Category Archives: Owners

01.13.12
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How the environmental process hurts design

On the northwest corner of West Santa Clara Street and North San Pedro Street in downtown San Jose, Baseball San Jose put up a series of Cisco Field renderings, many of which you’ve already seen. The renderings are blown up to poster size, which allows people to study them for details that may not be readily apparent when viewing small versions in a browser.

Cisco Field as it hugs Autumn Parkway

The aerial view above may be my favorite simply because it fully displays the one distinctive architectural element of the ballpark, the “colonnade” along Autumn Parkway. Maybe the colonnade was designed to integrate the ballpark with the rest of the neighborhood. Thing is, there is no semblance of a neighborhood along this block of Autumn, which is populated by nondescript office buildings and an auto parts store-turned-marijuana dispensary. It’s possible that the colonnade was not borne of some desire to create a snaking, thin colonnade structure. It may have been the product of designing to reduce the visual impact of the stadium. Light will be able to go right through the structure from inside the stadium to the street (and vice-versa), which should in theory make the structure less imposing from the outside. That, coupled with the lower profile of a smaller, double-deck seating bowl, makes Cisco Field the least imposing ballpark since Fenway Park.

As I studied the renderings for the umpteenth time, I couldn’t help but wonder if the CEQA process, which governs all environmental review in the state, artificially constrained the design. When 360 architecture was commissioned to design the ballpark by A’s ownership, they were already dealing with a number of major constraints:

  • An irregularly shaped lot, which could limit the ballpark’s size and field dimensions
  • FAA restrictions on building height
  • Uniform code and standards on setbacks (for sidewalks and such)
  • Budget limitations
  • A desire by civic leaders for a large entry plaza, preferably in the outfield

That’s a lot to design around and come up with something cohesive, which to 360’s credit they’ve done an amazing job conceiving. I still wonder if something more distinctive is possible. In my interview with Lew Wolff, he intimated that the design, which is largely coming from John Fisher, could be moreso. My untrained eye and lack of imagination can’t see where the change can happen other than some façade treatments and cladding, which has given many of the HOK/Populous brick ballparks their faux monolithic look. I think 360 and the A’s can do better.

A place like San Jose, with its many short buildings dating from the 50’s forward, is architecturally drab. Sink Combs Dethlefs was only partly successful in evoking trains via HP Pavilion’s steel siding. The way light shimmers off the panels is beautiful at night and in twilight, during the day it looks a uniformly dull gray. In downtown there are very few truly interesting buildings, except for some built largely with public money such as the Rep, Tech Museum, and Children’s Discovery Museum. Even the latter two were tamed after recently deceased Mexican architect Ricardo Legorreta ran into a brick wall regarding the lively color palette he wanted to use for those buildings. As hearing after hearing, committee after committee waters down vision into a muddled mess, what citizens are left with is something more utilitarian in feel than imaginative. That’s a shame because it only furthers the perception that San Jose is a sleepy, uninspiring place.

If you’re looking for something more imposing at Cisco Field, a brick façade covers the walls behind the seating bowl. It matches well with the long Plant 51 building on the other side of the railroad tracks. Plant 51 was formerly a Del Monte cannery which has been repurposed into lofts and condos.

Pre-existing Plant 51 brick exterior with additional levels in a recessed, modern treatment. Caltrain is on the other side of the wall to the left.

You might think that in the above picture, the upper two levels were photoshopped onto the lower levels. It’s every bit real, and done to reduce the impact of the modern additions compared to the historic original building. The whole lacks unity and despite the intent, does little to preserve the integrity of the building. For me, it actually makes the building weaker.

Panoramic view towards downtown from a townhouse in Cahill Park. Cisco Field's brick façade would fill right half.

With redevelopment dead and its powers significantly curtailed, there are now fewer chances to create bold architecture other than in the private sector. I’m not asking for a Bird’s Nest here, the proportions and size of the stadium won’t allow for that. There is room for something bold and beautiful at Diridon. Aspirational should be achievable. If bold is good enough for the Fishers’ SFMOMA expansion, it’s good enough for Cisco Field.

01.12.12
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Now we’re getting somewhere. Maybe.

