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Tuesday, 22 October 2013

“We 'don’t do' unfounded optimism!” Ernst’s Economy for You in an exclusive interview with Folkert Buiter, initiator of the Icedôme Almere (pt 1)

Today, I’ll have written another article about the Icedôme Almere. For this fact, there are two good reasons: 
  • Ernst’s Economy had an exclusive interview with one of the initiators of arguably the largest project that the city Almere has ever known, during its short, but turbulent history;
  • The targets and consequences of this state-of-the-art project are of the utmost importance for all inhabitants of Almere and for many Dutch and foreign people that cherish speedskating, short-tracking, figure skating and gymnastics; 
Folkert Buiter, in cooperation with former bronze medalist on the Speedskating World Single Distance Championships of 1999, Jakko Jan Leeuwangh, is the initiator of Icedôme Almere: a new, multifunctional speedskating and sports facility in Almere, The Netherlands.

Folkert wanted to talk exclusively with Ernst’s Economy for You, about this state-of-the-art, newly-developed project for professional sports, recreational sports and leisure. The interview took place on Friday, 18 October.

The cause for this interview was an article upon the Icedôme Almere, which I wrote on 26 August 2013. In this article I took a critical look upon certain aspects of this large project: 
  • The forecasted numbers of visitors, which seemed quite optimistically to these eyes;
  • The support at the Royal Dutch Skating Union (KNSB) for this monster project, which was going to compete with the beloved Thialf speedskating stadium in Heerenveen, Friesland: a monument for the speedskating sport;
  • The financial involvement of the city council of Almere and the financial risks that this project might bring for the population of Almere.
We agreed to meet in a cosy café-restaurant in Almere-Poort, at only a few kilometers from the area where the Icedôme Almere is planned in approximately 2016.

When I would have had the impression that Folkert Buiter was a typical dreamer, or a ‘free lunch’ kind of lightweight, commercial business man, than this impression is taken away within one minute after meeting him. Here is a down-to-earth guy, who has been busy with this plan for years and who apparently didn’t go for the easy solutions.

Folkert Buitert seems also someone, who listens to the opinions and focal points of other people and benefits from this, without losing his focus. He wants to help employment in Almere – his domicile since 25 years –, while at the same time giving the professional speedskating sport a boost. He wants to achieve this by building a multifunctional sports venue in Almere that is second to none in The Netherlands or abroad. 

Whatever you think about Icedôme Almere, it is a well-considered and bold plan, which gains respect by these facts alone. Whether it is an achievable plan, is something that the future will learn.

Anyway, we will have an open discussion, in which no subject is abolished. 

One exception: there will be no statements about the contract phase of the project and no statements about involved parties and relations, unless these relations explicitely approved of such publicity. AEG - Anschutz Entertainment Group – is one of the relations that may be mentioned publicly. Yet, it is not an official partner of this project.

On top of that, Folkert Buiter stated in advance that he is not involved in the sales process: he is mainly involved as content expert, who deals with the services and content of the ‘product’ Icedôme.

Folkert Buiter: Icedôme is one complex: at right there is the professional sports part, to the left there is the stadium and the recreational zone. Both sides meet in the middle of the venue.

Building plan of the Icedôme Almere
Picture courtesy: Folkert Buiter of Icedôme Almere
Click to enlarge
There is a 400 meter ice track for professional sporters: it is open all year for national and international professional skaters, and in the evening for license-holders as well. Also a short-track track is a part of this area in the complex. 

Next to it, there is a special, dedicated figure skating track and an inline skating track with 3000 seats in the grandstand. This is one of the two covered inline skating tracks in Europe and the only one in The Netherlands.

The tournaments that are held on these shorttrack and figure skating tracks, are for the license holders; for national level athletes, these are probably pre-selection competitions. The inline track is actually suited for large tournaments.

