Vilnius City Mayor announced the resumption of construction of Vilnius Stadium in May Valdas Benkunskas says that the most important thing now is to "put the project back on track" after decades of stalling.
"I'm not counting the beginning or end of the term. It's important that we put this project on track, where there's no turning back," the Vilnius mayor said on the Politika podcast, acknowledging that he hears hesitations about the costly initiative.
"I also get the same questions: is it necessary? Is it time now because of the same threat of war? Is this the real need? But I assessed several things, the threat of war was not included in any contracts and we could not have foreseen that indexation would be necessary for such reasons. We could not have foreseen that the former head of this company would organize such machinations and throw some of that dirt on this project. This means that all possible risks have probably come true," he said. V. Benkunskas.
He emphasized that discussions about whether it would have been better to abandon the previous project and start all over again are unfounded.
"If we had started everything over again, it would be futile to say that we would build it cheaper and better. That is why this project is being pushed forward through gritted teeth and I hope that we will soon see the equipment on the construction site and that irreversible process of opening in a few years is already here," the mayor assured.
In turn, the real estate company intending to take over the shares of the former project developer "Males"leader Arvydas Avulis stated that the goal of business is usually to make money, but in this case the ambition is greater - to restore trust and prove that it is possible to complete the stadium, which has been under construction for over 30 years.
"In most cases, we do business with a very clear goal. I will say it very simply, the goal of business is to make money. Everyone strives to do that," said A. Avulis.
"With this project, I want to restore confidence that we can do it and finally, that this building, which has been under construction for 38 years, is not cursed, it can be done. And the ambition... Of course, it is great here, and if we could achieve and do such a thing, then I think there would be no doubt about who is capable, who is less capable or incapable," he added.
– The European Commission (EC) approved National Stadium for amendments to the concession agreement. After receiving this conclusion, you decided to renew the project. Why was that conclusion so important?
V. Benkunskas: We could not continue the project without it. The amendment to the contract itself consists of two parts: the first part is the indexation of prices due to the war in Ukraine, inflation, energy crisis, rising prices of all materials. Those prices that were fixed seven years ago no longer corresponded to reality, which is why they had to be indexed and the EC had to check whether everything was correctly indexed, calculated, whether the bases that are indicated are legal, whether there is anything inflated.
The second part is the changes that we have decided to make in the council. This is to expand the stadium itself to 18 thousand seats, making it the largest in the Baltic States, as well as several modifications to the sports arena. These things had to be checked, because this is in any case also a state aid issue. Without it, we could not move forward.
– Mr. Avuli, how does the financial model itself work? What does the essence of the contract look like? How does everything work?
A. Avulis: This is a very good offer. I have been offering it for a year and a half, but no one has accepted it. If there is good earnings here, I invite you to come and do it or join. Of course, I am speaking sarcastically here, because some politicians are trying to "pin" on me that someone is coming to earn something. In fact, I am coming to this project with one goal - to complete it.
The stadium has been under construction for 38 years. I don't know if we will get into the Guinness Book of Records, but I think we have broken all Lithuanian records, because there is no building in Lithuania that has been under construction for so long. If anyone has any doubts about whether this is too high a price or whether it can be done cheaper, I invite everyone. Please come and show me how to do it. Or I can give up my place to someone who can go to the bank today and borrow 100 million euros, hire a few more construction companies and build in two and a half years what Lithuania has not built in 37 years.
– Let's get back to the business model itself. How will it work?
A. Avulis: First there is construction, and then the second stage of the concession agreement is the operation and maintenance of the entire sports complex. This means that competitions, training sessions, various sports and cultural events must take place there. eventsIt is planned to organize and carry out a lot of various events. Everyone will benefit.
I would like to remind you that not only a stadium is being built. This will be the largest sports complex in Lithuania, which will include two gymnastics halls, a boxing hall, volleyball halls, an athletics stadium that meets international requirements, which will be able to host international athletics competitions, a basketball arena, and so on.
