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49ers Stadium Marketing and Concessionaire Agreements Inked

The 49ers stadium project continues to advance. At its July 5 meeting, the Stadium Authority (which is one and the same as the Santa Clara City Council), unanimously approved six agreements with the 49ers stadium entity (Stadco) covering subcontractor and concessionaire selection, stadium design, seat license sales (“Stadium Builder Licenses,” SBLs), and ongoing consulting services.

Seat License Sales: The SA has hired sports marketing agency Legends to sell individual seat licenses – exclusive rights to buy season tickets for their seats for as long as the team plays in the stadium, referred to as Stadium Builder Licenses (SBLs). Santa Clara city residents get the first crack at buying SBLs, according to the company. Under the agreement, Legends can earn up to $6 million in commissions on SBL sales.

Legends is already selling luxury suites in the proposed stadium – which the 49ers say have brought in $138 million, although they don’t specify how many of the 167 luxury boxes have been sold. Seat licenses go on sale in January 2012. “We felt it was the most expedient thing and the cost effective approach was to use the same vendor,” explained Santa Clara Redevelopment attorney Tom Webber.

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A joint venture between IMG Worldwide Inc. and Legends Hospitality Management – a firm co-owned by the Dallas Cowboys, the New York Yankees, and private equity firms Goldman Sachs and CIC Partners – Legends got its start selling suites and seat licenses for the Dallas Cowboys’ stadium. The San Francisco 49ers were Legends’ first major league premium sales client, according to an August 2010 report in the Dallas Business Journal.

Currently, Dallas Cowboys seat licenses average around $5,000 on the secondary market – ranging from $250 to $53,000, according to online seat license reseller SeasonTicketRights.com.

Contention over seat licenses was one of the problems that plagued the Oakland Coliseum in the years after the Raiders returned to play there in 1995. However, the 49ers deal is significantly different from that of the Raiders. To lure the Raiders back from Los Angeles, Oakland spent $220 million to renovate the stadium and let the Raiders rent it for only $525,000 a year.

By comparison, the 49ers will be paying Santa Clara at least 10 times that amount in rent and the city’s operating fund isn’t directly on the hook to make up any shortfall in revenues. (Indeed, an NFL lockout will save Oakland $5 million this year, the New York Times reported in April).

Concessionaire Pre-Opening Agreement: Stadco has chosen catering and concessions company Centerplate as the concessionaire for the proposed Stadium. A provider of similar services for 250 U.S. sports stadiums and convention centers including AT&T Park in San Francisco and Jacob K. Javits Center in New York City, Centerplate is owned by investment firm Kohlberg & Co.

The agreement has an exclusive 5-year term and will pay the stadium management company – Stadco – at least $6.8 million annually. In return, Centerplate is absorbing all planning and design costs.

Centerplate promises “a unique concessions experience,” according to company spokesman Bob Pascal, one that reflects “the Bay Area food culture” and offers selections at “a variety of prices.” This includes local food products and familiar local businesses, according to Pascal, which will help to make the Santa Clara venue unique.

It’s important to note that the Santa Clara SA isn’t directly involved in the agreement. The question arose when Rick Sawyer, who represents food service employee unions, asked the SA to support a labor peace agreement – workers agree not to strike, picket or otherwise interfere with operations in return for management non-interference in union organizing efforts.

Because the SA isn’t a party to the agreement, it is limited to encouraging “open and professional discussions between 49ers, Centerplate, and Unite Here unions to ensure smooth ongoing operations of the stadium,” as Council Member Lisa Gillmor phrased it for the formal motion.

Stadium Design: This agreement authorizes the 49ers to move forward with the next phase of the stadium, with the understanding that they will be reimbursed from construction funding sources for costs associated with that design work. This is an interim agreement that lets Stadco begin design work prior to completing the Disposition and Development Agreement (DDA), which is not expected until fall 2011.

Stadco intends to hire Howard, Needles, Tammen, & Bergendoff California Architects as the architects, and Tumer/Devcon Joint Venture as the design-builder. An estimated budget of construction cost as well as a statement of costs incurred in the design will be included with the design drawings. The agreement sets a “best efforts” date of January 15, 2012 for the 49ers to deliver the design documents.

Subcontractor Selection: This agreement specifies the conditions required for the Stadium Authority to award a design-build contract for the stadium. By state law (referred to as SB 43), subcontractors can be chosen by one of two methods: Lowest Responsive and Responsible Bidder, and Best Value Selection.

The agreement specifies that any work paid for by Redevelopment Agency (RDA) or Contract For Differences (CFD) funds – a maximum of $40 million and $35 million respectively – must be awarded to the lowest responsible bidder. Other subcontracts may be awarded on a best value basis.

Consulting Agreements: The Stadium Authority plans to continue to use the services of San Francisco-based real estate advisory firm Keyser Marston Associates to develop the DDA and structure the overall stadium financing plan. The city first consulted the firm in 2009 because of its “expertise in fiscal and economic analysis, complex financing scenarios, and real estate issues pertaining to the stadium project,” according to the City Manager’s report. The new agreement is for a maximum of $400,000, which is already in the SA’s budget

All of the Santa Clara 49ers stadium project documents and history are available at the city’s webpage, santaclaraca.gov/index.aspx?page=1197.

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