SBJ/Feb. 7-13, 2011/Marketing and Sponsorship

AEG, Farmers clicked from start

AEG picked a sweet spot last July to launch its naming-rights pitch to Farmers Insurance for an NFL stadium in downtown Los Angeles.

The Ritz-Carlton Residences at L.A. Live, a shiny new condo-hotel property, sits across the street from Staples Center and overlooks the Los Angeles Convention Center’s West Hall, the site where AEG wants to build $1 billion Farmers Field.

Inside, AEG dressed up a luxury condominium on the 42nd floor with photographs of football games, soccer matches and concerts, all the events the new stadium could attract. It set up a “sizzle video” as part of the presentation, the same piece shown during the Feb. 1 news conference to announce Farmers’ 30-year deal, an agreement that with escalator clauses stops just short of $700 million. The hallway leading to the condo was lined with graphics depicting a concrete tunnel, as if Farmers officials were inside the stadium, walking from the locker room to the field.

AEG
AEG sold the new stadium as the next step in the revitalization of downtown Los Angeles.
When the group of officials — AEG’s Tim Leiweke, Todd Goldstein, Shervin Mirhashemi and Bill Pedigo and Farmers’ Kevin Kelso — went to the window facing the proposed stadium site, curtains were drawn to reveal a rendering of the facility that was attached to the glass itself.

Leiweke, AEG’s president and CEO, pointed toward the West Hall and talked about the vision for building a stadium next door, an idea first hatched by Casey Wasserman, chairman and CEO of Wasserman Media Group. Farmers Field would be the next step in revitalizing downtown Los Angeles, a process that began 12 years ago when Staples Center opened its doors, and moved forward when the first piece of the L.A. Live development opened in October 2007. Leiweke told Farmers officials to look past the absence of an NFL tenant, the key obstacle to building the stadium.

Farmers bought in early on the project, said Kelso, the company’s chief marketing officer.

The Los Angeles-based companies had done business together before: Farmers was title sponsor for international soccer matches at Home Depot Center, the MLS facility owned by AEG. Farmers also had done deals with the MLS Galaxy and NHL Kings, two teams AEG owns. As a result of that relationship, AEG Global Partnerships, AEG’s sports marketing division, knew Farmers had interest in doing something in the NFL, said Mirhashemi, AEG Global’s chief operating officer.

When the time came to start the search for a stadium naming-rights partner, AEG went straight to Farmers.

“Amazingly, although we had other people approach us, we had one conversation,” Leiweke said. “We happened to find a company that stayed with the conversation from the first pitch until the press conference.”

As the discussions progressed, Kelso brought in Farmers CEO Bob Woudstra. In September, entering a three-month stage that Mirhashemi described as “heavy negotiations,” Farmers hired Greg Luckman, CEO of GroupM ESP, to advise on the deal. Luckman, who consulted on the $400 million naming-rights deal for the Mets’ Citi Field, studied the Farmers-AEG proposal that could ultimately trump that figure and gave it a big thumbs-up.

“When we conducted our valuation analysis for Farmers, it exceeded every criteria, scoring off the charts because of the unprecedented nature of the opportunity,” Luckman said. “This is an unparalleled platform for Farmers … increasing its ROI across the board.”

Tied into that valuation, and most important for Farmers, was the trust it had developed with AEG through previous deals, Kelso said.

“I was really excited about the prospects of this project right from the beginning and, frankly, so were Paul [Patsis, Farmers president of market management] and Bob,” he said. “It’s obviously such a huge story to have the NFL come back to L.A., and so being able to be involved in that in and of itself is big. For us, one of the critical things was [AEG] has a great track record with fantastic venues all over the world. We see their handiwork in L.A., and we saw potential for this project to really anchor and revitalize downtown in a way that really is going to transform Los Angeles, basically forever.”

The negotiations intensified during the fall, and both sides set a deadline for the end of 2010 to get a deal done.

The name Farmers Field, Kelso’s idea, was easy to come up with, both sides said. One challenging piece to navigate through was developing the intellectual property tied to branding the collateral involved with naming rights and how those marks could change over the next 30 to 35 years. Normally that is not the case, but with a “longer runway” for a project targeted to open in 2015, it was something officials had to carefully evaluate, said Mirhashemi, an attorney by trade.

“Because this deal is not about a structure that is now operating or will open up in a month or a year, we had to sit there and think … there may be different things that happen between now and the opening,” he said.
In addition, AEG Global Partnerships had never done a naming-rights deal for an NFL stadium, so the two groups had to “think through NFL assets and how the league controls those assets compared with the team and how it’s different than other leagues,” Mirhashemi said. “There was some forward thinking on behalf of all of us.”

The deal, a key piece of stadium financing, hinges on whether an NFL team moves to Los Angeles. Both AEG and Farmers officials remain confident it will happen. Farmers received further assurance after having conversations with league officials about the situation early on during its talks with AEG, Kelso said. Should a team migrate to Los Angeles, Farmers would start making payments in 2013, two years before the facility opens, said sources familiar with the negotiations. No money would change hands until that time.

The value of the deal could climb to $1 billion should a second NFL tenant materialize, sources said.

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