All this will be for consumers – it will provide jobs, generate certain cash flows. This sports complex must be maintained from these flows, because in order to maintain either a museum or a sports complex, money is needed. We will only participate in the first part, that is, we will only build it. Later, we will transfer it to those people who know how to organize events better and use the sports complex. For example, Beautiful There is the Zalgiris Arena, which hosts 300 events a year. You need to be able to do that many. They are able to, so we will talk to them, maybe they will want to continue this activity.
– So that Kaunas Žalgiris Arena can operate in the stadium?
A. Avulis: One of the options. I wanted to give an example, because one of the participants in the concession agreement is Kaunas Žalgiris Arena. They currently have 1 percent of the shares.
– If you are only participating in the first stage, how does the city pay you for that construction?
A. Avulis: The city will pay when the construction is completed and when we show that we have built everything exactly as specified in the concession agreement.
– Are payments expected over a certain period of time?
A. Avulis: The amount that has currently been agreed upon and approved by the Vilnius City Council, which has also been checked and approved by the EC, will be paid in two installments.
– 155 million euros? Or another amount?
V. Benkunskas: This is the total investment value – 120 million plus interest on the loan. After we expanded the stadium to 18 thousand seats and modified it, the total value of the project now reaches 154 million euros.
– 154 million will be transferred to the company Hanner.
V. Benkunskas: Both the state, i.e. the Ministry of Education, Science and Sports, and the municipality will pay the entire construction costs to the concessionaire within 2 years. Up to this point, we have not paid a cent - neither the ministry nor the municipality. This is the essence of the concession, that the concessionaire, the business, comes and manages all the risks. How they were managed in the decade when the project was launched, this is perhaps a separate topic. We will pay only when we receive the keys to the entire complex.
When it comes to operation, it is usually a change of shareholders, one entity comes, takes over the company's positions. But where there is a fundamental problem with such objects, it is the stadium itself. We know the Lithuanian climate. The stadium stands empty for half a year, there are no events, it is essentially a loss-making activity, but if we take the entire complex, then if it is properly implemented, it can earn money. But this risk and responsibility, using all its business know-how, will have to be assumed by the concessionaire.
We will immediately receive from the city the right to manage the kindergarten, Šeškinė Library and community center, which will also be built in that complex. We will not pay any operating fees for them. In this case, the management risk for large facilities remains with the concessionaire.
– Unless you agree otherwise after some time. For example, Kaunas contributes to the maintenance of the Žalgiris Arena.
A. Avulis: I think that's how it should be, because the city receives many services.
– Kaunas is no exception. I don't know what it's like now, but for a long time the municipality paid Gediminas Žiemelis for the then ASG, the former Siemens Arena, and bought a certain number of events.
V. Benkunskas: And now the ministry has obligations, it has a quota to organize 7 or 8 events per year in the large stadium. The contract stipulates that this quota is included and for this, of course, the ministry will pay a set price. Those grids are already laid out now.
– Mr. Avuli, what now? 33 months. Work starts in full swing in the summer?
A. Avulis: I can tell you a little more in detail, not so globally. Now we have to take over the shares of the Vilnius multifunctional complex.
– By the way, part of the shares belong to “BaltCap" to the subsidiary. How will you address those issues?
A. Avulis: We will buy 100 percent of the company's shares and thus acquire the right to manage this complex.
– The deal hasn't happened yet because you were waiting for the EC's decision?
A. Avulis: Not yet. We have been waiting for the EC, now we are conducting intensive negotiations with BaltCap, as well as with Naresta, which has started the works, and we are also talking to a potential operator who could continue the maintenance and the entire management of this sports complex after we build it.
I would like to point out that the Vilnius multifunctional complex was headed by Šarūnas Stepukonis. We need to evaluate everything in great detail, what he did and what he did not do. There is probably no need to tell you how talented and resourceful Š. Stepukonis is. We need to evaluate ourselves in order to find everything he left behind, so that there are no surprises when, in half a year, we receive a claim from someone for, say, 10 million euros. That takes a little time.
When we acquire the shares, we will get the right to build that complex. We have to check everything very thoroughly and in detail so that we don’t step on a mine, so that we don’t lose a leg or an arm. We also have to talk to the construction companies that have stopped work and haven’t been doing it for more than a year. We ask them to start as soon as possible, but the builders all have work to do and, of course, they can’t drop another object they’ve started and jump on this one.
