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City of Virginia Beach Arena Proposal Evalua9on
May 13, 2014
Bill Rhoda President
Overview of Arena Proposals
USM Team Overview
• Privately financed arena • Covers all phases of development from design, construc?on to opera?on • Mix of local, na?onal and interna?onal experience • Project team members have designed, constructed and operated
hundreds of sports and entertainment venues in the U.S. • Arena Proposal:
– Privately financed – $200 million cost – 550,000 square feet – 18,000-‐19,000 total capacity
1
USM Key Assump9ons
• USM assumes financial and opera?onal risk
• SMG is arena operator
• 40 year land lease with USM for arena and ancillary development
• City provides parking, site improvements, special event ameni?es
• USM receives 1/8 of exis?ng hotel tax revenue and arena admissions/concessions tax revenue to pay debt service
• City retains excess tax revenue aRer debt is re?red
• $10 per person parking/development fee included in ?cket price
• Future enhancements to support NBA or NHL
2
Cost $200,000,000Square+footage 550,000Cost/SF $364Capacity
Basketball 18,000Concerts 19,000
Potential+Tenant(s) Indoor;FootballCity+Contribution
Upfront $0Debt $0
Annual+Rent $0Annual+Events 135Annual+Attendance 684,000
Premium+SeatingAnnual+
Inventory PriceSuites 30 $35,000Club;Seats 500 $900Loge;Boxes 40 $6,000Party;Suites N/A N/A
Naming+Rights $850,000Sponsorship+Revenue $807,500
W.M. Jordan Team Overview
• City-‐owned, Global Spectrum operated arena • W.M. Jordan – local design build experience • HKS – na?onal sports facility design experience • Global Spectrum – full service arena operator • Williams Mullen – law firm specializing in public-‐private partnerships • Arena Proposal:
– $12.5 million private contribu?on – $200 million cost – 475,000 square feet – 16,500-‐19,000 capacity
3
W.M. Jordan Key Assump9ons
• 25 year lease with Comcast-‐Spectacor ($5MM annual rent)
• Comcast assumes opera?onal risk ($12.5MM upfront contribu?on)
• Will assist the City in seeking $25MM in funding from Commonwealth
• City responsible for capital repairs
• City receives all parking and hotel tax revenues
• City retains tax revenues in excess of $5MM
• Future enhancements to support NBA or NHL
4
Cost $200,000,000Square+footage 475,000Cost/SF $421Capacity
Basketball 16,50023218,000Concerts 13,50023219,000
Potential+Tenant(s) AHL2franchiseCity+Contribution
Upfront $12,500,000Debt $150,000,000
Annual+Rent $5,000,000Annual+Events 147Annual+Attendance 829,900
Premium+SeatingAnnual+
Inventory PriceSuites 39 $50,000Club2Seats 600 $1,550Loge2Boxes 40 $14,000Party2Suites 2 N/A
Naming+Rights $650,000Sponsorship+Revenue $950,000
Arena Proposal Comparison
Key Assump9on Comparison
5
Cost $200,000,000 $200,000,000Square+footage 475,000 550,000Cost/SF $421 $364Capacity
Basketball 16,50034318,000 18,000Concerts 13,50034319,000 19,000
Potential+Tenant(s) AHL3franchise Indoor3FootballCity+Contribution
Upfront $12,500,000 $0Debt $150,000,000 $0
Annual+Rent $5,000,000 $0Annual+Events 147 135Annual+Attendance 829,900 684,000
Premium+SeatingAnnual+ Annual+
Inventory Price Inventory PriceSuites 39 $50,000 30 $35,000Club3Seats 600 $1,550 500 $900Loge3Boxes 40 $14,000 40 $6,000Party3Suites 2 N/A N/A N/A
Total+Revenue $9,476,000 $8,289,000Total+Expenses $7,652,000 $6,639,000Net+Income $1,824,000 $1,650,000
USMW.M+Jordan
City Responsibility Comparison
W.M. Jordan USM
6
• Upfront contribu?on of $12.5MM
• WM Jordan will assist the City in seeking $25MM from Commonwealth of Virginia
• Coordinate and execute debt issue of $150MM
• Capital improvement expenditures
• Parking & Arena Development Fee revenue totals $3.2MM and is dedicated to debt service
• Annual revenue generated to City:
• City to pay $10,522,621 in annual debt service
• 40 year land lease with USM for arena and ancillary development
• City provides parking, site improvements, special event ameni?es
• City to contribute the costs associated with permanent installa?on of ice-‐related infrastructure. Costs es?mated to not exceed $4.0MM.
