1/30/2024 Item #6
Santa Clara Stadium
Authority
Proposed 10-Year Extension to the
Stadium Naming Rights Agreement with
Levi Strauss & Co.
January 30, 2024, #24-107
SCSA
SANTA CLARA STADIUM AUTHORITY
Outline
• Background
• Overview of Proposed Naming Rights Extension
• Analysis and Consideration
• Recommendation
SCSA 2
SANTA CLARA STADIUM AUTHORITY
POST MEETING MATERIAL
1 1/30/2024 Item #6
Background
• On May 9, 2013, the Santa Clara Stadium Authority
(Stadium Authority) and Levi Strauss & Co. (LS&Co.)
entered into a Naming Rights Agreement.
• Under the 20-year agreement, LS&Co. provides an
annual payment to the Stadium Authority in
exchange for exclusive naming rights and branding at
the Stadium.
• Levi Strauss & Co. also has a separate sponsorship
agreement with Forty Niners SC Stadium Company
LLC (StadCo), which includes digital content, and
merchandise collaborations, among other things.
SCSA
SANTA CLARA STADIUM AUTHORITY
Background (cont.)
• The existing Naming Rights Agreement between the Stadium Authority and Levi Strauss & Co. includes the following key terms:
• Naming Rights Payments: LS&Co. is obligated to make annual payments to the Stadium Authority increasing at the rate of 3% per year. • Year One (2013-14) = $5.74 million
LEVI STRAUSS & CO.
• Year Eleven, current year (2023-24) = $7.6 million
• Totals $154 million over the initial term of 20 years • Revenue deposited into Stadium Authority's "Operating Fund" - Supports stadium operations, maintenance, and pays debt from the initial stadium construction.
Extension Right: LS&Co. had the option to extend the term for an additional five (5) years by delivery of written notice no later than the last day of the fifth contract year. The extension right expired on May 10, 2018.
SCSA
SANTA CLARA STADIUM AUTHORITY
2 1/30/2024 Item #6
Background (cont.)
• Sign Maintenance/Replacement: The Stadium Authority is responsible, at its sole cost for cleaning, repairing, and maintaining the Naming Rights signage throughout the 20-year term. If Levi's requests that the signs be replaced (for example, if they change their logo and want updated signage to match), this replacement will be done at Levi's sole cost.
• Levi's Proposal Discussion: In mid-December 2023, Levi's prior CEO and StadCo discussed a potential naming rights extension. On January 8, 2024, StadCo briefed the Stadium Authority on Levi's proposed terms for an extension to the Naming Rights Agreement, at staff's request, arranged a January 17h meeting between Stadium Authority, StadCo, and Levi's to discuss the proposal. • Proposal to the Board: As a product of the negotiations between the parties, the following proposal is being presented to the Stadium Authority Board >> SCSA 5
SANTA CLARA STADIUM AUTHORITY
Proposed Naming Rights Extension
• Amendment: Parties will enter into a First Amendment to the Naming Rights Agreement to extend the term for an additional 10 years, terminating on February 29, 2044.
• Annual Fee: During the extension period, LS&Co. will continue paying the annual fee to the Stadium Authority, increasing at a rate of 3% per year. The total anticipated revenue over the 10-year extension period is approximately $119 million. • Enhanced Signage: As part of the extension, the Stadium Authority will provide a one-time enhancement of the Naming Rights signage (Enhanced Signage). The Enhanced Signage includes the stadium Name Letters on the east and west exteriors of the Stadium and the two signs above the Stadium scoreboards in the interior of the Stadium.
SCSA 6
SANTA CLARA STADIUM AUTHORITY
3 1/30/2024 Item #6
Proposed Naming Rights Extension (cont.)
• Enhanced Signage (cont.): StadCo has provided a preliminary cost estimate for the project, including the removal of the existing signs and the design and installation of the Enhanced Signage in the amount of approximately $3 million. • Cost Sharing: Enhanced Signage installation costs will be shared between StadCo and the Stadium Authority under the terms of a project Implementation Agreement.
First Right: With the extension, LS&Co. will continue to have the right of first negotiation for an additional Naming Rights Agreement extension (expires last day of the twenty-seventh contract year).
• Requires good faith for a period of sixty (60) days
SCSA
Proposed Naming Rights Extension (cont.)
• Cost Sharing: Concurrent with the First Amendment to the Naming Rights Agreement, the Stadium Authority and StadCo will be entering into the Levi's Stadium Naming Rights Extension and Enhanced Signage Project Implementation Agreement (Implementation Agreement) to coordinate the Enhanced Sign Project and the share in the costs for the design, construction, and installation of the signage. • The Stadium Authority will be required to fund the first $2 million of the Enhanced Signage Project.
• Any Costs over $2 million will be shared between the Stadium Authority and StadCo in a 70/30 split.