So the news today started off with this:

 

All of that – and Lew Wolff’s reaction to Selig’s statements – is in today’s Mark Purdy article. There’s also USA Today baseball writer Bob Nightengale’s reply to Mike Davie’s inquiry:

Sounds like things are moving along. As for an actual resolution? Who knows? Bud Selig’s extension was approved 29-1, the dissenting vote coming from outgoing Padres owner John Moores. Jeff Moorad’s takeover bid has not yet been approved. Why? My guess is money. Say, isn’t Bob Piccinini in that group? He should be able to pump it up lickety split.

01.11.12
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Mesa deal closer, San Jose deal not

Update 11:00 PM – Mark Purdy has a recap of today’s “events”.

MLB.com’s Barry M. Bloom reports that while Commissioner Bud Selig’s three-man panel made a presentation to the Executive Council today, there was nothing new to report on the Oakland/San Jose situation. The panel has presented information at different intervals, so this is no surprise. However, remember that everything comes from the top down: panel presents to Executive Committee, then the issue (probably) goes to the Relocation Committee, then to all of the owners for a vote (if it gets that far).

Spring training homes have no expressed territorial rights, so Lew Wolff’s efforts to put together a deal with Mesa at HoHokam Stadium continue unabated. According to Bloom, improvements to Hohokam would cost $10-15 million, with the city footing 60% of the bill and the A’s 40%. I look forward to seeing the plans, and will dissect them as you’d expect me to when the time comes.

01.11.12
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Owners Meetings and FanFest Open Thread

Update 5:44 PM – These tweets from Sports Business Journal’s Eric Fisher look important:

Now the original post:

Again, I don’t expect anything to happen at the owners’ meetings other than Bud Selig getting his extension and some rules-related changes. Yet there is this fresh off the wire from Mark Purdy:

It’s probably nothing. Or is it?

There is other news. Today I was asked to participate in the Blogger Event at FanFest. Naturally, I accepted the invite. Interviews with players and such are not where this blog usually goes, but I appreciate what the A’s are doing to work with the blogging community, so it’s incumbent upon me to reciprocate. Any ideas on how I should do this? Does anyone with a video camera want to tag along? I’m open to suggestions.

In the meantime, read Wendy Thurm’s (@hangingsliders) excellent post at SBNation detailing a very reasonable solution to compensate the Giants for territorial rights.

01.05.12
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News for 1/5/12

Not the busiest week. Some news is coming in.

The Dodgers and MLB will start entertaining bids towards the end of the month. So far eight groups have been emerged:

  • Orel Hershiser, Steve Garvey, and pet food magnate Joey Herrick
  • Peter O’Malley
  • Fred Claire, Ben Hwang, and Andy Dolich
  • Dennis Gilbert, Larry King, and Jason Rees
  • Mark Cuban
  • Magic Johnson, Stan Kasten, and Mark Walter
  • Joe Torre and Rick Caruso (Torre quit his MLB executive position to be the frontman for the bid)
  • Time Warner

It should be competitive. In addition, Judge Leonard Stark is expected to rule next week on whether the Dodgers’ future TV rights can be sold with the team. For those thinking one of the losing groups could easily pick up the A’s if Lew Wolff is denied San Jose, I have to bring it up again: it’ll cost at least $400 million for the team (when including the premium) and $500 million for a ballpark (privately financed, of course). If Mark Cuban is balking at the Dodgers’ price tag at $1 billion, why would he put $900 million into Oakland? These guys aren’t in it to lose money.

More news:

  • Lowell Cohn provides a counterpoint to my appearance on Athletics After Dark. Or a vitriolic diatribe. You decide.
  • Governor Jerry Brown presented his new budget today, which would eliminate 3,000 jobs and consolidate numerous agencies.
  • Redevelopment agencies are set to officially shut down by February 1. Legislation is in the pipeline to extend that deadline to tax day, April 15. Good luck with that.
  • The replacement railings being installed at Rangers Ballpark will cost the team $1.1 million. They’re part of a $12 million package of improvements, much of them located in the outfield area.
  • The Minnesota Vikings’ lease at the H.H.H. Metrodome ended with their last game of the season. They have said that they will not move forward with a lease renewal unless they get state help on a new stadium. The Vikes continue to tout their Arden Hills plan, while also looking at stadium sites closer to downtown Minneapolis.
  • New York Governor Andrew Cuomo wants to reclaim Manhattan’s Javits Convention Center in order to allow for redevelopment, while allowing a developer to build a replacement convention center at the old Aqueduct race track in Queens. Matthew Yglesias wonders what the value proposition is for building the really large facilities, as opposed to the smaller ones often included in hotels.
  • The SF chapter of the Sierra Club filed a second appeal against the America’s Cup waterfront project, halting construction until a hearing for the appeal is held later this month.
  • Added 1/6 1:00 AM – Silicon Valley/San Jose Business Journal takes a look a development in the area between HP Pavilion and the ballpark site.

