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SBJ/June 20 - 26, 2005/SBJ In DepthPrint All
The St. Louis Cardinals have selected the Cordish Co. as the developer for Ballpark Village, an eight-acre mixed-use development downtown planned for land north of the new Busch Stadium.
Cordish, headquartered in Baltimore, handles a variety of real estate projects across the country. The fourth-generation, family owned company has transformed areas of Baltimore; Louisville, Ky.; Charleston, S.C.; and other cities into rejuvenated destinations for local residents and tourists.
Cordish currently is undertaking a nine-city-block retail, entertainment, office and residential project in downtown Kansas City’s Power and Light District, adjacent to the new Sprint Arena.Cordish Co. will oversee work on Ballpark Village, an area north of the new Busch Stadium.
Brothers Jonathan and Blake Cordish will lead the project for their company. Both emphasized the goal to make Ballpark Village unique to St. Louis and to draw both national and local tenants to the area’s planned retail and entertainment space. The village also will include residential and office space.
A public plaza in Ballpark Village will provide a gathering spot for fans. Also, the Cardinals will locate their team museum in the development.
National tenants at other Cordish developments have included ESPN Zone, Hard Rock Cafe, Barnes & Noble and Gold’s Gym.
The Cardinals own the Ballpark Village site and are obligated by the team’s deal with the city of St. Louis to create at least $60 million worth of development there. But Bill DeWitt Jr., Cardinals chairman and general partner, said the club expects to spend “multiples” of that amount to carry out its plans with Cordish.
The Cardinals and Cordish agreed to be 50-50 partners in the development.
Both parties will immediately begin to refine plans for the village based on conceptual plans already drawn up by the Cardinals. They will likely break ground in late 2006, several months after the new stadium is completed in time for Opening Day next April, DeWitt III said.
Cordish plans to open an office in St. Louis from which to operate during the development. As work progresses, as many as 30 Cordish employees may be staffed here, Blake Cordish said.
The company has in-house expertise in architecture, design, construction, engineering and leasing, but intends also to work with local subcontractors to carry out their plans. Details related to their local office location and subcontracting plans will be determined over the next several months, Cordish said.
Christopher Tritto writes for the St. Louis Business Journal.
Long-anticipated development around the RBC Center in Raleigh may finally be taking off, with veteran office builder Harold Lichtin staking claim to an elevated site at a heavily traveled intersection nearby.
Lichtin plans to build about 250,000 square feet of office space at the intersection of Wade Avenue and Edwards Mill Road. The site is part of a 168-acre tract owned by Forty Wade Investors Inc., a group led by Cary, N.C., investors Tim Smith and Bubba Rawl.
The office portion has the greatest visibility on Wade Avenue, said Karen Lichtin, director of leasing for Lichtin Corp. of Raleigh. You cant ask for a better location to put a name on a building.At least four major office buildings are in the works near the arena, which opened in 1999.
Smith is putting the finishing touches on a master plan for the entire 168 acres, which were acquired from the state in August for $14.5 million, or about $86,000 an acre.
RBC Center opened in 1999. The arena is home to the NHL Carolina Hurricanes and N.C. State Universitys mens basketball program.
Forty Wade Investors is not alone in seeing opportunity near the RBC Center:
n A group of private investors has started building the 59,000-square-foot Arena Centre office building on Sunday Drive near Trinity Road. It will open in February.
n Medical Mutual Insurance Co. of North Carolina is building the Arena Place office condominiums on Sunday Drive. That project will include four buildings, two of which are under construction and presold.
n Starmount Co. has a building permit for a 72,000-square-foot office building on Sunday Drive, but the development group is waiting for a prelease tenant before starting construction, said Brad Rice of Starmounts Raleigh office.
Grubb & Ellis/Thomas Linderman Graham in Raleigh is marketing both Arena Place and Arena Centre. Theres enough market out there to accommodate both of those, said company President Rex Thomas.
Thomas also is bullish about prospects at Forty Wade Investors property. Demand for residential is already there. Demand is there for retail, Thomas said.
The 168-acre site near the RBC Center was rezoned for mixed use in 2003 when Birmingham, Ala.-based Colonial Properties Trust had the land under contract. Colonial planned to build up to 1.2 million square feet of office, 225,000 square feet of retail and more than 700 single-family and multifamily residences. The Alabama company abandoned the project, putting the land back on the market.
Smiths plan probably will include more residential development and fewer commercial properties. He is expected to file a new master plan with the city by the fall.
