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