5/7/2024 Item 9
Santa Clara Stadium
Authority
Action on Stadium Manager and StadCo's
Request to Assign Stadium Builder's Licenses
to 24 Additional Field Seats in the North and
South End Zones of Levi's Stadium
Item #9
SCSA
SANTA CLARA STADIUM AUTHORITY May 7, 2024, #24-376
1 Background
• The Santa Clara Stadium Authority (Stadium Authority) has the sole and exclusive right to sell, license, or transfer Stadium Builder's Licenses (SBLs) and similar instruments for all the seats located in Levi's Stadium, with the
exception of those seats located in, or accessible through, the private "Suites."
• By entering into a SBL Agreement, a SBL Holder has
exclusive rights to purchase 49ers season tickets and
priority access to other events at the Levi's Stadium for the 30-year term of the agreement.
• The Forty Niners Stadium Management Company
(Stadium Manager) is responsible for making
recommendations to the Stadium Authority with respect
to facilitation of a secondary market for SBLs, and
marketing, monitoring, and managing SBL Agreements.
SCSA
2 SANTA CLARA STADIUM AUTHORITY
POST MEETING MATERIAL
1 5/7/2024 Item 9
Background (cont.)
• On June 21, 2022, the Stadium Authority Board considered a proposal from the Stadium Manager and Forty Niners SC Stadium Company LLC (StadCo) and approved the assignment of SBLs priced at $17,500 per seat for up to seventy (70) field seats in the North and South end zones of Levi's Stadium with the following actions:
• Approved Stadium Manager and StadCo's recommendation to add and sell SBLs priced at $17,500 per seat for the field.
• Authorized the Executive Director to negotiate and execute an agreement with StadCo regarding obligations related to the field seats consistent with the June 21, 2022 agenda report prior to the Stadium Manager selling SBLs for the field seats.
• Authorized the Executive Director to work with the Stadium Manager to make modifications and provide clarifications and clean up language to the SBL template form that is in compliance with the Stadium Lease.
SCSA 3
SANTA CLARA STADIUM AUTHORITY
3 Background (cont.)
• A SBL Allocation Agreement was subsequently negotiated and executed between the Stadium Authority and StadCo with the following key terms and conditions:
NFL must approve the addition of up to 70 field seats on an annual basis. • NFL may direct the move, removal, or alteration of the seats without prior warning. • Stadium Authority designates all 70 field seats to the form SBL Agreement included in Exhibit A of the SBL Allocation Agreement and priced at $17,500 per seat.
StadCo is responsible for any costs of complimentary food and beverage, or exclusive amenities offered to the field seat SBL Holders. • SBL Holders are granted access to Stadium club space; StadCo agrees to bear responsibility for the club space food and beverage costs. • StadCo is solely responsible for any costs related to any design, construction, alteration, maintenance, repair, replacement, removal, and deconstruction of the 70 field seats.
SCSA
4 SANTA CLARA STADIUM AUTHORITY
4 2
5/7/2024 Item 9
Background (cont.)
• Existing Field Seat SBL Revenues
• Stadium Manager sold SBLs for 66 out of the 70 seats that were approved on June 21, 2022.
• Stadium Authority has collected $635,523 in SBL principal and SBL interest revenue to date.
Existing field seats have generated $27,388.60 in NFL Ticket Surcharge revenue for the Stadium Authority since June 2022.
SCSA 5
SANTA CLARA STADIUM AUTHORITY
5 Stadium Manager/StadCo Proposal
• Assign SBLs priced at $17,500 per seat to an additional twenty-four (24) field seats in the North and South end zones of Levi's Stadium.
• South End Zone Field Seats
• Proposal: Increase by 21 seats, including 4 ADA seats • Total Gross Number of Seats: 47 seats including 8 ADA seats • North End Zone Field Seats
• Proposal: Increase by 3 seats (no ADA seats)
• Total Gross Number of Seats: 47 seats including 4 ADA seats Total Incremental SBLs Available: 24 (4 would be set aside for ADA seats) SCSA 6
SANTA CLARA STADIUM AUTHORITY
6 3
5/7/2024 Item 9
Stadium Manager/StadCo Proposal (cont.)
• StadCo will be responsible for the cost of complimentary food and beverage amenities offered or provided to the field seat SBL Holders, or any amenities exclusively provided to these SBL Holders.
• The field seat SBL Holders will be granted access to club space at the Stadium and StadCo agrees that it or its affiliate will bear responsibility for the costs and expenses of any complimentary food and beverage services. • StadCo will be responsible for any costs and expenses related to any design, construction, alteration, improvement, maintenance, repair, replacement, removal, and deconstruction of the 24 field seats.
• StadCo agrees to extend the May 31, 2024 cutoff date to June 30, 2024 to sell tickets for the 2024 NFL Season for any of the 24 field seats that do not have SBLs.
SCSA
SANTA CLARA STADIUM AUTHORITY
7 Stadium Manager/StadCo Proposal (cont.)
• New Field Seat SBLs are expected to generate approximately $650,000 in incremental revenue for the Stadium Authority, based on a $17,500 SBL seat price and key assumptions.
