Barrett Review
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CITY OF ALBUQUERQUE Proposed Arena Project Limited Review of Feasibility Reports Prepared By: Barrett Sports Group, LLC August 25, 2004 Presentation Outline I. Introduction II. Barrett Sports Group, LLC ¾ Overview ¾ Key Personnel ¾ Experience III. Scope of Services IV. Project Overview V. Summary of Findings VI. Recommendations Preliminary Draft Page 1 I. Introduction Our Understanding ¾ Arena Management and Construction (Developer) has Approached the City of Albuquerque (City) to Plan, Construct, and Operate a New Arena ¾ Proposed Arena to be Located in Downtown Albuquerque ¾ Developer has Reportedly Established a 501(c)(3) Tax-Exempt Corporation – Albuquerque Sports and Entertainment Development Agency (ASEDA) ¾ Developer has Requested that the City and the New Mexico Finance Authority Provide Conduit Financing ¾ Developer Team has Extensive Industry Experience: 9 Zev Buffman/Bill Dutton 9 Hunt Construction, Inc. 9 Global Spectrum 9 Rossetti Architects 9 Kutak Rock LLP 9 Piper Jaffray 9 Historic District Improvement Company ¾ Barrett Sports Group, LLC was Retained to Review Feasibility Reports Completed to Date (and Other Materials), and Comment on Potential Risks Associated with the Project Preliminary Draft Page 2 II. Barrett Sports Group, LLC Overview ¾ Strategic Consulting Services Specifically to the Sports Industry – Broad Range of Services 9 Facility Planning Market and Financial Feasibility Premium Seating Demand Evaluation of Naming Rights and Other Sponsorships 9 Facility Financing Financial Advisory Development of Financing Plans Public/Private Partnerships 9 Strategic Planning Negotiation Advisory Return Analysis Risk Mitigation Strategies 9 Transaction Due Diligence Acquisition/Disposition Due Diligence Identification of Acquisition Candidates Identification of Qualified Buyers Preliminary Draft Page 3 II. Barrett Sports Group, LLC Overview ¾ Strategic Consulting Services Specifically to the Sports Industry – Broad Range of Services (Continued) 9 Valuation Sports Franchise Valuation Lease Valuation Arena/Stadium Valuation 9 Other Economic and Fiscal Impact Studies Franchise Financing Support Benchmarking Studies ¾ We Understand the Complexities of the Sports Industry 9 Political 9 Financial 9 Operational ¾ Successful Track Record of Delivering Quality Advice to Private and Public Sector Clients ¾ Extensive Sports Industry Contacts/Relationships Preliminary Draft Page 4 II. Barrett Sports Group, LLC Key Personnel ¾ Our Team 9 Daniel S. Barrett 9 Joshua C. Cohen 9 Daniel N. Kantrovitz 9 S. Donald Sims, Ph.D. ¾ Daniel S. Barrett – Summary of Experience 9 15 Years Experience – Over 400 Industry Projects 9 Formerly Managing Director for Western Region Sports and Entertainment Investment Banking Division of A.G. Edwards & Sons, Inc. 9 Formerly Lead Western Region Hospitality Sports and Leisure Consulting Practice for Deloitte & Touche LLP 9 Sports Industry Expert Witness 9 UCLA B.A. – Economics/International Studies 9 USC M.B.A. – Real Estate/Finance Preliminary Draft Page 5 II. Barrett Sports Group, LLC Experience ¾ Selected Arena Related Projects 9 Allen County War Memorial Coliseum 9 Ascent Entertainment – Pepsi Center 9 California State University, Sacramento Arena Project 9 City of Atlanta-Fulton County Recreation Authority – Phillips Arena 9 City of Auburn Hills – The Palace at Auburn Hills 9 City of Dallas – American Airlines Center 9 City of Edmonton – Edmonton Coliseum 9 City of Oklahoma City – Ford Center 9 Franklin County Convention Facilities Authority Arena Project 9 Gwinnett County Arena Project 9 Hillsborough County Property Appraiser – Ice Palace 9 Maryland Stadium Authority Arena Project 9 New Jersey Sports and Exposition Authority 9 New Orleans Hornets 9 Oakland-Alameda County Coliseum Authority Arena Project 9 Los Angeles County Fair, Hotel, and Exposition Complex Arena Project Preliminary Draft Page 6 II. Barrett Sports Group, LLC Experience ¾ Selected Franchise Related Projects 9 Anaheim Angels 9 Arena Football League (AFL) Franchise Investor Group 9 Boston Bruins/New England Sports Network 9 Canadian Minor League Franchise 9 Charlotte Checkers (ECHL) 9 Cleveland Indians 9 Denver Broncos 9 Fleet Bank (New York Islanders) 9 International Hockey League (IHL) – Milwaukee Admirals 9 Mudville Nine Baseball Club 9 New England Patriots 9 New Orleans Hornets 9 Oakland A’s Investor Group 9 Philadelphia Eagles 9 Rogers Communications – Toronto Blue Jays 9 Sacramento River Cats 9 St. Louis Blue Investor Group 9 San Francisco 49ers 9 Tampa Bay Lightning 9 Fresno Grizzlies 9 Vancouver Canucks 9 Visalia Oaks Baseball Club 9 Western Hockey League Investor Group Preliminary Draft Page 7 III. Scope of Services Tasks Completed ¾ Reviewed C.H. Johnson