1.1 Introduction The City of Irvine (“Irvine”, “the City”), located in Orange County, California, contracted The Superlative Group to determine a Fair Market Value for Naming Rights and other corporate sponsorship opportunities as a means of generating additional revenue for the City. Specifically, the city tasked Superlative with performing a comprehensive Asset Inventory & Valuation Analysis for City-owned assets within the Great Park. The report provided a Fair Market Value analysis of the potential Naming Rights and benefits to be realized from a Naming Rights Partnership for assets within Great Park as identified by Superlative and the City during the Phase I process. 1.2 Strategic Objectives of this Study This report identifies and values Naming Rights opportunities and revenue-generating opportunities in order to maximize corporate investment in Great Park’s facilities. The key objectives of this study are to:
• Identify Great Park assets which are most likely to deliver incremental revenue in order to support further developments;
• Allow City leadership to benefit from establishing financial and other systems of support from local, national and international businesses;
• Strengthen the alliance between Irvine and its events, visitors, local citizens and businesses in the city, and by extension, the greater Orange County region; and
• Develop strategies specifically focused on generating revenue for Great Park. 1.3 Background & Methodology Sports and entertainment venues have traditionally attracted the highest value Naming Rights agreements, as they allow corporate partners to reach substantial markets of people beyond venue attendees. However, the revenue-generating benefits of Naming Rights and corporate sponsorships have become increasingly prevalent in a wide range of sectors:
– Parks Districts – Aquatic Centers – Outdoor Amphitheatres; – Convention Centers; and – Municipal Marketing.
A Naming Rights/Presenting sponsor can benefit from greater awareness, wider reach and better marketing via Naming Rights, as compared to traditional advertising because its name is featured anywhere and everywhere that the venue and its activities are mentioned (e.g., on exterior signage and within the venue, but also through newspapers, posters, schedules, magazines and websites). Activation of Naming Rights and corporate sponsorship programs involves merging private and public funds to provide additional revenue while building both private and public sector brands in a manner that reflects the stability and values of the community, its people and its goals for the future. The Superlative Group developed its Valuation Methodology over time and through our experience of securing revenue-generating opportunities for clients across the United States and Europe. Superlative
uses a combination of impressions-based valuation of media exposure and benchmarking to generate valuations that will form the opening negotiating position with target companies during the sales process.
1.4 Property Overview The City of Irvine is home to more than 277,000 people and 100 global corporations. Destination Irvine represents the city as the official Destination Marketing Organization responsible for promoting Irvine as an overnight destination for groups, sports events and visitors. Owned by the City of Irvine, Great Park sits on a section of the former Marine Corps Air Station El Toro. As an arts and sports recreation hub, attractions at Great Park include the Palm Court Arts Complex, Great Park Sports Complex, Farm & Food Lab and Farmers Market among others. The entire project spans approximately 1,300 acres in the center of Orange County.
2.1 City of Irvine Introduction Incorporated in 1971, the City of Irvine encompasses 66 square miles within the heart of Orange County, California. Irvine ranks as one of the best cities to live in the United States (MONEY, 2019) and the safest city in the country (FBI crime rankings, since 2005). In 2017, Irvine ranks as the 14th most populated city in the state of California and the 73rd most populated city in the United States. Between 2010 and 2017, Irvine saw a 30.8% population growth, which ranks as the 8th highest growth percentage for cities of 50,000 or more in the United States. Population and Demographics According to the U.S. Census Bureau, the population of Irvine is estimated to be 282,584 residents. The 2018 American Community Survey has the estimated median household income at $101,667. The same survey estimated median house or condo value at $753,400. The demographic composition of Irvine residents is detailed below: Age 0-14 years: 18.9% 15-24 years: 17.1% 25-34 years: 16.2% 35-44 years: 14.7% 45-54 years: 12.6% 55-64 years: 11.0% 65+ years: 10.6% Source: U.S. Census Data Race & Ethnicity White: 38.9% Black/AA: 1.0% Amer. Indian/Alaska: 0.4% Asian: 42.5% Native HI/Pacific Isl.: 0.1% Two or more races: 4.2% Hispanic or Latino: 12.5% Gender Male: 48.9% Female: 51.1%