Ernst: According to the national Dutch skating union KNSB, the Icedôme Almere only gets one important tournament per season guaranteed. It must apply for the other competitions. Is that enough?!

Folkert: The Icedôme Almere is allowed to make a choice for one of the great speedskating tournaments. In general, there is only one large, international tournament per year for one country in speedskating. Hence, the World Cup competition is left out of the equasion, as this series of tournaments does not count in this decision process. Besides that, there are figure skating and short-track tournaments too.

It is certain that Icedôme Almere may choose the best tournament from the Dutch long-track schedule. It might happen now and then that The Netherlands doesn’t apply for an international speedskating tournament; that is tough, but in any other case, we will certainly have the best tournaments.

We are in favour of spreading the Dutch national championships over the country. We have the first choice for the large tournaments; we’ll see what will further be in store for us. We build something good and consequently, we are not worried about this.

Ernst: Were you not annoyed by the ‘attacks’ from Friesland, when the Icedôme won the bidding process?

Folkert: No, not at all. There have been some conflict-mongerers and people with their own small interests, but these people were neither the Dutch nor the Frisian citizens. Most people – Frisian and Dutch – will agree that such a bidding process for a new ice temple must be played by the rules. Further, Icedôme Almere doesn’t speak about the other candidates. We speak about ourselves alone. 

Ernst: How high are the estimated building expenses for Icedôme Almere?

Folkert: That is approximately €170 million for Icedôme Almere itself and approx. €15 million for the building terrain: this is bought on a long lease contract from the municipality of Almere. 

All amounts are estimated plus or minus 10%, as these deviations do not cause relevant changes in the operations budget. As this project didn’t have to be put out to tender, these amounts can be borne very well. There won’t be considerable changes in price.

There will also be a professional sports hotel, including an appartment complex, to the tune of €12 - €15 million, including the terrain. The yearly fee for the long lease is 4.5% of the ground value; this amount will be indexated on a yearly basis. However, these prices are under heavy pressure currently; long lease fees in Amsterdam are much lower nowadays.

However, these are the amounts that we used in our bid book. We don’t want to receive illegitimate state support: that is our bedrock.

The building companies that will build the Icedôme are BAM Utility Building and Van Wijnen (section mid-Netherlands). These companies are part of the consortium, together with Jakko Jan Leeuwangh and Folkert Buiter. 

The consortium will be expanded and will turn into a CV or a BV [Dutch kinds of private limited companies – EL]Next, we will get a new BV for the development and building phase and afterwards you will get the owners and operators (aka franchise holders). This is business-as-usual.

We are the front operators in this project, but they – Van Wijnen en BAM – do the relations with the financiers and other parties.

Ernst: Do these mentioned parties guarantee the payment of the building expenses?

Folkert: No, by no means. They have stated: we can build the complex for this amount of approximately €200 million. We can go for that. However, this was misinterpreted by Dutch national television station NOS. 

The NOS understood and printed this incorrectly: they thought that BAM Utility Building and Van Wijnen had supplied a guarantee for the payment of this building amount, which was not true at all.

Ernst: Who will supply these building expenses, as €170 million, for the Icedôme alone, is a considerable amount?!

Folkert: There are multiple parties, which are interested in the financing of this project. The primary approach is that a number of parties will become joint owner of the Icedôme Almere and will hand this out to an operator, either through a lease construction or a covenant. 

Also an operator could lease the whole complex. In this process, a number of varieties is possible. However, these varieties need to be worked out yet.

For the role of financier/ owner, as well as operator or intermediate, there are multiple interested parties. During the comings months, the conversations with the financiers and operators will be fine-tuned and finished. At a certain moment, these primary parties will have to negotiate with the Dutch Olympic Committee (NOC/NSF) and with the Dutch skating union KNSB.

Ernst: Must the building amounts not be paid in advance during the building phase?

Folkert: BAM and Van Wijnen are used to work on a tender basis. As this project is not tendered, they can put time and money in the pre-development and the arrangement of the contract phase, which finishes on 1 April 2014. 

