Financing sports stadiums. A model to resolve current funding problems

Until recently, the majority of sports- and multi-purpose stadiums in Germany werenít competitive in an international context regarding both technical and quality standards as they showed a significant amount of deferred maintenance. Given this basic situation, the awarding of the FIFA World Cup 2006 to Germany provided a new impulse to start the necessary investments. As the construction and the refurbishment of modern stadiums is extremely cost intensive, stadium operators respectively the owners are forced to ensure a solid financing. Due to the fact that for most of the stadiums traditional financing has become more difficult or in some cases even unachievable, alternative sources of capital are crucial for successful developments. Hence, the purpose of this paper is to compare traditional to innovative financing for sports stadiums. New financial instruments are critically analysed with respect to their suitability in this context. Furthermore the study delineates advantages and disadvantages of possible options, the chances and risks they imply and it discusses their adequacy for stadiums as well as for stadium owners. The study concludes with a proposal for a model that can serve as a basis for future financing decisions in this field. The model will also show how owners can increase their return by preventing unnecessary high financing costs that might come up in later stages of the stadium life cycle due to decisions made during the development process.