a record $850 million price tag for NFL taxpayers in March (and will likely be surpassed by the Titans’ proposal), government funding can be difficult to secure.

Take what happened in Oakland, where baseball’s Athletics could leave without a new stadium. The city, which secured $321.5 million in grants for a $12 billion stadium and waterfront project, was scrambling to get more to help cover potential infrastructure cost overruns and keep the team in the city.

The Bears plan to pay for their stadium, but want taxpayer dollars to cover the costs of infrastructure such as roads and sewers to develop the site.

There are differences to consider when developing in large markets versus smaller ones. While the development around Los Angeles’ SoFi Stadium and what the Bears envision in Arlington Heights will bring in additional revenue, Buffalo’s small population base and visitor-pulling power played a big factor in Bills’ projections and a increased dependence on public funding.

“It’s not apples to apples. It’s a completely different metric,” said Zolke, who also worked with Rams owner Stan Kroenke on SoFi development following the team’s move from St. Louis.

“It didn’t make sense for (Kroenke) to privately fund a project in St. Louis,” he said. “It made 100% sense to say, ‘I’m going to finance this thing (in Los Angeles), just give me some infrastructure.'”

In Nashville, the public funding commitment may be greater because the region can count on recouping the money by creating yet another attraction to draw even more visitors to Music City, including the potential to host a Super Bowl.

That’s not the case in Buffalo, despite the pull of nearby Niagara Falls and the home of the chicken wing.

The priority when it comes to any development project, Zolke said, is for teams to feel comfortable with the return on investment over the long term, which cushions the impact of inflation to some extent.

“This is a long-term investment. You won’t cash in five years,” Zolke said. “You’re not flipping a house.”


Wawrow reported this story from Buffalo, New York.


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