• Reimbursement of annual admission and concessions taxes to USM
• Parking & Arena Development Fee revenue totals $6.8MM and is dedicated to debt service
• Contribu?on of 1/8 of exis?ng hotel tax revenue
TotalRevenue+Source Revenue
Hotel&Tax&Revenue $3,010,000Admissions&Tax 2,851,000Arena&Development&Fee 1,404,000Parking&Revenue 1,840,000City&F&B&Sales&Tax 414,000State&F&B&Sales&Tax 378,000Merchandise&Sales&Tax 129,000
Total $10,026,000
Note:&Tax&revenues&depict&a&first&year&estimate.
TotalRevenue+Source Revenue
Admissions(Tax( $3,155,000Hotel(Tax(Revenue 3,126,000Food(&(Beverage(Tax 602,000Merchandise(Tax( 143,000
Total $7,026,000
Note:(Tax(revenues(depict(a(first(year(estimate.
Future Enhancements Comparison
W.M. Jordan USM
• Expandable ameni?es capable of suppor?ng NBA or NHL opera?ons
• Addi?onal 36,000 sq. R. for locker rooms and prac?ce facility
• Addi?onal 8 bunker suites and 24 luxury suites for total suite inventory of 64
• Poten?a l mezzan ine l eve l premium space
• Other poten?al improvements including lobby expansion, more retail/restaurant/club space and addi?onal office space
7
Comparable Arena Benchmarking
Comparable Facili9es Summary
8
Total Total 2016Building Historical Inflated 2016
Year Square: Project Historical Project InflatedFacility City Opened Capacity Footage Costs Cost/SF Costs Cost/SF
Jacksonville,Vet.,Mem.,Arena Jacksonville 2003 14,091 440,000 $130,000,000 $295 $216,460,000 $492BOK,Center Tulsa 2008 17,839 565,000 $198,000,000 $350 $270,977,000 $480Bon,Secours,Wellness,Arena Greenville 1998 14,897 300,000 $68,000,000 $227 $137,756,000 $459W.M.:Jordan:Proposed:Arena Virginia:Beach 2016 18,000 475,000 $200,000,000 $421 $200,000,000 $421Wells,Fargo,Arena Des,Moines 2005 16,980 430,000 $117,000,000 $272 $180,116,000 $419Pinnacle,Bank,Arena Lincoln, 2013 15,147 471,000 $172,348,000 $366 $193,868,000 $412USM:Proposed:Arena Virginia:Beach 2016 18,000 550,000 $200,000,000 $364 $200,000,000 $364AVERAGE::(excluding:proposals) 2005 15,791 441,200 $137,070,000 $302 $199,835,000 $452MEDIAN:(excluding:proposals) 2005 15,147 440,000 $130,000,000 $295 $193,868,000 $459
(1),Total,construction,costs,for,Pinnacle,Bank,Arena,were,$157,million.,The,additional,$15,million,in,soft,costs,were,estimated,based,on,the,percentage,of,soft,costs,at,other,comparable,arenas.Note:,Sorted,by,2016,inflated,cost,per,square,foot
NBA/NHL Arena Square Footage
9
NBA/NHL Arena Square Footage
10
Comparable Facili9es Event Load
OtherFamily Sporting Tenant Other Total TotalShows Concerts Events Events Events Graduations Events Attendance
BOK$Center 16 22 18 56 58 0 170 675,683Wells$Fargo$Arena 22 10 32 32 17 0 113 476,602W.M.$Jordan$Proposed$Arena 33 24 23 38 23 6 147 849,900USM$Proposed$Arena 22 26 29 6 36 16 135 684,000Bon$Secours$Wellness$Arena 22 20 14 37 14 0 107 411,000Jacksonville$Vet.$Mem.$Arena 16 15 12 36 13 14 106 480,528
AVERAGEE(excludingEproposals) 19 17 19 40 26 4 124 510,953
11
16# 22#
33#
22# 22# 16#
22# 10#
24#
26#
20#
15#
675,683#
476,602#
849,900#
684,000#
411,000#
480,528#
0"
100,000"
200,000"
300,000"
400,000"
500,000"
600,000"
700,000"
800,000"
900,000"
0"
10"
20"
30"
40"
50"
60"
70"
BOK"Center" Wells"Fargo"Arena" W.M."Jordan"Proposed"Arena"
USM"Proposed"Arena" Bon"Secours"Wellness"Arena" Jacksonville"Vet."Mem."Arena"
Family"Shows" Concerts" Total"APendance"
42#
32#
38#
31#
57#
48#
Capacity #17,839#Metro#Popula;on: #947k#
Capacity #16,980#Metro#Popula;on: #567k#
Capacity #18,000#Metro#Popula;on: #1.7M#
Capacity #18,000#Metro#Popula;on: #1.7M#
Capacity #14,897#Metro#Popula;on: #851k#
Capacity #14,091#Metro#Popula;on: #1.3M#
Comparable Facili9es Funding
12
Public'88%'
Private'12%'
Funding
Financing
W.M Jordan
W.M Jordan
USM
USM
Public'57%'
Private'43%'
Public'94%'
Private'6%'
Public'0%'
Private'100%'
Facility Public Private
BOK$Center 91% 9%Pinnacle$Bank$Arena 58% 42%Jacksonville$Vet.$Mem.$Arena 100% 0%Wells$Fargo$Arena 91% 9%Bon$Secours$Wellness$Arena 100% 0%W.M.$Jordan$Proposed$Arena 67% 33%USM$Proposed$Arena 57% 43%
AVERAGE3(excluding3proposals) 88% 12%
Note:$Public$funding$of$USM$arena$includes$$7.0$million$in$annual$admissions,$sales$and$hotel/motel$tax$revenue.Note:$Both$arena$proposals$do$not$include$the$funding$of$land$acquisition.