Consulting, Inc. Report (8/04) ¾ Reviewed BDO Seidman, LLP Report (6/30/04) ¾ Reviewed KPMG Feasibility Report (9/00) ¾ Reviewed Cash Flow Model Prepared by Developer (12/30/03) ¾ Reviewed Operating and Financial Characteristics for: 9 Comparable Arenas (15) 9 New Mexico Scorpions 9 Central Hockey League (CHL) 9 ECHL 9 AF2 ¾ Reviewed Proposed Memorandum of Understanding (6/25/04) ¾ Our Analysis is Limited in Nature as a Result of Time Constraints Preliminary Draft Page 8 III. Scope of Services Comparable Arenas ¾ Reviewed Operating and Financial Characteristics of the Following 15 Arenas: 9 Sovereign Bank Arena – Trenton, New Jersey (1) 9 Budweiser Events Center – Loveland, Colorado (1) 9 Dodge Arena – Hidalgo, Texas (1) 9 John Labatt Centre – Ontario, Canada (1) 9 Everett Events Center – Everett, Washington 9 Wachovia Arena – Wilkes Barre, Pennsylvania 9 Spokane Arena – Spokane, Washington (1) 9 Sovereign Center – Reading, Pennsylvania 9 Verizon Wireless Arena – Manchester, New Hampshire 9 Laredo Entertainment Center – Laredo, Texas 9 The Mark of the Quad Cities – Moline, Illinois (1) 9 Van Andel Arena – Grand Rapids, Michigan 9 Pepsi Arena – Albany, New York 9 Ford Center – Oklahoma City 9 Alltel Arena – Little Rock, Arkansas (1) – Arenas referenced in C.H. Johnson Consulting, Inc. report. Preliminary Draft Page 9 III. Scope of Services Comparable Arenas ¾ Net Operating Income – 15 Comparable Arenas 9 High $2,300,000 9 Low $50,000 9 Average $975,000 ¾ KPMG Report (2000) Findings Within Range Above Preliminary Draft Page 10 IV. Project Overview Project Description ¾ Arena Opening – Fall 2006 ¾ Arena Characteristics – Physical 9 Fixed Seating – 8,545 9 Luxury Suites – 44 Sellable – 38 Party/Other – 6 9 Club Seats – 700 9 On-Site Parking – None (3,500 Spaces in Five City Garages Nearby) ¾ Arena Characteristics – Operating 9 Number of Events – 124 (Increasing to 130) 9 Total Attendance – 682,000 (Increasing to 689,000) 9 Major Tenants Minor League Hockey (CHL or ECHL)/AF2 9 Broadway Shows/Festivals 9 Other Events (Concerts/Family Shows/Sporting Events/Community Events/Consumer Shows) ¾ Proposed Project Reflects a Unique Approach to Arena Development, Financing, and Operation Preliminary Draft Page 11 IV. Project Overview Sources and Uses of Funds Sources of Funds: Uses of Funds: Project Revenue Bonds $36,340,000 Deposit to Project Construction Fund $49,899,992 Surcharge Revenue Bonds 31,995,000 Deposit to Capitalized Interest (CIF) Fund 7,103,790 City Contribution of Land, Infrastructure 5,500,000 Land, Infrastructure 5,500,000 Subordinated Loans 4,500,000 Deposit to Debt Service Reserve Fund (DSRF) 5,220,747 Food and Beverage Equipment 1,200,000 Developers Fee 3,000,000 Interest Earnings on Project Construction Fund 939,423 Pre-Opening/Marketing Expenses 2,997,000 Global Spectrum - Equity Contribution 500,000 Costs of Issuance 1,634,115 Hockey Team Franchise Cost 1,500,000 Coverage Account 1,500,000 Food and Beverage Equipment 1,200,000 Gross Bond Insurance Premium 712,939 AF2 Franchise Cost 700,000 Rounding Amount 5,841 Total Sources $80,974,423 Total Uses $80,974,423 Preliminary Draft Page 12 V. Summary of Findings Market Analysis – Methodology ¾ Key Market Characteristics – General/Demographic (U.S./Comparable Size/CHL/ECHL/AF2) 9 Population 9 Estimated Population Growth 9 Total Households 9 Total Effective Buying Income 9 Median Household Effective Buying Income 9 Total Households with a Median Effective Buying Income Over $50,000 9 Buying Power Index 9 Large Companies 9 Television Households/Population 9 Radio Population ¾ Key Market Characteristics – Competitive Facilities 9 Current and Planned Seat Inventory 9 Current and Planned Luxury Suite Inventory 9 Current and Planned Club Seat Inventory 9 Population Per Seat 9 High Income Households Per Seat/Club Seat 9 Large Companies Per Luxury Suite/Club Seat Preliminary Draft Page 13 V. Summary of Findings Market Analysis – Key Observations ¾ General/Demographic 9 Population – Adequate 9 Estimated Population Growth – Moderate 9 Income – Moderate 9 High Income Households – Moderate 9 Corporate Base Relatively High Number of Large Corporations Several of Large Companies in Following Industries: Government Education Military ¾ Competition 9 Competitive Attractions – Limited 9 Competitive Facilities – Limited Existing Inventory (Tingley Coliseum/Isotopes Park/The Pit/Journal Pavilion) Rio Rancho Arena (Potential Major Issue) Preliminary Draft Page 14 V. Summary of Findings Market Analysis – Key Observations ¾ Premium Seating 9 Luxury Suites Isotopes Park – Strong Support ($28,000 Price Includes Tickets) Proposed Price Does Not Include Tickets ($34,000 Price Plus Tickets) – No On-Site Parking for Premium Seat Holders 9 Club Seats Isotopes Park – Limited Success/Market Support Industry