SCSA
8 SANTA CLARA STADIUM AUTHORITY
4 1/30/2024 Item #
Proposed Naming Rights Extension (cont.)
• Santa Clara Community Grants: In conjunction with the Naming Rights Extension, StadCo is committing to support charitable causes within the City of Santa Clara for each "Contract Year" of the remainder of the amended term of StadCo's Sponsorship Agreement with Levi's (beginning April 1, 2024).
• The $4 million commitment will provide $200,000 annually for 20 years to benefit organizations serving the City of Santa Clara.
• Commitment is contained in the Naming Rights Implementation Agreement between the Stadium Authority and StadCo.
SCSA 9
SANTA CLARA STADIUM AUTHORITY
Proposed Naming Rights Extension (cont.)
• LS&Co. Sponsorship Agreement with StadCo: LS&Co. and StadCo plan to concurrently extend their existing Sponsorship Agreement. • The payments to StadCo under the Sponsorship Agreement extension are expected to be $51 million over the 10-year extension period. This represents 30% of the $170 million total.
SCSA 10
SANTA CLARA STADIUM AUTHORITY
5 1/30/2024 Item #6
Agreement Terms
• First Amendment to the Naming Rights Agreement
• Existing Naming Rights Agreement total value is projected to be $154 million over the initial term of 20 years. In the current year (2023-24), the annual payment is $7.6 million.
To date, the Stadium Authority has received $65 million in Naming Rights revenue.
• The Stadium Authority utilizes naming rights revenue to fund stadium operations and maintenance, and to pay down the debt from the initial stadium construction.
SCSA 11
SANTA CLARA STADIUM AUTHORITY
Agreement Terms (cont.)
• First Amendment to the Naming Rights Agreement (cont.) • Proposed 10-year extension will generate an additional ~ $119 million in revenue.
• The annual payments during that extended time period will begin at $10.3 million and increase at a rate of 3% per year.
SCSA 12
SANTA CLARA STADIUM AUTHORITY
6 1/30/2024 Item #6
Summary of Initial Term & Proposed Extension Payments
Current Agreement
Payment to SCSA
Contract Year Year Begin Year End
(+ @ 3%/yr.)
2013 2014 $ 5,740,000
2 2014 2015 $ 5,912,200 Proposed Extension
2015 2016 6,089,566
21 2033 2034 $ 10,367,078
4 2016 2017 6,272,253
2017 6,460,421 22 2034 2035 $ 10,678,091
5 2018
2018 2019 6,654,233 23 2035 2036 $ 10,998,434
7 2019 2020 6,853,860 24 2036 2037 11,328,387
2020 2021 7,059,476 25 2037 2038 $ 11,668,238
2021 2022 7,271,260 2039
26 2038 $ 12,018,285
10 2022 2023 $ 7,489,398
2023 2024 7,714,080 27 2039 2040 $ 12,378,834
12 2024 2025 7,945,502 28 2040 2041 $ 12,750,199
13 2025 2026 $ 8,183,867 29 2041 2042 $ 13,132,705
14 2026 2027 8,429,384 30 2042 2043 $ 13,526,686
15 2027 2028 $ 8,682,265 $ 118,846,937
Sub-total (Y21-30)
16 2028 2029 $ 8,942,733
Total (Y1-30) $ 273,082,886
17 2029 2030 $ 9,211,015
18 2030 2031 $ 9,487,345
19 2031 2032 $ 9,771,966
20 2032 2033 $ 10,065,125
$ 154,235,950 13
Sub-total (Y1-20)
Agreement Terms (cont.)
• First Amendment to the Naming Rights Agreement (cont.) • Naming Rights Signage: Levi's is requiring an enhancement of their existing "Naming Rights Entitlements" signage package:
• Suite Tower - Marquee Sign. One (1) primary exterior stadium identification banner sign displaying the Stadium Name in large lettering. • East Facade Marquee Sign. One (1) large, centered sign across the east-facing exterior displaying the Stadium Name in large lettering and, together with the West Side Lettering, the "Stadium Name Lettering"), visible to surrounding corporate and residential areas.
" Two (2) primary seating bowl stadium identification end zone panel signs above the Stadium jumbotrons displaying the Stadium Name. The signage will face the inner bowl of the Stadium and will be illuminated during all Stadium events.
SCSA 14
SANTA CLARA STADIUM AUTHORITY
7 1/30/2024 Item #6
Signage Package Images
Varia jose warr
E LEVIS STADIUME LEVIS STADIUM
Suite Tower - Marquee Sign East Facade Marquee Sign
LEVIS STADIUM
COME T
EVI'S• STADIU LEVIES STADIUM
End Zone Jumbotron Sign - N End Zone Jumbotron Sign - S SCSA
15 SANTA CLARA STADIUM AUTHORITY
Agreement Terms (cont.)