Accolades and Awards The City of Irvine has received numerous recognitions from organizations across the United States. Some of those include:
• Voted “Best City to Live” 4th consecutive year (Best of OC, 2010) • 6th best park system in the United States (Trust for Public Land, 2019) • Ranked #1 in Latest Fiscal Strength Survey (Truth in Accounting, 2019) • Ranke #3 Best Places to Raise a Family (WalletHub, 2019) • Top 100 Best Places to Live in America (MONEY, 2019) • Ranked 2nd Happiest City in America (WalletHub, 2019) • Top 100 Best Places to Live (Livability.com, 2018) • America’s Safest City of 250,000 or more in the nation for the 14th consecutive year, based on FBI
statistics for violent crime • Best Cities for Young Families (ValuePenguin, 2018)
2.2 Great Park Great Park totals 1,300 acres owned by the City of Irvine and sits on the former El Toro Marine Corps Air Station. Great Park offers numerous amenities to the residents of Irvine and Orange County. Those amenities include: the world-class Great Park Sports Complex, Great Park Ice, Great Park Balloon, Historical Timeline, Hangar 244, Palm Court Arts Complex and the Farm & Food Lab. Great Park has an agreement with Five Point Communities to develop Great Park Neighborhoods, which is adjacent to Great Park. The agreement allows Five Point Communities to build more than 9,000 housing units within the neighborhood. Five Point Communities is also helping fund improvements so surrounding roads through other agreements with the City of Irvine. Sports Complex Part of the new development is the 194-acre Great Park Sports Complex. Located within the Sports Complex is the Championship Soccer Stadium that seats up to 2,500 spectators. The Sports Complex also includes 24 soccer fields, a tennis center with 25 courts, five sand volleyball courts, four basketball courts, a baseball stadium, softball stadium and 10 more baseball/softball fields. The 270,000 square foot Great Park Ice is also on the grounds of Great Park and is the training facility for the National Hockey League’s Anaheim Ducks. Future phases include more trails and open space as well as additional commercial recreation opportunities. Special Events Besides sports and recreation, Great Park is also host to a number of special events put on by the City of Irvine for its residents. The Irvine Global Village Festival celebrated its 17th anniversary in 2018 and includes performances, cuisine, activities, crafts, exhibits and an international marketplace that represents cultures and religions from around the world. The Irvine Global Village Festival sees as many as 30,000 attendees per year. Movies on the Lawn is a summer series of free family-friendly movies taking place at the Palm Court and Terraced Lawn at Great Park. Admission and parking are free for attendees and food trucks are available on site. The seven movie events attracted a total attendance of nearly 9,000 people in 2018.
2.3 Key Statistics The following provides a brief overview of some of the main sources of impressions for Great Park’s marketable assets.
• City of Irvine Population: 282,584 • Orange County Population: 3,185,968 • Overnight Visitors: 3,930,000 • Average Annual Daily Traffic (AADT) counts near the facilities1:
o SR-133 NB (south of Irvine Blvd): 46,900 o SR-133 SB (north of Irvine Blvd): 46,900 o I-5 NB (Sand Canyon Ave exit): 243,700 o I-5 SB (Sand Canyon Ave exit): 272,000 o Irvine Blvd (4 signs east of SR-133): 21,000 o Irvine Blvd & Sand Canyon Ave: 27,000 o Sand Canyon Ave & Trabuco Rd: 32,000 o Trabuco Rd (west of Sand Canyon Ave): 11,000 o Sand Canyon Ave (under I-5 & SR-133): 27,000 o Barranca Pkwy & Marine Way: 16,000 o Alton Pkwy & Barranca Pkwy: 30,000
• Social Media o Orange County Great Park Followers: 47,776
o Orange County Parks & Recreation: 63,287 § Facebook: 38,569 § Twitter: 15,007 § Instagram: 9,711
o City of Irvine: 56,310 § Facebook: 15,992 § Twitter: 33,320 § Instagram: 6,998
o Orange County SC: 27,551 § Facebook: 11,328 § Twitter: 9,165 § Instagram: 7,058
o Orange County Events: 320,774 § Facebook: 158,340 § Twitter: 38,017 § Instagram: 124,417
• Annual Event Attendance o Great Park Sports Complex (2018): 312,560 o Orange County SC: 41,982 o Irvine Global Village Festival: 30,000 o Spooktacular: 21,200 o Movies on the Lawn: 8,984
• Website Views o Great Park (ocgp.com): 156,903 o Orange County (ocgov.com): 5,340,000 o City of Irvine (cityofirvine.org): 5,180,994
1 City of Irvine Average Daily Traffic. Retrieved from: http://www.caltrans.ca.gov/trafficops/census/docs/2016_aadt_volumes.pdf and http://legacy.cityofirvine.org/civica/filebank/blobdload.asp?BlobID=21099.