Funding
Public'67%'
Private'33%'
Comparable Facili9es Premium Comparison
13
Annual Annual AnnualFacility City Inventory Price Inventory Price Inventory Price
Loge4BoxesSuites Club4Seats TotalPremiumRevenue
BOK$Center Tulsa 38 (1) $73,000 20 $17,500 680 $1,500
Pinnacle$Bank$Arena Lincoln$ 36 $55,000 20 $20,000 900 $1,250
W.M.$Jordan$Proposed$Arena Virginia$Beach 39 $50,000 40 $14,000 600 $1,550
Jacksonville$Vet.$Mem.$Arena Jacksonville 36 $60,000 OO OO 1,834 $355
Wells$Fargo$Arena Des$Moines 36 $50,000 OO OO 600 $1,600
Bon$Secours$Wellness$Arena Greenville 30 $65,000 OO OO 1,000 $400
USM$Proposed$Arena Virginia$Beach 30 $35,000 40 $6,000 500 $900
AVERAGE44(excluding4proposals) 35 $60,600 20 $18,750 1,003 $1,021MEDIAN4(excluding4proposals) 36 $60,000 20 $18,750 900 $1,250
Note:$Sorted$by$cost$per$square$foot
$4,144,000
$3,505,000
$3,440,000
$2,811,000
$2,760,000
$2,350,000
$1,740,000
$3,114,000$2,811,000
(1)$BOK$Center$also$has$10$Sky$Lofts$sold$per$event$in$addition$to$the$38$suites
Comparable Facili9es Financial Opera9ons
14
($MM) ($MM) ($MM)Net(Direct Operating Operating Operating
Facility Revenues Expenses Profit((Loss) Margin
Wells%Fargo%Arena $5.6 $3.7 $1.9 33.6%Bon%Secours%Wellness%Arena $7.0 $5.2 $1.8 25.7%BOK%Center $8.1 $6.4 $1.7 21.3%W.M%Jordan%Proposed%Arena $9.5 $7.7 $1.8 19.2%Jacksonville%Vet.%Mem.%Arena $4.6 $4.1 $0.5 11.9%USM%%Proposed%Arena $8.3 $6.6 $1.6 19.9%Pinnacle%Bank%Arena $5.4 $5.8 M$0.5 M8.7%AVERAGE((excluding(proposals) $6.1 $5.0 $1.1 16.8%
MEDIAN((excluding(proposals) $5.6 $5.2 $1.7 21.3%
FINANCIAL(OPERATION(COMPARISONSComparable(Venues
Chesapeake Energy Arena Case Study
• Hosts approximately 115 events a year
• 45 Thunder games
• 20 to 25 concerts • 8 to 10 family shows
• 25 to 30 other sports events. • 15-‐year lease agreement which began in 2010
• Thunder retain majority of revenues except for parking, a concession split and revenues from other arena events.
• Thunder pays rent of $1.6 million plus an annual naming rights fee, office expenses, facility fees and arena conversion fees
Notes: *Includes $89.2 million in original development costs and $103.5 million in renova?on costs to bring the facility up to NBA standards.
