The new Texas arena, to open in 2021, will not cost the university a cent following an agreement with Oak View Group, C3 Presents, Live Nation and actor Matthew McConaughey, a Texas alum.gensler sports rendering

Chris Del Conte had been the University of Texas’ athletic director just a few months when he was tasked with building a new state-of-the-art arena on the Austin campus. The catch: Del Conte had to find someone else to pay for it, someone from the private sector.

To the best of his knowledge, such a pioneering public-private finance model had never succeeded in the college space, maybe never even been attempted.

“You go out, you raise the money and then you build it,” Del Conte said of the typical development process on campus. “That’s how it’s always been done.”

Texas’ visionary president, Greg Fenves, wasn’t interested in how things had been done. He had seen plenty of cases where municipalities subsidized privately owned professional teams. Couldn’t it work the other way around, where a private entity paid to build an arena for a public university?

Turns out that it can. Five days before Christmas, the Longhorns announced a groundbreaking 35-year agreement with ArenaCo, a group of private entities led by Tim Leiweke’s Oak View Group along with C3 Presents, Live Nation and actor Matthew McConaughey, each of whom will play a role in financing the arena and generating revenue from it. 

OVG will spearhead ArenaCo’s financing for the $338 million new building. In exchange, ArenaCo will keep the majority of profits from naming rights and sponsorship sales, and the ticket sales and premium seating from myriad events.

The school will retain about 60 dates for men’s and women’s basketball and community events such as graduation ceremonies.

“All of these elements make this the most unique partnership I’ve ever been a part of,” Leiweke said. That’s saying something, given Leiweke’s track record as a sports facility developer and operator starting at AEG in the 1990s.

Early in the process, though, Del Conte struggled to contain his skepticism. He knew Fenves as an innovative thinker, but this funding model seemed far-fetched, even by his standards.

Who’s going to pay for an arena and let the school keep it?

“I’m always inspired by big, audacious goals,” Del Conte said. “But this new funding model … I just couldn’t wrap my head around what he was talking about.”

So, when the university issued its request for qualifications and proposal last February, the Longhorns weren’t exactly sure what might come back.

Spearheaded by Austin’s vibrant music scene, ArenaCo — the group of private entities — plans to make the arena one of the top music venues in the country.gensler sports rendering

Meanwhile, Leiweke, working closely with his daughter, OVG President Francesca Bodie, saw an opportunity. Ever since he started Los Angeles-based Oak View Group a little more than three years ago, he had searched for a facility strategy that would put the firm into college athletics.

Texas had everything he was looking for — a vibrant, music-inspired urban marketplace, a Longhorns brand that’s perhaps the most valuable college brand in the country, and a deal predicated on booking concerts in a new arena and selling sponsorships, which fits right in OVG’s wheelhouse. Essentially, OVG and its partners will have control of the building outside of Texas’ 60 dates.

Leiweke and Del Conte also studied Nashville as a comparable market to Austin with a similar population and music-oriented culture. As of mid-2018, Nashville’s Bridgestone Arena ranked ninth in the U.S. and 24th in the world in ticket sales.

Leiweke ultimately came to one conclusion: “This is going to be one of the top music venues in the world,” he said. He wanted in.

Del Conte said there wasn’t one particular turning point in the 10-month negotiation that ensued, just a steady progression from one stage to another. He and Leiweke often made eye contact in the room full of lawyers, knowing that they were on the same page.

“Chris began to speak Tim, and Tim began to speak Chris,” Leiweke said. “It gave us great comfort to know the AD saw the world the same way, and that he understood how generating revenue fit within the relationship so that we could get a rate of return and make our money back. That’s when it became clear what a dynamic, unique AD Chris is.”

Del Conte over time began to see how this unique public-private agreement would work, and that he would be able to protect certain assets in the new arena.

Even though Texas is getting a new on-campus arena at no cost to the university, the Longhorns still have to show revenue growth from the deal. The new arena will have many more fan amenities and premium seats than the 41-year-old Erwin Center, so Del Conte made sure to keep the rights to floor seating, club seats, loge boxes and suites for Texas games.

Texas also had to preserve static and rotational signage in the new building because Learfield IMG College owns the same marketing rights there as it does in the Erwin Center.

“I went back to President Fenves and said, ‘This is actually going to work, my man. You might be on to something,’” Del Conte said. “And he just looked at me with that twinkle in his eye.”

OVG’s group will have the ability to generate revenue from naming rights, founding sponsors and as many events as it can book. Dan Shell, who oversees OVG’s college group, will head up sales. The former college basketball coach and IMG College sales executive gives OVG a level of expertise in the space that it didn’t have previously.

McConaughey, an Austin resident who’s often seen on the sideline at Texas football games, was anointed minister of culture. He’s responsible for making sure the project serves the Austin community and enhances the fan experience. He’s been especially involved in the formation of the premium spaces.

Austin-based C3 Presents and its parent company, Live Nation, are two of the most prolific concert producers in the world and their role will be to keep the building busy. Charles Attal, one of C3’s co-founders, said the group would like to book 40 high-end concerts a year.

“Austin needs a world-class arena and with it, the sky’s the limit,” said Attal, who grew up in Austin and attended his first concert at the Erwin Center. “Every touring act likes to play new rooms, so you’re going to see a lot more talent running through Austin.”

The on-campus facility will feature a compact 10,000-seat space for basketball and have the ability to expand to 15,000 seats for concerts and other events.gensler sports rendering

OVG will soon be in the market with naming rights, which are expected to go for the mid-seven figures annually. Fiserv reportedly paid $6 million a year for naming rights for the new arena in Milwaukee. Founding sponsorships will cost $2 million to $3 million a year.

Texas gets a percentage of sponsorship sales.

Leiweke said as many as 80 percent of the arena’s sponsors could come from Austin’s growing corporate community. He wouldn’t, however, offer any hints on how long it will take for ArenaCo to make its money back. The four entities that make up ArenaCo combined have about a third of the equity in the project. The other two-thirds of the money will be borrowed.

OVG works personally with the lenders and does not use a third party, Leiweke said.

“If you’re going to bet, you bet on a brand like the Longhorns, you bet on people like Chris and Greg, you bet on content, and you look at our track record,” Leiweke said. “I like that combination. We’ll be just fine.”