Sports Facilities: impact of Financial Fair Play Regulations
This is the fourth and final post in a series of 4 blog posts in which we explore what football clubs and other sporting organisations should consider in relation to maximising the commercial value of their facilities.
In our first post, we looked at when a club should consider expanding or re-developing their stadium. In our second post, we considered utilisation as a factor to be considered in any stadium redevelopment. In our third post, we considered the impact a stadium re-development could have on a community.
In this final post, we consider the impact of the UEFA Financial Fair Play Regulations (“FFPR”) which seek to encourage football clubs to invest in facilities and are an additional driving force behind the increase in investment in facilities by football clubs. The comments in this blog focus on the UEFA FFPR. Whilst those regulations only apply to clubs taking part in European club competitions they are relevant to all teams who have aspirations of taking part in such competitions and as such should capture the bulk of teams in the Premier League and other clubs in the premier divisions of their domestic leagues across Europe.
Stadia and training grounds are a key part of a club’s identity and vital to on field and off-field success. According to Deloitte’s recent analysis (2017), Premier League clubs spent a record level of £235m on stadia and facilities in 2015/16 (a 3% increase from previous year).
The FFPR require clubs, to a certain extent, to balance their expenditure (for example, wages and money spent on players) with their income from ticket sales and other commercial activities. This is to ensure that clubs don’t make unsustainable losses year after year and to make sure that they “play fair” with other clubs. However, if a club invests in their stadium’s infrastructure, youth development or community projects, the money spent is exempt. The FFPR therefore open up an avenue to use exempt expenditure to create new income streams with the knock on benefit of greater permitted expenditure.
Deloitte suggest that two beneficiaries of larger facilities West Ham and Liverpool, are “likely [to see] matchday revenue uplifts” with West Ham’s move to the London Stadium seeing an average attendance increase of 60% in the first season and Liverpool’s main stand expansion leading to an average attendance increase of 20%.
As well as opening new revenue streams and leaving more money to be spent on players, as outlined in our previous blog posts improving facilities can have other benefits including presenting a better shop front, to improving space utilisation and engaging the local community. FFPR also allows clubs to put more funding into their training facilities, which is a crucial part of developing its talent for the future and making the club a more attractive prospect for young talent.
If you are embarking on a major development project, we know how important it is for you to think ahead, anticipate pitfalls and find practical solutions. Mills & Reeve have a team of more than 114 real estate lawyers all around the UK with a wealth of experience in major real estate development, finance, construction and planning. Please see our Sports Facilities flyer for more details of our experience and project highlights. If you require any assistance in this area, please do not hesitate to contact Chris Pike or Mark Hovell.