• First Amendment to the Naming Rights Agreement and Enhanced Signage Project Implementation Agreement
• The Enhanced Signage Project involves the replacement of all four of the existing signs.
• The project shall be implemented in a manner that minimizes impacts on Stadium NFL and non-NFL events.
• The overall quality is to be equal or superior to the quality of comparable NFL stadium signage installed over the past 5 years. Final design is subject to Stadium Authority approval.
• The estimated cost of this overall project is $3 million and will need to be completed by December 31, 2025.
• Stadium Authority to fund the initial $2 million of the Enhanced Signage Project. Any Costs over $2 million will be shared between the Stadium SCSA Authority and StadCo in a 70/30 split. 16
SANTA CLARA STADIUM AUTHORITY
8 1/30/2024 Item #6
Agreement Terms (cont.)
• First Amendment to the Naming Rights Agreement and Enhanced Signage Project Implementation Agreement
• The Stadium Authority Fiscal Year (FY) 2023/24 Capital Expense (CapEx) Budget includes a line item for a Levi's Naming Rights Signage Refurbishment project ($1,260,000) related to the maintenance of four (4) signs located above the North and South Scoreboards, west side of the suite tower, and on the east side of the grandstands.
• These funds have not been expended and staff will recommend that they be carried forward to FY 2024/25 as part of the upcoming Stadium Authority FY 2024/25 budget process.
SCSA
SANTA CLARA STADIUM AUTHORITY
Agreement Terms (cont.)
• Grants to Santa Clara serving Community Organizations • The Implementation Agreement includes, as part of the proposed extension, $4 million ($200,000/annually over the next 20 years) for grants to Santa Clara serving community organizations
• Details of the commitment will be implemented through a Grants Agreement to be entered into between a StadCo-designated charitable affiliate and the City utilizing the City's existing Community Grants Program for distribution.
SCSA 18
SANTA CLARA STADIUM AUTHORITY
9 1/30/2024 Item #6
Analysis and Consideration
Through research, staff found the proposed terms in line with recent naming right extensions deals, market events, and expectations.
• In general, it is beneficial for facilities to maintain their initial and/or iconic naming rights partner to fully leverage the brand goodwill which takes years to build. • Switching to a new naming rights sponsor will likely cost the Stadium Authority a 10- 20% broker commission (anticipated between $18.8 - $37.6 million). And, Stadium Authority bears sole responsibility for all Naming Rights signage removal costs. • Projections indicate that around 2031, the Stadium Authority's demolition fund reserve will be fully funded so the additional Naming Rights revenue, if beyond the amounts necessary for operations and annual debt, could offer unrestricted "excess revenues" funding to the City.
SCSA 19
SANTA CLARA STADIUM AUTHORITY
Analysis and Consideration (cont.)
• It is also important to consider that many top tier sponsors are currently not extending their naming rights agreement due to underperforming return on investment (ROI).
• Examples include Target not renewing its naming rights deal in Minneapolis, and Wells Fargo not renewing its naming rights deal in Des Moines. • The proposed extension guarantees continuity for the Stadium Authority with Levi's, which is one of the strongest brands in the San Francisco Bay Area with a 170- year track record of solid financial performance.
• Comparisons to other large market naming rights deals are on par with this deal when Designated Market Area (DMA) media ranking, car/foot traffic, and the number of NFL games played are considered.
SCSA 20
SANTA CLARA STADIUM AUTHORITY
10 1/30/2024 Item #6
Analysis and Consideration (cont.)
• Comparisons to other large market naming rights deals are on par...
Stadium
SoFi Stadium - Los Angeles (#2 DMA) Mercedes-Benz Stadium - Atlanta (#7 DMA) SCSA 21
Analysis and Consideration (on.)
• Comparisons to other large market naming rights deals are on par...
Levi's Stadium - SF-Oak-SJ (#10 DMA) Target Field - Minneapolis (#15 DMA) SCSA 22
SANTA CLARA STADIUM AUTHORITY
11 1/30/2024 Item #6
Staff Recommendation
1. Approve a First Amendment to the Naming Rights Agreement with Levi Strauss & Co. that will provide a 10-year extension and additional Naming Rights revenue to the Stadium Authority on the terms presented, in a final form approved by Authority Counsel.
2. Approve a Levi's Stadium Naming Rights Extension and Enhanced Signage Project Implementation Agreement with Forty Niners SC Stadium Company LLC (StadCo) to coordinate the Enhanced Sign Project and the share in the costs for the design, construction, and installation of the signage, and memorialize StadCo's $4 million charitable commitment over 20 years, on the terms presented, in a final form approved by Authority Counsel.
3. Authorize the City Manager to negotiate and execute a grants agreement, and take other actions as may be required to implement StadCo's charitable commitment, in final form(s) approved by the City Attorney.
SCSA 23
SANTA CLARA STADIUM AUTHORITY
SCSA
Santa Clara Stadium Authority
12