Another nearby site also is being gobbled up by Smith and his group. Forty Wade Investors has a contract to buy a nine-acre hotel site owned by the Charles Winston family adjacent to the Cardinal Gibbons High School campus, according to Wake County records. Winston Hotels of Raleigh planned to build an upscale hotel at the site to accommodate visitors to the RBC Center.
Smith has said it was his intention to sell off the property in pieces to other developers. Smith and Rawl followed a similar scenario in the 1990s when the duo purchased much of the property that is now the upscale Weston and Preston mixed-use developments in Cary with financing help from SAS founder Jim Goodnight. Smith and Rawl also were partners in purchasing the land for Wakefield Plantation, which they quickly sold to other developers for a profit.
As for the property near the RBC Center, it is in proximity to Lichtin Corp.s Palisades office park on Trinity Road, which includes two Class A office buildings. The second Palisades building is under construction and is 50 percent leased, Karen Lichtin said. I dont feel it will compete with this new project, she said.
Amanda Jones is a writer for Triangle Business Journal.
Businesses being asked to foot the bill for a chunk of the Washington Nationals’ new ballpark would get some short-term relief under one public financing option the city is considering.
The Office of the Deputy Mayor for Planning and Economic Development says it can reduce the money businesses would pay each year by more than 42 percent if the $581 million stadium’s cost is spread out over 30 years.A plan would spread out the fee businesses will pay to help build a stadium for the Nationals.
“It’s the same plan, but it asks for a lower payment over a longer period of time,” said Steve Green, director of development in the deputy mayor’s office.
Under the proposal, revenue from a ballpark fee on businesses could be as little as $8 million a year. That compares with $14 million under the original plan, which called for the stadium to be paid off in 15 to 18 years.
How much each business would pay under the new proposal is still under discussion. But city officials say the fees would likely be reduced by the same proportion as the revenue needed.
For the largest business, this could mean a reduction in the annual ballpark fee to as low as $9,500 from $16,500. Smaller businesses could see their fee reduced from $5,500 annually to about $3,200. Only D.C. companies with $5 million in annual sales are subject to the fee.
“This creates the opportunity for the ballpark fee to be less,” Green said. “From the businesses’ point of view, it’s a better thing. This can lessen the burden.”
The rest of the stadium’s cost would be paid by a tax on ticket sales and concessions, rental payments from the team’s owner and a utility tax on businesses and federal buildings.
The new proposal comes as discussions to include private financing in the funding mix have stalled. Sources involved in those talks say private financing is all but a dead issue.
D.C. Council Chair Linda Cropp notoriously blocked a council vote on public funding in late December after insisting the city look at private financing options. The legislation that passed required the city to explore private financing options but allowed the council to adopt the original public financing plan if it did not like any of the private financing proposals.
Although the annual fees paid by businesses would be lower under the new option, the stadium’s total cost would increase because the city would have to pay more interest. The plan still does not address the concerns of some medium-sized businesses, which pay a higher percentage of their revenue toward the fee.
It’s tough to gauge how businesses feel about the new proposal because most were unaware it existed.
“Until we see it, we won’t comment on it,” said Ted Trabue, regional vice president for Pepco, one of the city’s largest businesses.
Others offered cautious support.
“It’s significant that the business community is endorsing the tax, so to the extent that it would be lessened, I’d think businesses would support it even more,” said Jerry A. Moore III, a partner with the Venable law firm, which would pay the maximum fee.
The D.C. Chamber of Commerce, while it has supported a lowering of the fees if possible, said it will stand by its long-held stance that businesses would do better if the stadium were paid off sooner.
Said chamber President Barbara Lang: “We want to get rid of the debt as quickly as we can.”
Tim Lemke writes for the Washington Business Journal.
Mike Bennett comes across as a feisty character, an electrical contractor back in Bradenton doubling as a state senator in the Florida Legislature. And arguably the worst nightmare for a sports team owner in the market for taxpayer subsidies to build a new stadium.
These days, you could argue Bennett is right in tune with the populace, which, judging from opinion polls and surveys, isn’t thrilled about seeing tax dollars go to build sports facilities.
It doesn’t seem to matter if you look to the bright lights of New York, the dim of Louisiana or down in the Sunshine State, where Bennett successfully fought last month to kill legislation that would have provided millions, including seed money for new venues for the Florida Marlins and Orlando Magic.
“I just don’t believe the taxpayers should be funding professional stadiums,” Bennett said. “If you can afford to pay somebody $53 million to throw a baseball 90 feet, you can afford your own damn stadium. I believe you should support your business and I’ll support mine. Nobody ever gave me a handout. What kind of deal is that?”
The Republican lawmaker added: “You’re going to see a drastic change in the way these things are financed. People are finally fed up. And so I think the Marlins and others will be funding their own projects in the future.”
