Victor De la Cruz || 1^1 Iclll Manatt, Phelps & Phillips, LLP manatt | phelps | phillips Direct Dial. (310)312-4305 E-mail: [email protected] October 21, 2014 Client-Matter: 45860-031 BY MESSENGER AND E-MAIL President Patsaouras and Honorable Commissioners Board of Recreation and Parks Commissioners City of Los Angeles 221 N. Figueroa Street, Room 1510 Los Angeles, CA 90012 Re: The Greek Theatre Concession Award - Response to Mayer Brown Letters of October 8, 2014 and October 20, 2014 Dear President Patsaouras and Honorable Commissioners: On behalf of Live Nation Worldwide, Inc. ("Live Nation"), we write in response to the October 8, 2014 and October 20, 2014 letters from Nederlander-AEG's legal counsel. Unfortunately, these letters are nothing more than additional attempts to confuse and delay the process after your staff and a five person independent panel of experts (the "Evaluation Panel") unanimously found that Live Nation by far delivered the superior proposal to operate the Greek Theatre for the next 20 years. Live Nation scored a total of 455 points out of a possible 500, whereas Nederlander-AEG only scored 396. Live Nation delivered a vastly superior proposal - it is that simple. This letter will demonstrate, and even the most cursory review of the two proposals will confirm, that Nederlander-AEG's proposal - like Nederlander's current operation of the Greek Theatre - leaves much to be desired. Whether it's the Nederlander-AEG proposal's inappropriate use of Patina Group venue photographs (Patina Group is not Nederlander's, but Live Nation's food and beverage partner), a capital improvement contribution that isn't even half of Live Nation's, or a misleading pro forma projecting revenue from up to 80 shows when the proposal guarantees 50 shows elsewhere, the 40-year incumbent's proposal was so flawed that it could only have come from a company with a self-entitled belief that it, and not the people of Los Angeles, own the Greek Theatre. Los Angeles deserves better. After Nederlander derailed the last request for proposals ("REP") process in 2001, the Department of Recreation and Parks ("RAP" or the "Department"), with the oversight of the Board of Recreation and Parks Commissioners ("Board"), worked extremely hard to prevent a repeat of what the Editorial Board of the Los Angeles Times then called a "Greek Tragedy" - Nederlander's disruption of the City's contracting process by politics and campaigns of misinformation. For that reason, RAP and the Board went through an exhaustive, lengthy, and transparent process to create an independent panel of experts from throughout the country - the Evaluation Panel - and received community, professional, and proposer input on the REP 11355 West Olympic Boulevard, Los Angeles, California 90064-1614 Telephone: 310.312.4000 Fax: 310.312.4224 Albany | Los Angeles | New York | Orange County | Palo Alto | Sacramento | San Francisco | Washington, D.C. manatt manatt | phelps | phillips October 21, 2014 Page 2 components, point allocations, and the evaluation process, even asking potential proposers to comment on a draft RFP. In that vein, on May 15, 2014, Nederlander-AEG submitted minor technical comments on the RFP, making no major objection to the evaluation process, the RFP scoring categories, or the planned point allocations. (See Exhibit A.) True to form, however, as soon as the independent Evaluation Panel unanimously recommended Live Nation for the award this year - Nederlander was "shocked," attacked the integrity of the entire process, and questioned the structure and scoring allocations of the RFP. Nederlander-AEG's October 8, 2014 letter fails to address the actual scoring of the proposals. As the letter jumps from one part of the RFP to another without attempting to make any meaningful connection to the Evaluation Panel scores, it becomes apparent that the letter is not geared at shedding light on any scoring discrepancies, but rather, creating confusion by omitting key elements of the proposals and the scoring that was given to each section. This is because all five members of the Evaluation Panel were consistent in their scoring, and the 59 point differential between the proposals is simply insurmountable. For example, so great is the point differential that even if Live Nation had scored zero points out of 50 on "Revenue Sharing" - the one area that the overwhelming majority of Nederlander-AEG's letter focuses on - Live Nation would still come out ahead. Moreover, Nederlander-AEG's allegations are even more bizarre when one realizes that Nederlander-AEG actually outscored Live Nation by 6 points on this section, which only begs the question: If Nederlander-AEG is so adamant that it delivers better revenue sharing, then doesn't this indicate that the scoring worked? The process leading to Live Nation's selection as the recommended proposer was a model of transparency and careful review. As this letter will demonstrate, Nederlander-AEG's allegations are unfounded and based on gross