3.1 History of Naming Rights Sports and entertainment venues have historically attracted the highest values for Naming Rights agreements because of the potential for corporate partners to reach millions of people over and above venue attendees. With a long tradition of naming academic or housing facilities after individual benefactors and donors, many Universities have also begun selling Naming Rights to their athletic venues as well. Increasingly, over the last decade, local community facilities, including health and recreational centers, aquatic centers and youth sports complexes have begun to attract interest from corporate partners.
In recent years, The Superlative Group has been working to expand the traditional scope of Naming Rights and corporate sponsorships to include a large number of new industries and organizations. Convention centers, theatres, transit agencies and municipalities are increasingly turning to the private sector to help fund public services and overcome shrinking budgets via Naming Rights sales. Over the past several years alone, Superlative has secured the following nontraditional Naming Rights agreements for its clients:
• Cleveland Convention Center sold to First Merit for $10.5 million over 20 years. • Two Rockford, IL Park District Facilities, one sold to UW Health for $1.9 million over 10 years, one
secured by Mercy Rockford for $2.1 million over 10 years. • San Diego MTS Blue Line sold to UC San Diego Health for $37 million over 30 years. • St. Paul Saints’ new ballpark sold to CHS, Inc. for $15 million over 13 years. • Santa Monica Bike Share sold to Hulu for $3.6 million over five years. • Cleveland Bike Share sold to University Hospitals for $1.4 million over 5 years.
Our intense focus on innovation allows us to lead and shape the Naming Rights and sponsorship industry, which is continually changing because we are changing it.
3.2 Valuation Measurement Strategies Despite the growth of sponsorship and Naming Rights agreements in both sporting and non-sporting contexts, industry experts struggled to establish an objective method to value sponsorships because many of the benefits associated with sponsorships, such as public image, do not have a physical presence and are therefore intangible. Sponsorship and Naming Rights agreements frequently differ in terms of duration, breadth of benefits available, reach and value. This is largely due to the bespoke nature of each contract and the need to predict present and future benefits, quantified in present-day dollar terms. The most common—but insufficient—methods used to calculate Naming Rights valuations are:
• The Cost Method; • The Income Method; and • The Market Method.
These are explained in further detail on the next page. The Cost Method is a time-sensitive calculation of the amount of money that must be spent to replicate the exact bundle of benefits available through a Title Sponsorship Naming Rights agreement by some other means. This approach suggests that Naming Rights can be divided into specific and separate benefits and that a quantification of their cost of purchase, external to the Naming Rights Agreement will help both buyer and seller arrive at a mutually acceptable valuation. However, there are four issues with this method:
i. Many of the replicated benefits will occur in the future, but individual forecasts about the present-day value of future costs or revenue cash flows are subjective and can vary widely.
ii. No allowance or dispensation is made for the uncertainty of the future. iii. The Cost Method always treats the impact of impressions in the same way, regardless of their
source. It does not address the variable impact of impressions from different media. To overcome this problem, conversion ratios are used but a significant number of variables often remain.
iv. Duplication of impressions can create variability in the valuation. The number of impressions generated is almost always higher than the total number of people reached because a percentage of individuals will receive multiple impressions such as word of mouth impressions.
The Income Method compares the projected nominal income (present and future) expected from naming rights with the economic life or length of time that the intangible assets can expect to command a given price. An internal rate of return is then calculated to analyze the impact of alternative future scenarios upon the level and value of benefits accrued by the buyer. Hence, the income method deals more accurately with the uncertainty of the future, but remains just as susceptible as the Cost Method to the subjectivity of forecasting and duplication of impressions. The Market Method assumes that a Naming Rights proposition can be valued by reference to similar transactions of Naming Rights bundles within equivalent sets of local area demographic characteristics, comparable points in time and equivalent features. This is described as the most common approach to Naming Rights valuations as the nature of Naming Rights agreements immediately calls into question the search for similar transactions. It is also considered to be a less subjective means of valuing Naming Rights agreements as it makes fewer assumptions than the Cost or the Income Method. Academic study also advocates making adjustments to valuations in order to account for comparative analysis against current market rates. 3.3 The Superlative Valuation Methodology Due to the lack of a universally accepted valuation methodology for naming rights and sponsorship valuation, Superlative developed the following valuation methodology – a combination of facets of the three methods described above – based on its experience in negotiating naming rights agreements. The diagram on the following page shows the key steps, specific activities, and outputs during implementation of a sponsorship marketing strategy.