That may ring true of the South Florida baseball team, if ownership isn’t up to being courted by Las Vegas, but it’s a bit early to be talking trends. Case in point: While Florida and Missouri shot down bills earmarking funds for stadium projects, Arlington, Texas, recently committed $325 million to help build new digs for the Dallas Cowboys. And taxpayers are footing most of the $581 million stadium tab for the Washington Nationals.
Like anything else, it often boils down to who has leverage and who doesn’t. NFL franchises in Indianapolis or Phoenix can calmly, without needing to utter a threat, play the Los Angeles card to get public financing. You find subsidies more readily available in these secondary cities looking to keep their name on the map or where they fear an owner pulling out of town in the middle of the night.
But the difference between the building boom of the 1990s and today is that a fair number of state governments that once were churning out surpluses now face deficits. Changes in federal government policy also have forced state and local governments to cover a greater cost of social programs, leaving them reluctant to subsidize projects viewed as marginal or frivolous.
And so, municipalities find themselves being more creative in how they fund stadium projects while team ownership is increasingly left to find greater sources of private financing.See related data:
Hot sports: Where are sports facility projects facing the toughest resistance? Financing packages from the majors to the minors Public financing alive and well Turnkey Sports Poll
Elected local officials also continue trying to shift the burden off residents and onto visitors in the form of taxes on car rentals and hotel-motel rooms. More than a third of the professional sports venues built since 1990 have been funded in part by tourism taxes, according to Rutgers University professor Judith Grant Long.
A chunk of the $700 million in public money for the sports venues in Houston, as an example, is derived from an additional 2 percent tax on hotels and a 5 percent car rental tax. Atlanta officials signed off on a 3 percent rental surcharge to help finance Philips Arena.
Consider these recent developments:
Indianapolis: After tossing up trial balloons like a tax on player salaries — the NFLPA, as one might assume, lobbied hard against it — and tapping revenue from slot machines that exist across the state, the legislature and Gov. Mitch Daniels signed off on a bill doubling to 2 percent a food and beverage tax already in place to fund the original RCA Dome, as well as an additional 1 percent food and beverage tax in seven surrounding counties.
The $500 million home for the Colts is touted as being part of a grander convention center, though an even more integral factor in selling the project may be a sweet agreement with the hometown NCAA to guarantee Indy a series of high-profile NCAA events through 2039, including the Men’s Final Four, Women’s Final Four, Division I men’s championship first- and second-round or regional games, the Division I women’s championship first- and second-round or regional games, and the annual NCAA convention.
“We’re the only city in the country to have this blockbuster deal with the NCAA,” said Indianapolis Deputy Mayor Steve Campbell. “The driving factors behind us wanting to build a stadium were wanting to keep the Colts and the NCAA [events].”
Campbell said the Colts are kicking in $100 million of the total facility cost, with their share coming from money generated off the building — specifically naming-rights fees and the lease of luxury suites.
Arizona: Cardinals owner Bill Bidwill is on the hook for $104 million of the estimated $448 million to build a new stadium for his NFL club. Industry experts suggest Bidwill may find one-time seat licenses a tricky sell in the soft market, though potential revenue from the team’s seat inventory, which includes 88 suites and 7,400 club seats, should go a long way toward repaying the debt. The club also could hit fans with a ticket surcharge.
The Arizona Sports and Tourism Authority is responsible for the remaining money, which is expected to be derived from a variety of consumer taxes, including car rental and hotel-motel.
Kansas City: The proposed Sprint Center continues to shop for an NHL or NBA tenant, but what can be taken to the bank, along with an apparent naming-rights deal, is a $50 million pledge from Los Angeles-based management firm Anschutz Entertainment Group as well as a $10 million commitment from the National Association of College Basketball Coaches. (The facility would house the college basketball hall of fame.)
The public commitment for the downtown arena approaches $125 million, with most coming in taxes on car rentals and hotel-motel rooms.Voters in Arlington, Texas, decided to provide $325 million to cover half of the cost to build a new stadium for the Dallas Cowboys.
Minneapolis: Assuming the Minnesota Legislature signs off, revenue generated by an additional 0.15 percent sales tax (which excludes groceries, medical and clothing costs) in Hennepin County will be dedicated to repaying the construction debt on a $478 million downtown ballpark for the Twins. Club owner Carl Pohlad would bear responsibility for $125 million of the cost.
East Rutherford, N.J.: New York Giants ownership is privately financing much of the $750 million project for a new stadium in the Meadowlands, and likely will be able to tap into the league’s G-3 loan program. Industry experts project the club will pledge revenue generated from operation of the facility toward debt retirement — including naming rights, luxury suites and club seats, as well as a possible ticket surcharge.