There is a bit of inertia here, but I still hope that we will hear sounds in the stadium in June. Right now, the birds are chirping there and there is no construction going on. Our goal is to get construction moving in the second half of June, and I hope we will succeed.
– Do you really encounter people who say: “Maybe we don't need that stadium? Maybe we shouldn't build it anymore? Are they still building it?” In most cases, that project is morally written off.
A. Avulis: My goal is first and foremost to restore trust, because people no longer believe. So much has been promised, so many times spoken. It has already been built four times and demolished three times. I find it shameful. We have introduced everything you want in Lithuania – skyscrapers, shops, schools. We have everything, but we don’t have a stadium. Kaunas – they are great, they did it. They really do a lot of good things.
I went there a few weeks ago, I looked at the Darius and Girėnas stadiums, the arena, and the swimming pool. Everything there is really very well done, it is a good example for Vilnius and me of how it should be done or how it should be done even better. I want to restore the confidence of Vilnius residents that we are also capable, can and will do it here.
– Mr. Benkunskas, many people are probably saying to you: “Maybe you can come up with something else?” Will you still be able to open during your term?
V. Benkunskas: I don't count the beginning or end of the term. It's important that we put this project on track, where there's no turning back. In fact, I also get the same questions: "Is it necessary? Is it time now because of the same threat of war? Is this the real need?"
But I assessed several things, the threat of war was not included in any contracts and we could not have foreseen that it would be necessary to index for such reasons. We could not have foreseen that the former head of this company would organize such machinations and throw some of that dirt on this project. This means that all possible risks have probably come true.
My decision was very simple – first, is there an easy way out of this project from a legal perspective, to terminate it, try to restart it again sometime later, perhaps in a different location, perhaps with a different size, etc. The answer was unequivocal – we would have been involved in legal disputes, because neither the city nor the municipality has paid a cent, and it is estimated that a little more than 6 million euros have been spent. So we would have had to litigate for several years, who owes whom, whose fault it is, etc. Nothing costs more than time.
If we had to start all over again, it would be futile to say that we would build it cheaper and better. That is why this project is being pushed forward through gritted teeth and I hope that we will soon see the machinery on the construction site and that irreversible process of opening in a few years is already here.
– Sounds optimistic. How do you assess the degree of risk in this project?
A. Avulis: Very high in various senses. There was a lot of speculation about the price. When they can't find arguments, they say there's a possible overpayment, we need to click here again so we don't overpay, etc. So far, no one has appeared who would like to do this. It hasn't appeared because the amount of money that has been allocated is really very small or even, I would say, too small to interest anyone.
(…) It is quite difficult to attract those who want to build, and here you need to attract about fifty construction companies, because the work is very diverse, starting from the fact that there must be electronic scoreboards, all kinds of systems, ending with how to make the grass grow in the winter, with all kinds of ultraviolet lamps and everything else. This is a really big challenge. There is very little money. One risk is to fit into that budget.
The second risk is, of course, political risk. Today, the mayor is Mr. V. Benkunskas. He wants the stadium, but no one knows when we will finish it, when we will build it, who will be in political power then. There may be all kinds of decisions, which are still being heard now. The Seimas from certain politicians: "Why do we need to do this here?" And we are going to the bank now, we have to borrow 100 million euros from the bank. We have to put in another 30 million of our own money and I have to pledge almost all my capital, all my assets for 100 million euros so that I can borrow that money. And I have to expect that in 2,5 years, when we finish the construction, there will be another 2 years when we will have to wait for the money.
This means that there will be no political dramas in Lithuania in 5 years. Well, any, like in Poland. Everyone thought there would be one president, now there will be another. Poles don't know what to do, they are confused and so on. This is a political risk and, of course, a business risk. There is a liability to the bank. There is enough of everything here.
– Mr. Avuli, we spoke with you recently, I asked when you would step back a bit, but it seems that, as they say, we will have to push on until the stadium construction is completed.