Project Initiation & Desktop Research Upon appointment as sales agents on any new engagement, Superlative carries out initial desktop research to review relevant documentation such as financial statement and strategic plans to gather contextual information such as major capital projects in the locality, specifics of the existing facilities and key statistics such as visitor numbers, drive-by traffic, media publications, hits on websites / communication channels. Our research team maintains a database that is used to compile key pricing and contractual data for all relevant Naming Rights and sponsorship initiatives. Site visits are undertaken where relevant to view the assets being valued. A digital inventory is compiled for each location that is used during the valuation process and subsequently, during development of promotional materials during the sales process. Superlative gathers site maps to document key details such as number of existing signage and venue specifications. This information is used to identify commercial opportunities as part of the Phase I valuation process. Assessment of Media Exposure Assessment of media exposure requires an understanding of the number of impressions that a corporate sponsorship would deliver. This involves gathering traffic statistics for specific venues and consideration of impressions from roadside signage, aerial views and naming on radio traffic updates or other media channels. Local rates are gathered from radio stations and billboard advertisers in order to establish accurate local benchmarks. With the gathered data, Superlative generates an initial model of impressions. Superlative takes the following factors into account when determining the appropriate amount of impressions, a piece of signage or collateral would receive:
• Initial Desktop Research
• Project Initiation Meeting
• Site Visits• Collation of Digital
Inventory• Review of
sponsorship policies & political considerations
• Analysis of existing sponsorship Contracts
• Agree structure of Phase 1 Report
• Assess number of visitors
• Assess number of impressions (visitors, traffic, ridership etc.)
– Current Media– Potential Media– $ Value of Media• Consider
demographics• Assess “quality
of exposure”• Assess cost of
engagement• Establish
utilization of existing assets
• Assess direct & tangible benefits
– Onsite signage– Events & ticket
packages– Display
opportunities• Use of media
rate cards to assign price to each benefit identified
• Financial Modeling of impressions and Contract term options
• Identify comparable benchmarks
• Research commercial terms & contract values of benchmarks
• Quantifiable evaluation of impressions
• Rank assets in order of potential to generate revenue
• Discuss and review with client
• Agree shortlist of assets for Phase II Sales process
• Collate desktop research, key findings and valuation of assets
• Identify target companies for Phase II activity
• Develop implementation strategies for Phase II
• Develop draft report for review by client
• Present findings to client and any key stakeholders
• Report finalization
• Develop understanding of existing assets & sponsorships
• Agree base inputs for quantitative evaluation of impressions
• Assess Return on Investment for sponsors
• Establish values for approach to target sponsors
– Sign Size – has a direct impact on visibility. Within a given market, advertising space carries a different value depending upon the number of impressions, which are used to calculate advertising rates. An impression indicates the number of times an advertisement is seen by pedestrians, motorists and transit riders.
– Location – Rates are higher in high demand areas. Billboards in New York City will carry some of the highest rates in the nation. Location also dictates the demographics of the audience. Airport advertising rates are high due to the premium demographics of air travelers.
– Rotation – In the case of digital advertising inventory, rates are based on the length of each advertisement. Rotations can range from 8 seconds to 30 seconds (depending on average wait time in a given location) with OOH advertising agencies aiming to maximize the number of advertisers on each digital ad board.
– Demand – Premium units and high-traffic transit stations in the heart of cities may have a long list of advertisers waiting to display their message. The proximity of certain ads to airports, shopping centers and other attractions also increases demand and price. Further, other events and timing make outdoor inventory more "precious" and can impact rates, such as large sporting events or beach adjacent inventory in the summer months.