• Year Opened: 2002
• Capacity: 18,200
• Total Cost: $192.7MM*
• Tenant: Oklahoma City Thunder
• Owner: City of Oklahoma City
• Operator: SMG
• Suites: 48
• Loge Boxes: 48
• Club Seats: 2,838
City%Sales%Tax%$192.7MM%
15
Chesapeake Energy Arena Case Study
• 1 cent sales tax passed in 1993 • Funded nine (9) capital projects including arena construc?on • 1 cent sales tax extension approved in 2008 to fund arena
improvements for relocated Thunder
• $103.5 million renova?on began in 2009:
• 48 new terrace boxes • Two terrace lounges • Upgraded retractable sea?ng in the lower bowl • Refinished upper level concourse. • Renovated locker rooms
• $3.9 million scoreboard
• New Grand Entrance in the southwest of the building added
in 2012
Courtside club
Grand Entrance
• Year of Renova?on: • Cost of renova?on:
• Areas Renovated:
2009
$103.5 MM
Took out 20 suites and replaced with terrace boxes in both ends. Renovated event level by adding 7 bunker suites and courtside club.
16
Smoothie King Center Case Study
• 91 percent ($101.5M) public sector funding:
• $85M in hotel/motel tax revenue
• $16.5M from other public funds.
• 9 percent ($10.5M) private sector funding
• $9M from the arena concessionaire
• $1M from the former ECHL tenant.
• Lease extension in 2012 (through 2024)
• Guaranteed NBA All-‐Star Game
• $50M in improvements to the arena over the following two off-‐seasons (funded by state bond issue)
• $10M in available funding at the op?on of the team in 2013 for addi?onal upgrades to the arena or construc?on of a prac?ce facility
Notes: *The arena is currently undergoing the second phase of a $54M renova?on that is an?cipated to be completed prior to the Pelicans’ 2014-‐15 season. The funding of the $54M renova?on is not included in the chart below.
• Year Opened: 1999
• Capacity: 18,500
• Total Cost: $112MM*
• Tenant: New Orleans Pelicans
• Owner: State of Louisiana
• Operator: SMG
• Suites: 56
• Loge Boxes: 16
• Club Seats: 2,450
Concessionaire*$9.5MM* Hockey*Tenant*
$1MM*
Superdome*Refinancing*$12.9MM*
Hotel/Motel*Tax*Revenue*$85MM**
Economic*Development*Fund*
$3.6MM**
17
Smoothie King Center Case Study
• Currently undergoing a $54M renova?on • Interior & exterior improvements • Funded through a state bond issue, as agreed upon
in the lease extension • Phase I (Complete)
• 16 new loge boxes located on the 100 Level • Renova?ons to all exis?ng 56 luxury suites • New Whitney Bank Party Deck on the Terrace Level • New 360 degree Halo Board • Renovated and expanded Pelicans team locker room, • New Chairman’s Club located adjacent to the team’s
locker room • Phase II (TBC Prior to 2014-‐15 Season)
• New front office entrance and lobby (20,000 square feet of new space)
• New box office • New 2,000-‐square foot sports lounge • Expanded team store • New LED ligh?ng system
Chairman’s Club
Loge Box
• Years of Renova?on: • Cost of renova?on:
• Areas Renovated:
2013-‐15
$54 MM
Added 16 new loge boxes, upgraded all 56 suites, concession upgrades, new club lounges/party areas, exterior upgrades, team store, box office, lobby, new ligh?ng system.
18
Pinnacle Bank Arena Total Project Costs
19
Designer(Assist(Procurement $85,817,000Bid(Package(1 18,294,000Bid(Package(2 4,022,000Bid(Package(3 11,084,000Bid(Package(4 9,720,000Bid(Package(5 10,856,000Bid(Package(@(Total(Cost $139,793,000
Building(Permit $250,000Impact(Fee Exempt
Project(Contingency $4,984,000Subtotal $144,777,000
CM(Performance(&(Payment(Bond $967,000Builders(Risk(Insurance 258,000Railroad(Protective(Liability(Insurance 85,000Liability(Insurances 1,302,000
$147,389,000
Contractor's(Fee $2,869,000Preconstruction(Fee 140,000
Furnishings,(Fixtures(&(Equipment((By(Owner) $6,950,000
TOTAL%CONSTRUCTION%COSTS $157,348,000%%%%%(Pinnacle%Bank%Arena%and%Garage)
Total(Soft(Costs((1) $15,000,000
TOTAL%PROJECT%COSTS $172,348,000
(1)(Soft(costs(include(marketing,(project(management(and(architectural(fees.(Total(soft(
costs(have(been(estimated(based(on(the(percentage(of(soft(costs(to(overall(construction(
costs(at(comparbale(arenas(around(the(country.
Pinnacle Bank Arena
20
Pinnacle Bank Arena
21
Pinnacle Bank Arena
22
Pinnacle Bank Arena
23
Pinnacle Bank Arena
24
Pinnacle Bank Arena
25
Pinnacle Bank Arena
26
Pinnacle Bank Arena
27
Pinnacle Bank Arena
28