A. Avulis: I think I will have to postpone that wish of mine, I am already 70 years old, and now I still need to build a stadium. I have deviated from my goal, I will retire to a calmer business phase after completing the stadium.
– Is this your greatest ambition in life as a developer, as a real estate entrepreneur?
A. Avulis: Yes. In most cases, we do business with a very clear goal. I will say it very simply, the goal of business is to make money. Everyone strives to do that. With this project, I want to restore confidence that we can do it and finally, that this building, which has been under construction for 38 years, is not cursed, it can be done. And the ambition… Of course, it is great here and if we could achieve and do such a thing, then I think that there would be no doubt about who is capable, who is less capable or incapable.
– The Speaker of the Seimas, Saulius Skvernelis, criticizes this project, saying that it will be far from a football stadium, will become a universal center for everything. It will happen like in Kaunas. S. Skvernelis has said that if he had known that the Kaunas stadium would become a concert arena, not football, his Government would not have given a single euro. Isn't too much added to this facility?
V. Benkunskas: I find it very strange to hear. It was during the period of the S. Skvernelis Government that all the fundamental decisions were made to keep the project alive. At that time, the Government, seeing that this project would not be able to use European Union (EU) money, included the Ministry of Education, Science and Sports as a contracting party to the project, and the Government resolution approved the financing. If there was a desire to stop or remove some excess things, then it was time to do so.
Ingrid Šimonytė During the government's term, nothing was fundamentally different, only after a court marathon was the decision confirmed that the ministry participated in this project. There were many changes of opinion. Former Vilnius Mayor Artūras Zuokas, under whom this project began in 2014, when Algirdas Butkevičius was the prime minister, supported this project all the time. When "Rubikonas" left the project, fierce criticism, lies and slander began. We can find many such turns. I was also among those who once criticized and said that the project was perhaps too big.
– And you made it even bigger.
V. Benkunskas: Several things have changed. First of all, both the state, the municipal council, and the ministry made the decision to go into this project, the contract was signed, and even then my personal love-hate, like-dislike was put aside. As an official, as a civil servant, I have a goal to complete this project. Despite the fact that if I were allowed to do something from a blank sheet of paper, I would probably do it differently. But this is no longer the time and place.
Finally, let's calculate how much money the state has spent during this last 10-year period? How many people have worked on this, how many lawyers have been hired, how many courts have been burned down? It seems to me that we have already come a long way.
– And how much for the construction itself? Sir, Avuli, has anyone calculated how much money was invested in that site? If converted to the purchasing power of the time, how much would the sum total be? After all, the construction was constantly coming to life. It seems to me that during that entire period it would definitely amount to several tens of millions, if not more?
A. Avulis: A very good idea, let's start calculating, because it would be a very good argument for those who are so reserved or somehow cynical. Of those 6 million euros spent, 3 million euros were spent solely on the demolition of what was built before. It needs to be demolished, then ground down, and the garbage removed. This is money. In fact, such things should be calculated. Back then, it was not a concession agreement. It was state budget money.
– And what is the final amount? How much will it cost taxpayers, say, over 10 years, including concessions, rents, contributions? In the public sphere, there is talk of 250 million euros.
V. Benkunskas: Lamp. 154 million euros is the fixed investment value – this includes both construction investments and borrowing funds. When the actual operation begins, as I mentioned, the ministry will have a sports museum under the stadium stands, it will simply pay current taxes for electricity, water, and there will be some amortization payments.
This is the very minimum that we pay for the maintenance of our kindergartens, which we manage ourselves, etc. Perhaps intentionally or unintentionally, the potential income of the concessionaire from the operation, including commercial events and the like, over the entire 20-year operating period, was reduced to several hundred million euros. But these are completely different things, what the state undertakes to provide for this project in return for all investments and what is normal operating practice.
– In other words, the city and the ministry will commit to holding a certain number of events at the stadium per year. This will be one of the obligations to the future concessionaire, so that he is already guaranteed a certain cash flow, whatever it is – whether it is sports games, concerts, or Song festival, or something else. And the contribution, covering some losses – everything for the concessionaire?
