Milan, Inter and a new stadium – why the site in Rho is so expensive (updated 17/03/14)

They’re only eight or so years behind the rest of Europe, but at last new stadia have become all the rage in Italy. Now that clubs have had a chance to take a long look to Turin and analyse the benefits of a pristine, club-owned venue, they all want one.

Milan are no different. What started as a plan, with Inter, to simply buy San Siro and the neighbouring hippodrome from the Milan city council, has now turned into a hunt for a plot of land able to take the construction of a fresh arena.

Both Milan and Inter have identified a site in Rho, northwest of the city (it’s a separate municipality, not located in the city of Milan), where the 2015 Expo will take place. The reason it’s so popular? Because in order to host the Expo the land is being completely redeveloped – new facilities, buildings and an improved transport infrastructure mean that, in the simplest of terms, all Milan or Inter would need to do is build the stadium. The construction and compatibility of the surrounding area for new facilities – important for all sports arenas to ensure they can be used 24 hours a day, 365 days a year – will largely have been completed for them.

The problem is that this redevelopment has come at a great cost to all who are involved in putting the Expo together. La Gazzetta recently ran a piece claiming that Milan president Silvio Berlusconi wanted to look for a different territory for a new ground, as it would cost around €300m just to acquire the plot in Rho, not including stadium construction costs.

What La Gazzetta didn’t detail is why it would cost €300m, and nor did they anticipate that the land could well cost a whole lot more than that.

Arexpo SpA is the company that manages the land upon which the 2015 Expo will take place, with a role to oversee its redevelopment and ensure a sustainable post-Expo plan for the area is in place.

The company was originally controlled entirely by the Lombardy administration, but is now comprised of five shareholders, who each have a differing stake:

  • Regione Lombardia – the administrators of the Lombardy region – own 34.67%
  • Comune di Milano – the Milan city council – also own 34.67%
  • Fondazione Fiera Milano – a trade show company that hosts various exhibitions – own 27.66%
  • Provincia di Milano – the Milan province (not the city) – own 2%
  • Comune di Rho – Rho city council – own 1%

Prior to the formation of Arexpo SpA, the site was owned by the Fondazione Fiera Milano (50%), Belgioiosa (a private company, who owned 30%) and the Milan and Rho city councils (the remaining 20%), although one lot belonged to the Italian Post Office, which has agreed to leave the land in return for being relocated elsewhere.
The Fondazione Fiera Milano sold part of their land for €66.4m to the Arexpo group, and then converted the rest of the land under their control into shares in the company to retain a stake in the site. The Cabassi brothers, who own Belgioiosa, sold their 30% for €49.6m.

The Milan city council then bought into Arexpo SpA , with their 34.6% stake costing €32m.

As a result of the investment, and realising they had no chance whatsoever of affording the redevelopments costs without help, the Lombardy administration reduced its stake to 34.67%.

Not only did these five stakeholders buy into ownership of the land, but they each invested varying sums of money for the purposes of redeveloping the plot for the six-month Expo. The contributions of the parties involved in running the Expo are as follows:

  • €1.486b – the Italian government
  • €218m – the Lombardy administration
  • €218m – Milan city council
  • €109m – Milan province
  • €109m – the Milan chamber of commerce (a chamber of commerce is just a collection of businesses from the area)
  • €260m – private investors

You can already see where La Gazzetta obtained their €300m figure from. The Milan city council have invested €250m into the project – €218m for their part in developing the land and infrastructure, plus €32m for a large stake in Arexpo SpA. That is money they will look to recoup, with the chance to make a tidy profit by selling some of their land to Milan or Inter.

To get an idea of the level of overall investment into this site, and consequently why it is a potentially valuable area, it is worth looking at some of the figures and where the money was spent. €1.235b alone was spent preparing and constructing the site for the Expo, €1.78b on transport infrastructure, and €91m on increasing the land capacity. It is a financial trade-off for the Milan clubs – the costs of this redevelopment and transport improvement are going to be passed on to whoever wants to buy a plot, but at the same time the area is ready-made for a football stadium.

Transport links to the Rho area are considerably better than the current links to San Siro, where the M1 line to Rho on Milan’s metro is often overcrowded on sell-out matchdays because Lotto is the only station serving the ground (though by 2015 the new M5 line will have a San Siro stop, right outside the stadium).
The proposed new area is further out – you have to stay on M1 and carry on to Rho, instead of alighting at Lotto – but there are also rail links to Rho Fiera Milano station, and three motorways linking Milan and other cities to the site.

The Arexpo group recognise the strength of what they own. The post-Expo plan, which had to be drawn up as part of the conditions of hosting the event, acknowledges that the infrastructure for services on the site itself is suitable for sporting use:

‘The main buildings will be maintained and turned into structures of public or general interest for the city, to be used for services, entertainment, concerts and sports facilities.
‘All thematic pavilions will be turned into facilities for the city (entertainment, sports, services and exhibition spaces).’

Unfortunately, the fact that it would not need as great a regeneration as the area surrounding San Siro, means the land is going to come at a premium for Milan or Inter, should they wish to buy it.

That said, a renovation of San Siro alone would be cheaper – and that option has caused a miniature game of cat and mouse to develop between the two.
Initially, reports suggested Inter were the ones looking to move to a new stadium, while Milan were happy to anticipate a Nerazzurri success in this quest, and therefore seemed content to attempt to buy and renovate San Siro, even though they submitted a proposal of interest for the Expo site. Roberto Maroni, president of the Lombardy region (who, remember, have invested at least €218m into the project), was quick to encourage Inter to put forward a proposal of their own in December, presumably with the intention of driving the price up, and even pinpointed the area where any stadium would be built.

But since the arrival of Erick Thohir as Inter president, the scenario appears to have switched. Ernesto Paolillo, Inter’s ex-director general, strongly implied Inter’s reticence to push on with the situation lay at the door of Thohir, claiming that he and his former club ‘lacked the courage’ to go ahead with a new stadium, that he believed Inter were going to be the ones to leave, but that now Milan have the advantage.

For his part, whenever the issue has cropped up in discussion, Thohir has been reluctant to commit either way, perhaps because he cottoned on early to the expense of the site in Rho, but primarily due to his desire to stabilise the club financially. In December last year, he was clear in saying that it was important for the club to evaluate building a new stadium versus renovating San Siro – essentially the more costly option versus the cheaper one.

In February 2014, he went a step further, explaining that a new stadium is ‘not a priority’ and that they will talk about it next year, possibly fuelled by the reports that Milan were now actively seeking to vacate San Siro.

And that sums up the position of the two clubs at the moment – one seemingly happy to wait for the other to make a move. Milan appear to have realised that Thohir is in no rush to plan a new ground, and combined with Barbara Berlusconi’s appointment to the board of directors, are making plans of their own to leave. Inter and Thohir, with an eye on what’s happening in the red half of Milan, will keep their options open for now.

 

UPDATE:

Milan were the only team to submit a proposal for the Expo site by the deadline set by Arexpo. The proposal features plans for a stadium, to be built on the east side of the site, with a maximum capacity of 60,000, with additional space requested for facilities around the ground to aid the running of matchdays. Milan have also requested space for retail areas, and have expressed an interest in other areas of the site for the potential to build other sporting facilities and structures.

This is just a proposal – Arexpo do not have to accept it, and even if they do, they must come to an agreement with Milan over a price for the land.

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