That’s all for now.

01.03.12
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KQED Forum talks franchises

Last week I got a call from the folks at KQED’s Forum program to see if I’d be interested in being on today’s show. Then yesterday, I received word that their panel was full so I wouldn’t be needed for the show. That’s just as well, because it was a pretty good show hosted by Joshua Johnson and with guests Susan Slusser, Mark Purdy, and Glenn Dickey. Giants CEO Larry Baer also chimes in later in the hour. If you haven’t listened to it yet, do so. Below are the embedded player and an MP3 link.

MP3 Audio

A couple of observations:

  • Purdy mentioned that he talked to sources on the MLB panel. According to them, the Giants’ contractually are not tied to South Bay territorial rights.
  • Baer is content with a two-team market as long as the market definitions stay as is. Pressed on what defines the South Bay, Baer hemmed and hawed, finally mumbling that it includes San Mateo and Santa Clara Counties. He also talked Warriors, saying that he’s going along with the process to evaluate options in both Oakland and San Francisco.
  • The 49ers and the potential for a new referendum on the revised stadium deal were discussed, especially by callers. I don’t think there’s enough political will to make that happen, but you never know.

I need to do a full relisten to see if there’s anything else, as I didn’t bother to take notes.

01.02.12
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Ballpark on layaway

The new CBA has a major change to its debt rule that will affect the A’s as they try to put a ballpark deal together.

The Debt Service Rule will be maintained, but the default EBITDA multiplier has been lowered from ten to eight, and from fifteen to twelve for Clubs incurring stadium-related debt in the first ten years of a new or renovated stadium.

Questions about the commissioner’s actual enforcement of the rule aside, suddenly the A’s have a little less of a ceiling to play with when it comes to building a stadium. For Wolff/Fisher, debt will be limited to 12x the team’s gross income, which according to Forbes has been $22-23 million for the past two seasons, and probably won’t change significantly this year. Should that hold steady, the maximum debt the owners could incur is $270 million. The team already has $90 million on the books, which reduces to available figure to $180 million. Let’s say the team pays down $20 million in the next year. That would put the ceiling at $200 million…

…Unless something were to change dramatically for the A’s. As Billy Beane gets rid of arbitration-year guys like they’re going out of style, the effect is that it can drive up the team’s EBITDA/gross profit. Right now the A’s payroll projects at $24 million unless they sign a series of one-year veteran deals.  Beane told Murray Chass that he’s willing to go with a payroll in the $50+ million range, which would immediately turn into roughly $10 million of additional gross profit. If the A’s maintain that level over the next two seasons, the A’s profit figure will hit $30 million or more, which would put make their debt ceiling as much as $360 million, assuming the team pays down some of its existing debt (which it can do thanks to the saved payroll).

That extra $100-150 million is a huge difference, perhaps large enough to be difference between financing the ballpark and not financing it. We should remember a few basic things about how the A’s would move forward with a ballpark, regardless of location:

  • The projected cost was $450 million for the smaller, 32,000-seat stadium. Now that MLB has pushed for a larger park (35-36,000), the cost will go up to around $500 million.
  • Cisco’s naming rights deal in Fremont was worth $4 million per year for 30 years, or $60 million in net present value against the construction cost. I think the rights are worth more in San Jose than in Fremont, which could translate into $5 million a year or $75 million NPV if the A’s wanted to reopen the discussion.
  • Wolff/Fisher have to set aside additional money for the remaining land acquisitions and infrastructure work. Depending on what’s negotiated, that could be $50-75 million.

The total cost of the stadium is well above the team’s debt ceiling, however I think a little creative accounting is at play. Financing for any stadium usually falls into two debt buckets: one that is easily secured (naming rights, sponsorships, pouring and concessionaire rights, etc.) and one that is not (tickets, actual concession sales). The easily secured stuff can have a 5% or 6% interest rate, plus in some cases (East Coast) the team is able to sucker a city or county into raising tax exempt bonds, or some other instrument which can save millions. The other stuff often hits at 7-8%, or in the 49ers case, as much as 8.5%. That’s junk bond grade debt. It’s absolutely critical that the A’s structure their debt that as little as possible is at the higher rate, which is an automatic limiting factor (this is a good thing). For that reason, I can’t see the applicable stadium debt being any higher than $250 million. Everything else will either be paid down early or locked into the “first bucket” revenue streams. MLB doesn’t appear to be as worried about the first bucket as it is the second, which also goes for the banks that will eventually provide construction loans.