– Population – Audience size will influence your billboard cost. Sponsorship Rates A naming rights buyer will typically invest in a naming opportunity based on a cost per thousand impressions (CPM). CPM for Naming Rights or advertising programs varies due to location, type of media exposure and position of sponsorship space. While an average CPM for a national television advertisement may be $28, a 30-second advertisement during the 2018 Super Bowl typically cost around $6 million, with CPMs in the range of $60 - $80. CPM values can vary considerably across the nation. As a result, Superlative applies local media rates to each project. Superlative made conservative assumptions in comparing these values to current and suggested sponsor exposure on County facilities and assets (e.g., main identity signage). The CPM value includes assessment of the demographics of the target audience and the quality of exposure to that audience. For example, sporting venues tend to be patronized by 18 - 34-year-old males, which is a “premium audience” in terms of the potential revenue for sponsors generated by this audience. Accordingly, sponsors wishing to gain exposure to this audience would target sports venues. The target demographic for other venues may be considerably different and hence, this must be taken into consideration as part of the valuation. The following table sets out the average historic media rates from the Superlative database. Table 3.3.2 Traditional Media Rates
Traditional Media Rate Card Average CPM Cost per Impression TV $28.00 $0.0280 Magazines $17.00 $0.0170 Newspaper $17.00 $0.0170 Cable $12.00 $0.0120 Social Media $10.76 $0.0108 Radio $7.00 $0.0070 Internet $3.60 $0.0020 Mobile $2.23 $0.0020 Average $12.20 $0.0120 Average across USA (exchange wire)
Further, Table 3.3.3 on the below shows current out-of-home media rates for the City of Irvine considered as part of this study. Table 3.3.3 City of Irvine OOH Media Rates
DMA DMA A18+ Population Media Type
4-Week Rate Per
Face 4-Week
Total Rate CPP CPM
Los Angeles-San Diego, CA (average) 8,536,915 Bulletin (Static
Billboard) $6,937 $281,738 $366 $5.00
Los Angeles-San Diego, CA (average) 8,536,915 Posters $788 $110,565 $142 $2.21
Los Angeles, CA 14,463,449 Digital Bulletin $7,595 $531,180 $681 $4.71 Los Angeles-San Diego, CA (average) 8,536,915 Transit Shelters $384 $112,384 $145 $1.88
Los Angeles-Long Beach-Anaheim, CA (CBSA) 12,492,000 Bulletin (Static
Billboard) $725 $58,075 $197 $1.84
Los Angeles-Long Beach-Anaheim, CA (CBSA) 12,492,000 Posters $650 $76,050 $380 $3.72
Los Angeles-Long Beach-Anaheim, CA (CBSA) 12,492,000 Jr. Posters $312.50 $57,675 $195 $1.86
The quality of exposure is determined by how prevalent the sponsor’s branding is during the exposure period and the impact that this placement will have on the target demographic. Quantitative Evaluation of Impressions Superlative uses financial modeling to assess the dollar value of impressions from the naming rights opportunities offered by Great Park (e.g., signs at Great Park facilities, recognition on websites). Superlative assigns a CPM-based value to each component available for naming rights, based on the strength and reach of exposure for a possible sponsor associated with each branding opportunity. In developing these values, Superlative uses a template financial model it has developed over time and adjusted the model to fit the saleable components of Irvine. Superlative’s values are presented in Section 8 of this report. Superlative’s values assume alternative contract terms and incorporate assumptions that the payments for naming rights would escalate annually in proportion to changes in the Consumer Price Index (CPI), which is assumed to rise at 2.6% in the state of California. Benchmarking to Validate Market Value In order to negate the short-fallings identified above in academic commentary with regard to Naming Rights valuation, The Superlative Group identifies sector benchmarks (or comparable) for each opportunity, researching commercial and contract values. In order to confirm that an impression-based valuation is appropriate and accurate, Superlative investigated the prices paid for naming rights for similar properties and assets in similar markets. When evaluating benchmark comparisons, Superlative considers the prestige of each asset, likely sponsor interest, and geographic reach of each sponsorable asset. Superlative takes into account the geographic reach of a sponsorship opportunity as a whole, on a local, regional and/or national basis, but also the geographic reach of each individual asset. For example, an individual piece of signage within the interior of a property would have a local reach, while recognition on publications and/or signage within a transit car would reach a far broader audience. Assets are then ranked in order of potential to generate revenue to establish priorities for the sales process.
Benchmarks
City Facility Sponsor Year Term (years) Total Fee
Total Annual
Fee
Williamsville, NY Erie Community College Athletic Sites
West Herr Automotive Group 2014 10 $3,000,000 $300,000
Cranberry Township, PA
Dick’s Sporting Goods Sportsplex at Graham Park
Dick's Sporting Goods 2009 10 $2,000,000 $200,000
Amherst, OH Mercy Health & Recreation Center Mercy Hospitals $2,000,000
Rockford, IL MercyRockford Health Sportscore
MercyRockford Health 2015 10 $2,000,000 $200,000
Rockford, IL UW Health Sports Factory UW Health 2015 10 $1,900,000 $190,000
Woodbury, MN HealthEast Sports Center HealthEast 2017 14 $1,764,000 $126,000
Cary, NC WakeMed Soccer Park WakeMed Health System 2014 3 $1,000,000 $333,333
Topeka, KS Midwest Health Aquatic Center Midwest Health 2015 10 $1,000,000 $100,000
Shenandoah, TX Woodforest Bank Stadium Woodforest Bank 2007 10 $1,000,000 $100,000
Worcester, MA Commerce Bank Field at Foley Stadium Commerce Bank 2007 10 $1,000,000 $100,000