Things look good, as far as that is concerned. It is a lot of work, however.

All kind of parties are yet in negotiation modus. Discussions are ongoing, but we know about where it might end. Things should only happen now. Parties should get to know each other and create their own space. Some parties we do know good already.

Ernst: Hence, the financing is not covered yet?!

Folkert: Right. The financing is only covered when the contracts are signed. However, the financing is certain and it is certain too that the operation of the complex will be arranged and that somebody will actually do this.

One party says: I’m interested. The other party says: I want to invest too. A third party says: we want to become owner and operate the complex ourselves.

We negotiate in an order-of-our-own-choice. We will choose the parties, which are best for the sportive goals and the quality of the accommodation. 

There must be a balance between finances and quality. We don’t want to supply poor quality, in favor of great profits. When you ask: can things go wrong?! Then I say: in this particular economy everything can go wrong, especially when you don’t take any chances at all.

What people must get used to, is that the Icedôme is a hi-tech and highly innovative building. You can’t compare it with anything else, as no other building equals it.

People state sometimes: "No speedskating track ever makes a profit". But the Icedôme Almere is no speedskating track alone. Everything must be developed multi-functionally, including – jokingly meant – the bath rooms.

When compared to other speedskating tracks, in sheer size and numbers of visitors, our business case on a yearly basis has been settled very cautiously. We are open around the clock. 

At the Icedôme, we ‘don’t do’ unfounded optimism, but we have based our business case on sensible and generally accepted business models, at this location.

Ernst: How many visitors and spectators do you need to reach break even point?!

Folkert: You can’t state it like this. When you would only look at the professional sports part, a project like the Icedôme Almere would not be viable at all. When we would only offer professional sports facilities, without a medical centre and accommodation for our guests, then the foreign visitors would not show up.

Consequently, we take a good look at how f.i. Calgary managed things after the 1988 Winter Olympics. Yet, their training facilities are very popular and thus we try to start a cooperation with them. More countries are actually interested in a project, like the Icedôme, for themselves, but first we are going to do it in Almere, The Netherlands.

We offer a business case, based upon 1.2 to 1.3 million visitors annually. These people not only show up to skate. Besides that, they can come to us all day, during a very large part of the year.

We have calculated, based upon 200 paying recreational skaters per hour; these people can also show up from 5pm until 8pm: times, where normal speedskating tracks only allow speedskating clubs to ride on the ice. 

During 5pm to 8pm, the clubs can ride on the professional sports ice, as these are time slots wherein the professional skaters don’t want to ride at all. The recreational sporters can ride on the recreational ice, which is also of outstanding quality.

We calculate with 390,000 recreational skaters per annum: independent external parties benchmarked this number to 400,000 skaters per annum, however. 

During the extra hours, recreational skaters can also skate on the other tracks. When compared to other speedskating tracks with extra facilities, we offer more than twice as much facilities. 

This will gain a lot of revenues, especially as we reside at a much better location than other tracks: about 2.9 million people live within one half hour of driving from the Icedôme and more than 9 million within one hour of driving. Besides that, we will get very favourable transport facilities, through our own train station at less than five minutes walking. Many trains in northern and south-western direction will stop there in the future.

With 1.2/1.4 million visitors, we will make a profit. It depends, of course, for which cause they are visiting the Icedôme: recreation, events or as a consequence of renting the ice to foreign speedskating teams. 

Dutch speedskating teams don’t pay anything, as we do want to help the Dutch skating union in its desire for renewal and reinforcement.

This is the first part of the interview with Folkert Buiter of Icedôme Almere. The second (and perhaps third) part will be printed in the coming days. In a follow-up part, I will enter into the statements and forecasts from this interview and from additional, classified information, that I received from Folkert Buiter.

I print this separately, in order to prevent the interview and my opinions from mixing up.

To be continued…

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