The rise of sports infrastructure and sports academies in the middle east region
Sports and Event Management Focus
Suhail MirzaPartner,Corporate Commercial
Qatar’s successful staging of the 2022 World Cup brought to the world’s attention the region’s magnificent stadium infrastructure and transport capabilities. The 2022 World Cup was, of course, mainly funded from the Government purse. A legacy of the World Cup 2022, amongst other things, is that it demonstrated the regional appetite for large scale sports events and the opportunity they provide to local economies to diversify beyond the traditional oil and gas sectors. Similarly, the rapid development and international recognition of the Saudi Pro League further evidences the appetite in the region for sports investment, with major Government support. As the regional sports sector continues to mature, there will be opportunities for private sector investors to participate in this rapidly growing sector. In addition, the region’s sporting bodies will look to develop sports academies to identify and nurture local talent to feed into the professional sports leagues. Further, this growth is not limited to football.
The region is also making a concerted effort to develop talent across other sports including cricket, basketball, athletics and golf. To this end, regional sports academies provide a vital supply chain for the professional teams that exist in this region. Sports academies help to identify and nurture local talent, which is vital to ensuring the region’s sporting capabilities become self-sustainable and opportunities to excel are available to local talent in equal measure to foreign talent.
In this regard, there is precedent for successful private sector investment in sports infrastructure and academies. Most recently in April 2023, US based investor, the Endeavour Group (and owner of the UFC) exited from the IMG Academy sports training school, after selling it to the Asian private equity investor EQT (see the Reuters Article UFC owner Endeavor to sell sports school IMG Academy in $1.25 bln deal | Reuters) for an enterprise value of USD $1.25bn. Similar sports academy infrastructure exists in the region (notably the Aspire Zone Foundation in Qatar). Accordingly, from a private sector investor perspective there are a number of opportunities to become involved in such developments.
As with other infrastructure projects in the region, Governments play a critical role in the structuring of projects including the contribution of land assets and providing licensing/regulatory support to the construction and operation of the infrastructure. Governments (or a department/agency of the relevant Government) will most probably comprise a key investor in such projects and will often solicit private sector investors to enter into joint venture with it. This allows the relevant Government to tap into the expertise and commercial knowledge of the private sector.
Given the land is usually under the direct ownership of a Government, it is also common for the land to be contributed into a joint venture vehicle as an in-kind equity contribution with an independent valuation attributed to it. The private sector investor may participate on the basis of an agreed valuation to its equity contribution. There are often consortia established for the purpose of bidding for and acting as contractor or joint venture partner to the Government. These sorts of structures provide opportunities for investors – not merely infrastructure investors but to be involved in different aspects of the sports infrastructure or academy project.
Stadia infrastructure and sports academies are not developed as stand alone facilities. The added attraction from a regional perspective is that sports infrastructure will often form part of a wider masterplan sponsored by a lead developer. This is where the value added benefits of sports projects can be seen in the region. An academy, for example, may not merely focus on nurturing sporting talent but may also have a school and/or sports science facility as part of its offering. If this is the case, then typically an international education services provider will be part of the project. Similarly, a sport science, health and well-being centre (including rehabilitation and warm weather training facilities) can provide opportunities for medical services and hotel accommodation providers. This sort of infrastructure initiative is in line with regional government policy to develop other sectors of the economy. Education and healthcare are key drivers for the region’s growth. More importantly for investors and sponsors of sports projects, these additional lines of activity create an income stream and form the basis of a return on investment that underpins valuations in the sector.
Real estate developers in the region continue to jostle to differentiate themselves from competitors. For example, residential developments adjacent to golfing facilities are often tailored with the expatriate investor in mind. The current trend is to develop multi-purpose residential facilities which are often branded. This provides opportunities for established sports and leisure brands to enter into licensing deals with regional developers to increase regional brand awareness and deliver more value to their investors. For example, on 15th September 2023 prominent UAE real estate developer, Sobha Realty announced a global partnership with English Premier League team, Arsenal FC (see Arsenal and Sobha Realty announce new partnership | Partner Activation | News | Arsenal.com).
In our view, the region will continue to experience significant investment in sports infrastructure and is (with full Government support) focussed on developing the sports eco-system from training academies to multi-billion dollar mixed use facilities with residential and leisure developments. This is a golden age for sports investment in the region with multiple opportunities for international brands to take advantage of the exciting investment opportunities.
For further information,please contact Suhail Mirza.
Published in October 2023
