Building a new rink or recreation center can be an exciting process. But when it comes time to seek funds for the project, there’s no magic formula.
“Each and every situation is going to be different,” said Jeff Campol, Recreational Facilities Consultant, Campol Consulting Group. “Whether you’re a private developer, a nonprofit or a hockey parent — they all come from different angles and have different reasons why they want to build that rink, recreation center or multi-sport facility.”
While the finished products may look similar, each has its own unique path to funding.
“A city or county will look at this a lot differently than a private developer,” Campol said. “It really depends on where you are in the country, and the level of interest from organizations, your city or county, or other groups.”
As you embark on the process of building a rink or recreation center, these financial considerations can help guide you.
1. Do your homework
Whether you’re a seasoned investor with years of experience, or a community volunteer doing this for the first time, the process starts the same way.
“First, you have to do your homework,” Campol said. “Have a business plan that includes a feasibility and market analysis. That way, you’re going into this whole process armed with information you’re going to need down the road.”
Campol recommends conducting a SWOT analysis that details the strengths, weaknesses, opportunities and threats of your recreation facility plan. Then, develop a pro forma financial statement that will help you calculate financial projections.
“A pro forma is essentially a best guess estimate over five years,” Campol said. “You should ideally have a very well-balanced pro forma — one that’s realistic and conservative.”
This research is a critical first step for any project, and can also help lending institutions see the value in what you plan to build.
2. Find the right funding
Conducting extensive research can help determine the best method for funding a project. Though there are many options to consider, some may be a better fit than others.
You may need to find enough donors before a bank can help bring the project across the finish line. Or, perhaps you’re looking for an investor that’s interested in a new venture.
“Private lending is an option, which involves going out and looking for investors in a project,” Campol said. “This is usually done when there’s a group of people that have a common interest. They want something built and they're going into a limited partnership. They will raise funds themselves, and then go to traditional financing for the balance.”
Other times, recreation centers are built by established organizations or associations, such as a youth hockey association.
“In that case, you have people in the organization or association that have a vested interest because their kids are involved,” Campol said. “That association may also have lawyers, bankers or others in their network with ties that’ll help them down the road. This gives them a little more force to what they’re presenting.”
Public-private partnerships are another way to fund a project, and they can vary in complexity and how they’re executed.
“What's more common these days is the city will put up a bond, float the bond and build the building,” Campol said. “Then, they'll have an organization that manages the facility — but the city still owns it. There's typically a revenue share that will go back between the two.”
3. Have the right partners
When it comes time to seek funds, banks and lending institutions will take a deep dive into the data you present.
“They're looking for the strength of the people behind them,” Campol said. “They’ll look at those nice glossy pictures — but ultimately what they're going to look at is what the building can produce. They’ll look at historical data in the area and then compare it and then look at everything else that's on the outside.”
Campol encourages individuals to find a financial lender with experience in these types of projects. Choosing a certain bank because of its familiarity doesn’t necessarily mean it’s the best choice.
“Banks or traditional lending institutions usually stay in their lane, and they’re adverse to risk,” Campol said. “It helps if you have a bank or lending institution that works in the realm of sports or recreation, because there's a comfort level there.”
Beyond finances, finding the right partners can go a long way in making sure the project is a success.
“Early on, get a consultant on board who understands these types of facilities and the market, and get an architect that's done buildings like this,” Campol said. “That’s so important. Do your homework early on and find the right people, so you’re wasting time and or money down the road.”