• Projected Revenue Breakdown: $385,000 in Principal; $128,000 in interest; $137,000 in NFL Ticket Surcharge (which Stadium Authority would receive with or without SBLs) • Total Projected SBL Seats Sold: 22 (with no SBLs expected to be sold for 2 out of the 4 new ADA seats)
• Projected sales for 17 SBLs on or prior to June 30, 2024; 5 remaining seats would be sold after June 30, 2024 and SBL revenue will be collected in 2025 or subsequent years • 20 SBLs would be financed over the term of 10 years with an 8.5% interest rate; 2 SBLs would be paid in full at the time of purchase
• Ticket prices for the field seats would grow at 5% annually, through 2039. • 4% SBL sales commissions can be accounted for in the SBL Sales and Services portion of the Stadium Authority FY 2024/25 Operating Budget.
SCSA
SANTA CLARA STADIUM AUTHORITY
8 4
5/7/2024 Item 9
Staff Analysis
• Annual NFL Approval / Temporary Nature of Field Seat SBLs • The NFL holds full authority to annually review and approve the seating structures prior to each season.
• Any changes to the field seat locations and set up, including the addition of the 24 seats, will require additional NFL approval.
• At the time of writing the report, StadCo received the NFL's conditional approval of the field seats for the 2024 NFL Season.
SCSA
9 SANTA CLARA STADIUM AUTHORITY
Staff Analysis (cont.)
• The SBL Allocation Agreement ensures that StadCo is responsible for food and beverage amenity costs, and capital construction and improvements costs.
Otherwise, the Stadium Authority could be responsible for the following:
• Food and beverage amenity costs for field seat SBL Holders per game, per seat. • Capital construction and improvements, maintenance, replacement, etc.
SCSA 10
SANTA CLARA STADIUM AUTHORITY
10 5
5/7/2024 Item 9
Staff Analysis (cont.)
• StadCo's agreement to extend the annual SBL cutoff date from May 31 to June 30, 2024 for the 24 field seats provided the Stadium Authority and StadCo additional time to come to agreement on the various commitments associated with the seats. • The extended cutoff date also provides the Stadium Manager's SBL team additional time to sell SBLs, as the SBL team will have over a month to sell SBLs for the 24 field seats.
SCSA 11
SANTA CLARA STADIUM AUTHORITY
11 Staff Analysis (cont.)
• Stadium Authority will be in a net positive revenue position even if it has to refund unamortized portions of the SBLs to field seat SBL Holders in the future. • The NFL may direct the move, removal, or alteration of the seats without warning, in any given year.
• Under the SBL Agreement, Stadium Authority would need to assign a "Comparable Seat" or refund the unamortized portion of the SBL should a SBL Holder's seat(s) becomes unavailable.
It is unlikely there will be any "Comparable Seat" option acceptable to the field seat SBL Holders. The Stadium Authority will carry the obligation of refunding the unamortized portion of the SBL to the customer if the seats are removed.
SCSA 12
SANTA CLARA STADIUM AUTHORITY
12 6
5/7/2024 Item 9
Staff Analysis (cont.)
• The Stadium Authority is not responsible for paying costs related to food and beverage amenities and construction, maintenance, and deconstruction for the field seats.
• Stadium Authority's obligation for potential SBL refunds for the 24 seats will change over time. The potential refund amount if the seats are not available adjusts per year due to: a) requirement that only the unamortized portion needs to be refunded if no comparable seats available; and b) timing of the receipt of the SBL payment.
• SBL proceeds must be spent on debt repayment upon date of receipt. Stadium Authority cannot hold on to any SBL revenue from these field seats to be used for any potential refunds if no Comparable Seats are available and would need to find alternative funds to refund the unamortized portion of the SBLs.
SCSA 13
SANTA CLARA STADIUM AUTHORITY
13 Staff Analysis (cont.)
• SBL Price Point of $17,500 is the fair market value. Staff reviewed and analyzed the Stadium Manager's proposed SBL price point of $17,500 per seat for the 24 field seats against the following:
• Original 70 field seat SBLs which are located in the same North and South end zones as the new field seats
• No field seat SBLs have been resold in the third-party marketplace. • Pricing of other SBLs throughout the Stadium (non-field seats) • Non-field seat SBLs throughout the Stadium are selling at a 5% to 77% discount on the secondary market, with a blended average of approximately a 39% discount to face value. This is due in part to the annual depreciating value of the SBL term life.
SCSA
SANTA CLARA STADIUM AUTHORITY
14 7
5/7/2024 Item 9
Staff Recommendation
1. Approve the Stadium Manager and StadCo's recommendation to assign and sell SBLs priced at $17,500 per seat for the proposed additional 24 field seats located in the North and South end zones of Levi's Stadium.
2. Authorize the Executive Director to execute an Amendment No. 1 to the SBL Allocation Agreement to include the 24 field seats and to extend the annual SBL cutoff date from May 31, 2024 to June 30, 2024 for the corresponding SBLs.
SCSA 15
SANTA CLARA STADIUM AUTHORITY
15 SCSA
Santa Clara Stadium Authority
16 8