$250 million at 7% over 25 years translates into $20 million in annual debt service. It’s a lot, but it’s manageable. One thing to consider is that A’s tickets, with the exception the Diamond Level seats, are generally 25-50% lower than comparable tickets at other ballparks. That leaves a ton of headroom in ticket prices that the A’s can use when establishing their 2015 Cisco Field pricing structure. Yesterday I did a quick survey of 2012 season ticket prices for several non-New York ballparks.

2012 Season Ticket Prices for several MLB teams. Dodgers prices include large discounts which may only be in effect for 2012.

Now let’s take a look what happens if the A’s, entering the 2015 season, priced tickets more in line with (but slightly less than) the going market trend.

2015 estimated prices, factoring in 4% annual inflation

What does it mean for annual revenue? If the A’s sell 2.5 million tickets, they’ll rake in over $78 million just in tickets. If they sell out the season, that jumps up to $91 million. That doesn’t include proceeds from concessions or  parking, which are worth at least $30 million more in annual revenue, or $12-15 million in profit assuming a 40% margin.

2015 projected revenue with two scenarios: total attendance of 3 million (37,000/game) and 2.5 million (30,500/game)

Now you’re getting to a magical number of $1 million in ticket revenue per game. The challenge here is to maintain at least 2.5 million in annual attendance. If attendance drops to 2.2 million per game, that’s $8-9 million in revenue not realized, and that’s when the mortgage starts to hurt. Historically, the A’s have gotten 2.5 million fans or more only three teams in their tenure in Oakland, and never prior to that. The team will be highly dependent on new fans, casual fans, and existing fans who are so turned off by the Coliseum that they don’t bother going. Overcoming that stigma will be a challenge to say the least. If the Giants, Cardinals, and Phillies are successful examples of how to deal with an eight-figure annual debt service, it’s definitely feasible.

 

12.29.11
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Taking stock as the post-redevelopment era begins

It’s never too early to declare winners and losers that were made as a result of today’s earthshattering news.

First the losers:

  • Backers of the Victory Court site. The site was heavily dependent on tax increment (redevelopment funds) to buy the land and pay for improvements. Now that’s out of the question.
  • The City of Oakland. Strategically, it chose to sit back and wait for the originally passed “pay-to-play” ransom plan, which was scuttled today. Now they not only have no way to do redevelopment, they’re stuck trying to figure out how to fill in major holes that have just opened in the City’s budget that were filled by a large redevelopment operating budget.
  • San Jose Redevelopment Agency. As far as old school redevelopment goes, the City is now handcuffed with no way to raise funds. Of course, the City had already been choking the life out of SJRA by finishing several projects, laying off staff, and not taking on new projects. One word: prescient.
  • Affordable housing advocates. Not directly related to stadium building, but it’s a big point of emphasis for redevelopment backers. And consider this: any large mixed-use plan including residential development in any major city in California would require an affordable housing component. Who’s gonna subsidize that now? Already, San Diego is looking for a legislative means to bring back a scaled down version of redevelopment with a focus on affordable housing.
  • Oakland Raiders. Any options the Raiders may have been considering elsewhere in Bay Area (aside from the Coliseum and Santa Clara) have to be considered nonstarters at this point.
  • Redevelopment agency employees. Many agencies had planned for the “pay-to-play” scenario. This is armageddon. Good luck to them.
  • Anyone with a downtown gentrification initiative. Those projects are now for the birds.