V. Benkunskas: This is the concessionaire's risk.
– I would say that the probability is 9 out of 10 that a company will come in a year and say: "Listen, mayor, we, we are doing this, that, third and fourth for the city. Contribute."
V. Benkunskas: Within the framework of this concession, this is simply impossible.
A. Avulis: Maybe there will be a new service purchase agreement. Well, for example, some federation or something else. There will be two athletics stadiums, so obviously someone will be doing sports there and obviously someone will be paying for it. It is not clear yet who, but such conditions will be provided. If Mykolas Alekna wants to throw the discus there, then please, we can invite all three Aleknas, we just need to agree on who will pay for it. There will still be changing rooms, showers, everything will have to be paid for - both the cleaners and the security.
– These are details, but when you go into projects of this size, you probably never know the answers to all the questions.
A. Avulis: In business, there is no such situation where everything is known. If everything were known, then everyone could do business. In business, there is a risk factor that is sometimes small, sometimes large, and sometimes very large.
– Don't your relatives say: "Arvydas, what are you doing? Where are you going?"
A. Avulis: I can't say that they support me on this issue, but, of course, there are various questions. Of course, they would prefer it if I did something at home.
– I mean about public risk, about certain pressure, about reputational issues, because, obviously, this is a political risk project.
A. Avulis: Absolutely. There are quite a few people who don't believe in the project, who don't think it's needed. Most of them think so because the whole retrospective is very bad. Everyone is fed up, no one believes it. It's time to just take it and say that we're going to do it differently now. And I want to prove that it can be done.
– Mr. Benkunskas, to be honest, I was surprised by the surveys you have. Their results show that the people of Vilnius want a national stadium.
V. Benkunskas: Even in the context of recent events, when there were Š. Stepukonis stories, when those avalanches of slander were pouring in. The latest survey conducted in early May shows that 6 out of 10 Vilnius residents want this project to be completed. One tenth is undecided, so, let's say, 6 "for", 3 "against" and 1 "undecided". Nothing new here.
I can feel that mood very well when I talk to people. Skeptics are no longer that they don't want to, but they don't believe. Vilnius is the only EU capital besides Malta that doesn't have similar infrastructure. This is not just a whim that we absolutely need to build a toy and have it. I see it primarily as an investment in growing the city's economy.
These are jobs, events, and inbound tourism, which will allow us to increase the turnover of the city, contribute to the growth of the state's GDP, and at the same time increase the percentage of defense. Everything is very closely related. That's why that project should definitely be completed. When the cranes or equipment appear, I believe that there will be more people who want and believe in the survey.
– It is likely that attitudes will change. It is probably difficult to talk when people have to choose between national security and a national stadium. Everyone will choose national security. But perhaps it is possible to reconcile things if the majority of the public supports it. To be honest, I expected a completely different result from the survey. At least in my environment, most people would say that the stadium is no longer worth bothering with. Mr. Avuli, what do your surroundings say?
A. Avulis: There are different opinions. This issue is relevant to people. They come forward. I feel their support and desire. I have quite a few supporters who simply greet me on the street. Strangers approach me and say: "Well, will you build that stadium?" I always say that I will build it if you support me. They always answer: "We will support, we will support."
– 33 months. When does that counter start?
V. Benkunskas: The counter has already started after we received the EC notification. We have a maximum term, which seems to be 32 months and a few weeks. That term is the maximum, despite the fact that the amendment to the contract has not yet entered into force, the share transaction has not yet taken place, but the counter is already spinning.
A. Avulis: Our goal is to open the stadium by the end of 2027. We will make every effort, we are determined to inform and show everything very transparently along the way, what is going well and what is not. We will inform everyone - both the public and the media, so that there will finally be hope and faith that this stadium or sports complex will be built and that we will be able to invite all Vilnius residents to a beautiful event in the new stadium in 2,5 years.
– Maybe you're already thinking, who will play or not? Who will we or not run? There can be various ideas for the opening.
V. Benkunskas: God grant that those issues will indeed be on the agenda. Now we are moving forward step by step.
Edmundas Jakilaitis, politika.lt, ELTA
ELTA (ELTA)