misrepresentations of both proposals. Live Nation has assembled an award-winning team of architects and preservationists - backed by Live Nation capital - that will put an end to the Nederlander legacy of deferred maintenance and elevate the Greek Theatre experience to one every Angeleno will be proud of. We respectfully urge the Commission to adopt the staff recommendation and move this item forward to the City Council as soon as possible. As detailed in the discussion below, Nederlander-AEG's contentions should be rejected for the following reasons: • Live Nation offered the superior financial proposal. • Live Nation proposes a vision for the Greek Theatre unmatched by Nederlander-AEG. • Live Nation's Greek Theatre Community Trust is a benefit above and beyond Live Nation's required Community Partnership Plan. manatt manatt | phelps | phillips October 21, 2014 Page 3 • Nederlander-AEG's food and beverage proposal relied on photographs from Live Nation's culinary partner. Patina Group; only Live Nation's team has the experience and capability to transform the Greek's existing concessions. • Live Nation's preventative maintenance plan met all RFP requirements, and after a valid "apples-to-apples" comparison, was appropriately found to be superior by the Evaluation Panel based on multiple factors. • The Evaluation Panel correctly read, and evaluated, Nederlander-AEG's proposed landscaping plan. • RAP and the RFP process are fully complying with the requirements of the California Environmental Quality Act ("CEQA"). • Nederlander-AEG's insinuation that providing tickets to Greek Theatre Advisory Committee Members would be illegal is not supported by any evidence. • Nederlander-AEG's myriad other objections are all completely unfounded, and represent desperate attempts to discredit Live Nation's superior proposal. A. Live Nation Offered the Superior Financial Proposal. 1. Nederlander-AEG Continues to Misrepresent the Total Guaranteed Revenue. Nederlander-AEG has mounted most of its protest around the argument that its proposal provides more guaranteed revenue share. Never mind that Live Nation's proposal provides approximately $30 million more guaranteed revenue overall. Never mind that the Financial Proposal section of the RFP is actually comprised of three components: (1) "Strategic Plan and Direction" (50 points); "Level of Revenue Sharing" (50 points); and "Level of Capital Investment" (50 points) and never mind that Live Nation's proposal was so superior across the board - including in all the other financial categories - that even if Live Nation had scored zero points out of 50 for "Level of Revenue Sharing," it still would have outscored Nederlander- AEG's proposal. Live Nation's minimum guarantees are in fact overwhelmingly higher, which explains, in part, why Live Nation received higher scores for Strategic Plan and Direction and Level of Capital Investment. Nederlander-AEG conveniently ignores the additional guaranteed revenue offered by Live Nation in the form of: (1) the Guaranteed Community Trust; (2) the Guaranteed Capital Improvements; and (3) the Guaranteed Penalties for every show below 70. As the matrix below demonstrates, whether one treats the concession as a 10-year or 20-year contract, Live Nation's minimum guarantees are consistently higher - and not just by a small margin. Live manatt manatt | pheips | phillips October 21, 2014 Page 4 Nation's proposal guarantees approximately $13 million more total revenue to the City at the 10- year mark and $30 million more total revenue to the City at the 20-year mark. MINIMUM GUARANTEES - THE FULL PICTURE Years 1-10 Years 11-20 Total NEDERLANDER-AEG Minimum Revenue Share $36,250,000 $41,250,000 $77,500,000 Guaranteed Capital $18,746,000 $0 $18,746,000 Improvements Nederlander Total $54,996,000 $41,250,000 $96,246,000 | LIVE NATION Minimum Revenue Share $30,000,000 $30,000,000 $60,000,000 Guaranteed Community Trust $3,000,000 $3,000,000 $6,000,000 Guaranteed Capital $25,000,000 $15,000,000 $40,000,000 Improvements Guaranteed Penalty $10,000,000 $10,000,000 $20,000,000 Payments1 Live Nation Total $68,000,000 $58,000,000 $126,000,000 The above numbers are the reason that Nederlander-AEG has tried so hard to focus only on the minimum revenue share, and not all the other guaranteed revenue streams in Live Nation's proposal. Likewise, it is the reason Nederlander-AEG's correspondence on the financials has been so intentionally jumbled; placing all the guaranteed revenue in one easy-to-read matrix demonstrates the true contrast between the proposals. Importantly, Live Nation's proposal also guarantees more total revenue at the 10- and 20-year marks even if one does not include the last row of Live Nation revenue from penalty payments - by approximately $3 million and $20 million, respectively. While Live Nation does not need to include the penalty payments to come out ahead, it is important that the full revenue picture be provided - something that Nederlander-AEG has consistently failed to do.