Meanwhile, the rival New York Jets, who also currently call Giants Stadium home, had been counting on $300 million each from the state and New York City as part of plans for a downtown stadium that also was to serve as the centerpiece for an Olympic Games bid. But state officials have refused to approve their share of what at last report was a $2.2 billion project. With the project uncertain at best, the Jets are talking with the Giants about sharing their new venue. And the city is now pitching a new stadium for the Mets on Queens that would double as an Olympic venue.
Pitching a bigger plan
The public partnership behind Petco Park in San Diego could be to finance strategy what Baltimore’s Camden Yard was to stadium design in the early 1990s. Though public funds accounted for nearly two-thirds of the $474 million price tag, San Diego received a binding, $150 million commitment for residential real estate development as part of the deal and Padres owner John Moores, alone, has pumped $550 million into residential, hotel and retail development around the park.New York City residents have protested plans to use tax dollars on stadiums.
Similar approaches have been undertaken for the ballpark under construction for the St. Louis Cardinals and the NHL hockey venue in the Phoenix suburb of Glendale, and have been broached by ownership of both the San Francisco 49ers and Oakland A’s.
“The city of San Diego is using what is called Tax Increment Financing as a way to provide the public dollars for development,” explained Dennis Howard, professor at the University of Oregon’s Warsaw Sports Marketing Center and co-author of “Financing Sport.”
“What happens is you take an area that is struggling, freeze the tax base and provide all these stimuli, including the ballpark, and private developers build around it,” Howard said. “As the value of the property is enhanced, property tax moneys that can be imposed will also grow. The bonds you used to pay for infrastructure are paid off by incremental property tax revenue realized from this enhanced area. So there is no new tax dollars [spent] and it is paying for itself.”
Howard disputes the premise that more private money is going into stadium projects, claiming that the six current or proposed projects actually have as large, if not a greater, percentage of taxpayer money as those built in the boom years of 1995 to 2003. Where there is increased private funding, he contends it’s offset by construction costs that have almost doubled in the last five years. The city of Arlington’s contribution of $325 million to the Cowboys’ proposed stadium, alone, is more than the total cost of Heinz Field or PNC Park in Pittsburgh.
Howard’s argument is further strengthened by the decision of Washington, D.C., leaders to foot nearly the entire $581 million to build a stadium for the Nationals, the still-for-sale club owned by Major League Baseball.
The flip side is the availability of capital and opportunities for private financing are probably greater than 10 to 15 years ago, factoring in elements like stadium naming rights and other sponsorships. And then, there’s the willingness of people to attend more games and spend more on concessions, accompanied by the emerging trend to turn stadiums into, as Stanford economist Roger Noll suggests, shopping centers.
“The stadium is best thought of when the team is the anchor tenant and gets a low-rent deal and then other people pay a lot to be around the anchor tenant,” Noll said. “If you look at stadiums, the capacity hasn’t changed much. What is changed is the area around the stadium, which is most evident in Fenway Park and closing down the street outside. What the Red Sox weren’t so much interested in was expansion of the stadium, but outside and putting restaurants and bars out of business. As this continues, you get the single anchor tenant getting more satellite tenants paying to come in and be there.”Quick fact
SportsBusiness Journal projects that more than $660 million in public money will be spent this year on stadiums and arenas that are scheduled to open as homes to professional sports teams. That figure represents approximately 82 percent of the total money spent on these new facilities.
“Sports franchises are a limited resource and communities across the country compete for them,” said Shields, the Senate majority leader. “But sometimes they get treated like second-class citizens from a business standpoint.
“The fight we just went through in Missouri, if you said Ford or General Motors, it wouldn’t even be a discussion. But the fact it was stadiums that professional sports franchises play in ended the discussion.”
Show-Me State lawmakers weren’t even debating whether to raise taxes, just to divert about half of the $30 million a year collected from a tax imposed on athletes and entertainers. Some of the tax money in the past went to sports facilities, but since a budget crisis three years ago all of it has gone into the general state budget. But Kansas City-area voters struck down the proposal.
Because the Chiefs and Royals can exercise an escape clause in their leases with the Jackson County Sports Authority next year if the stadiums aren’t refurbished to state-of-the-art status, Shields worries about the small-market city being at risk of losing one or both franchises.
“It’s just tough to do anything until you hear of a crisis,” Shields said. “Well, we may be almost there. You may now hear the Kansas City Chiefs mentioned with Los Angeles.”
And so, the financing debate will continue when the lawmakers convene again.
Mike Fish is a writer in Georgia.