The winners:

  • Lew Wolff and Baseball San Jose. If Wolff and his people were secretly rooting for redevelopment to wither and die, they certainly weren’t showing it. But the decision today has such wide ranging, powerful effects on municipalities throughout the state, that’s it’s easy to envision Lew Wolff sitting in his office, thinking, Okay, that narrows the field. With the MLB panel’s report distributed prior to today’s news, they probably laid out several scenarios, and the owners have to be aware by now the ramifications – if not by the panel’s report, then by the news reports. And that plays right into Wolff’s plans. If there was ever a tipping point event for a decision on San Jose, this is it.
  • San Jose Mayor Chuck Reed. It was Reed who oversaw the winding down of SJRA and the creation of SJDDA (SJ Diridon Development Authority) to sidestep the state raid. There may be a legal challenge against SJDDA, but where will it come from? The State doesn’t have the resources to start going after dozens, if not hundreds of redevelopment agencies. Santa Clara County might, but it seems the County got what it wanted by having redevelopment eliminated. Everything else is a matter of negotiation. As noted before: prescient.
  • San Francisco 49ers and Santa Clara. They got their tasks done before the end of the year. Now it’s a matter of selling suites and seat licenses, plus getting the Raiders on board.
  • Your local municipality’s General Fund and local schools. While the State will get a portion of the newly realized tax increment, part of it will be returned to cities, counties, and school districts. For cities with very large redevelopment areas such as San Jose and Oakland, this could actually mean a windfall of sorts, or at least a way to shore up their budgets. How much will it help? That’s for the bean counters to figure out.
  • Governor Jerry Brown. The beautiful irony of this situation is that Jerry Brown used redevelopment in Oakland as a stepping stone to get him back in power in Sacramento. Now he’s killed redevelopment. That’s an experienced politician.

Too early to tell:

  • San Francisco Giants. The death of redevelopment may tip MLB in the A’s favor. Then again, it may not. One thing to consider: the Giants overtures towards the Warriors about getting an arena in Mission Bay may be negatively affected by the ruling.
  • Backers of the Coliseum City plan. The Coliseum is part of a separate joint-powers agreement which allows the Coliseum Authority to raise money for its own projects. The track record isn’t great (Mt. Davis) but the power remains. Still, Coliseum City came about as part of a major planning and redevelopment initiative in and around the Coliseum and Airport. Now at least half of that project has been rendered irrelevant, which could have cascading effects on the Coliseum. On one hand, the Coliseum could be considered one of the only places with land where something could get done. On the other hand, the Coliseum is still pretty much limited to contributing site and infrastructure improvements, with little ability to contribute directly to any new facility or refurbishment. It’s also at the mercy of private developers to flesh out Coliseum City, which given the area, is definitely not a given.

It was hard enough getting something built in California with the state of the economy. Now, if you don’t at least have something already underway or an existing facility or land from which to base improvements, you may as well not show up. Redevelopment as an industry is over. Now bring on the new industry of “creatively” financing traditionally redevelopment-oriented projects.

12.28.11
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Wolff finalizes Hotel Sainte Claire purchase

As mentioned at the beginning of the month, an investor group including Lew and Keith Wolff has purchased the Hotel Sainte Claire in Downtown San Jose from Larkspur Hotels and Restaurants. The final price is reportedly under $18 million ($105,000 per room), a major discount from the market value of $34-42 million ($250-300,000 per room) for the 171 room, boutique hotel.

sainte claire hotel

Hotel Sainte Claire at night. Credit: Ed Schipul (flickr)

If, as I speculated then, the purpose of the acquisition was to redo the hotel to host visiting MLB teams, buying the place for only $18 million leaves a pretty nice budget available to turn the place into a five-star joint, if the investment group were interested in doing so. I had also heard that certain unnamed MLB executives are in the investment group, which would make it seem like baseball has a vested interest in having the hotel succeed along with a ballpark in downtown San Jose. For his part, Wolff told reporter George Avalos that the purchase has nothing to do with the A’s potentially moving south. Wolff’s group also owns the nearby Fairmont, and a few years back sold the Hilton next to the convention center.

Wolff also had a curious quote:

“Cities like San Jose and Oakland are in the path of growth,” said Wolff, a principal executive with Los Angeles-based Wolff Urban Development, in explaining some of the reasons behind the purchase. “San Jose has a fairly strong downtown.”

Interesting that Wolff is working hotel deals in San Jose, but not Oakland. Perhaps a move in Oakland is in the future?

12.27.11
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Reminder: Athletics After Dark interview

I just finished my interview with Athletics After Dark‘s Dale Tafoya. It lasted a little less than a half hour, which is how long AAD’s episodes usually run. The episode is up. Enjoy.

Update 12/27 5:40 PM – A report at MLB.com has Lew Wolff saying there is no movement on the stadium front yet. Yet.

Update 9:58 PM – Susan Slusser gets Peter Magowan’s take take on the matter. There’s also a poll.

Results of the poll so far: