Mixed-Use Projects Around Sports Stadiums Have Security Blanket Through Pandemic Uncertainty
Even in the absence of fans at live sporting events, the past year has underscored the all-around benefits of using arenas and stadiums as centers of mixed-use development districts.
While teams across the major professional U.S. sports leagues lost billions of dollars in the past year due to the lack of ticket sales, ownership entities with stakes in commercial developments surrounding their stadiums have managed to insulate themselves slightly from the worst of the coronavirus pandemic’s effects. At the same time, commercial tenants have been buoyed by their proximity to a reliable predictor of future foot traffic.
Owners of sports teams have long claimed that their stadiums are drivers of economic growth and vibrancy in order to get controversial tax breaks and public financing, but in recent years those ownership entities have taken much more active roles in creating that growth and vibrancy on the land surrounding their stadiums.
From The Battery at Truist Park for the Atlanta Braves to the “Deer District” surrounding the Milwaukee Bucks’ new Fiserv Forum arena, teams have increasingly developed a variety of uses on land they own as a way to diversify their income.
“A lot of the ownership entities and stadium authorities that control those venues have realized that there’s an enormous lift from the activity and revenue that those venues generate,” said Enoch Lawrence, who leads the capital markets team within Cushman & Wakefield’s Sports and Entertainment Advisory Group. “So a lot more of those developments are getting folded into the financing to take advantage of those revenue streams.”
That has bolstered these projects through the last year.
For the Braves, the car count at The Battery's parking lot was roughly the same in October 2020 as it was in October 2019, Braves Development Corp. CEO Mike Plant told Bisnow. The two hotels operating at the development were fully booked for the weekends of Feb. 27 and March 6, though the latter also saw Downtown Atlanta host the 2021 NBA All-Star Game, albeit without fans.
Several retail and dining options continued to operate, while the office building set to be the headquarters of TK Elevator (formerly Thysenkrupp) and Papa John's is targeting an opening of May or June.
“Even in 2020, even though we amended a lot of leases, we still drew a lot of people and largely remained open,” Plant said. “We’re fortunate that we’ve created an environment that goes well beyond 81 games. People feel that it’s safe and accessible, so our tenants have weathered this storm a lot better than tenants in other places.”
Like with all stadium-anchored, mixed-use projects in the U.S. that Bisnow identified, the Battery was financed entirely on the private market, and the Braves organization has remained up to date on all debt payments, Plant said.
The Braves organization wasn't alone in giving rent concessions. The Golden State Warriors paused rent payments for dining tenants at its "Thrive City" entertainment district neighboring its new Chase Center arena. MRP Realty did the same for its dining and entertainment tenants near Nationals Park in Washington, D.C., as did Bozzuto with the retail tenants at The Kelvin, the apartment building it manages for Jair Lynch Real Estate directly across from Nationals Park's main entrance, Bozzuto General Manager Mark Hannan told Bisnow.
“We’re fine with freezing rent and just agreeing to payments later on, because the important thing is to keep these retailers in place,” Hannan said. “We’ve had to clear that with the buildings’ ownership, but for the large part they’ve been on board.”
Even when the negative effects of the pandemic have hit tenants at such projects, stakeholders have seemingly avoided the worst-case scenario. Punch Bowl Social, a bowling, drinking and dining chain, pulled out of its lease anchoring The Kelvin's retail portion when it filed for bankruptcy, but Bozzuto is already negotiating a lease with a similar operator to take its place with minimal wasted effort and money adjusting the build-out, Hannan said.
Uber is apparently looking to sublease up to 300K SF of the 1M SF headquarters complex it has yet to even move into next to the Chase Center, but Uber and the project's co-owners, Alexandria Real Estate Partners and the Warriors, refinanced the development weeks before the pandemic struck the Bay Area, pulling out sizable chunks of equity at a crucial time.
Behind all of those decisions taken with a long-term approach is a confidence that eventually fans will return, along with all of the fundamentals that drove the decision to develop around the stadium in the first place. That confidence drove D.C. United, which opened its Audi Field not far from Nationals Park, to spend 2020 firming up plans for its upcoming mixed-use project with Hoffman & Associates, rather than pressing pause on any decisions like so many have done.
“What we looked at as a group and determined was that business and life as a whole will return more or less to the same,” D.C. United Chief Strategic Officer Samuel Porter told Bisnow. “There will be some tweaks — people could be more concerned with having space at work, so a building housing offices could change its configuration. But does what we fundamentally think and want to do, what people want from a sports and entertainment project change? Not really.”
D.C. United is still waiting on certain deals with the District of Columbia to be struck before “forward momentum” can really begin on its project with PN Hoffman, but some teams and their development partners have even accelerated construction on their projects. The additional time without game day foot traffic allows for parts of construction that would otherwise be disruptive to the fan experience to proceed ahead of schedule, Cushman & Wakefield's Lawrence said.
Stakeholders in these projects have the latitude to make such decisions because of the longer-term financing teams secure, either privately or publicly, around their new stadiums, Lawrence said. Deals that guarantee the presence of such a massive business give confidence to lenders, making them more likely to wait out fallow periods even for businesses not directly associated with the teams.
“If you have, say, an NBA team with a non-relocation agreement, if [a retailer] has a long-term leasehold at a facility, it knows that in three to four years, there will still be games,” Lawrence said. “So your ability to go out and get new financing is helped by the guarantee of that income stream.”
Even if fans don't return at full capacity for another year or more retail tenants go bankrupt, stadium-anchored developments' pandemic performance have justified their existence to stakeholders.
“If we can space these things out every 100 years, I think we’ll be OK,” Porter said.
CORRECTION, MARCH 10, 4 P.M. ET: A previous version of this article used an out-of-date name to refer to Hoffman & Associates. This article has been updated.