By Jaboner Jackson 8 a.m. | This past summer, AEG and the City of Los Angeles signed a Memorandum of Understanding (MOU) that provided the general framework for construction for Farmers Field in downtown Los Angeles. Under the MOU, AEG confirmed key aspects of its operation of Farmers Field in regards to professional football, including a nontraditional landlord-tenant relationship with an NFL team that would differ from usual NFL stadium situations. The MOU also delineated a clear relationship between Farmers Field and the City of Los Angeles for construction of a new wing for the Los Angeles Convention Center, commonly referred to as Pico Hall. But AEG has since stumbled in regards to both aspects, thereby delaying the Environmental Impact Report (EIR) for Farmers Field, which in turn has delayed a Disposition and Development Agreement (DDA) with the City of Los Angeles and resultant groundbreaking on construction by at least a year from 2012 to 2013.
The NFL And A "Fixed Return"
As part of its offer to finance the construction of Farmers Field for an NFL team, AEG has proposed a landlord-tenant relationship with an NFL team that would be nonconventional by NFL standards. The MOU outlines this relationship as being "unique." In typical NFL stadium deals, the NFL team operates the stadium in regards to NFL games and ticket sales. In fact, this is the exact arrangement that is to take place between the San Francisco 49ers and Santa Clara Stadium Authority for Santa Clara Stadium, a situation that we have covered extensively on this site.
But for Farmers Field, AEG will be in charge of game day operations in the same way it is responsible for game day operations for the Los Angeles Lakers and Los Angeles Clippers for Staples Center. As first reported by Jason Cole of Yahoo! Sports, the NFL has been reluctant to proceed with this type of relationship. The NFL would like to control its own game day experiences and ticket sales. Doing so would enable the NFL team to share in revenues from all seating, parking, and concessions. But as it stands, AEG would control these aspects of the game day experience. Accordingly, AEG would give a "fixed return" to the NFL team. The NFL would like a return with greater upside for a relocated franchise rather than one that is fixed.
The City of Los Angeles and Stadium Designs
Publically, the City of Los Angeles and AEG pushed the benefit of Farmers Field on convention center business as the main reason why Los Angeles needed a new football stadium. Farmers Field's permanent or retractable roof structure would enable the stadium to house convention center events while synergies from additional hotel construction in the area would put Los Angeles into the nation's top ten convention cities.
But in November, AEG--through its partners Gensler Architects and ICON Venue Group--unveiled new designs for Farmers Field. In these new designs, a deployable roof was the centerpiece. This design was in contrast to earlier designs presented to the City of Los Angeles, which featured a retractable roof.
The change was prompted by the NFL's criticisms of projected construction costs for Farmers Field. A deployable roof costs less than a retractable roof. Although AEG had pinned construction cost at $1.3 billion, the NFL projected true stadium costs at a significantly higher amount. Footballphds.com had projected a construction cost of at least $1.6 billion for the old Farmers Field design, out of which we had estimated approximately $400 million as the cost of the retractable roof, which was significantly more than AEG's estimate for such a structure.
AEG has only recently started to present updated designs to the City of Los Angeles. The City Councilmembers will have to be sold on a deployable roof structure, particularly as it relates to housing convention center events at Farmers Field. But more importantly, City Councilmembers will have to come to terms with the realization that the NFL is calling the shots on the city's new stadium, a situation all too familiar to the City of Los Angeles and soon-to-be defunct Los Angeles Memorial Coliseum Commission.
Putting together a new stadium design delays AEG's EIR to the City of Los Angeles beyond its previous January 2012 deadline. Since the EIR relies on stadium designs to assess environmental impact, the EIR cannot be completed until designs come closer to completion. AEG had hoped to have an EIR submitted to the City of Los Angeles by January 2012 and a team commitment in place by February 2012 with groundbreaking on Farmers Field taking place June 2012. Eventually, the City Councilmembers will sign off on the new designs, but the delay is inevitable.
Accordingly, the delay in the EIR has postponed AEG’s timeline by a year. Since AEG is squarely focused on the San Diego Chargers as their anchor tenant for Farmers Field, the delay has given life not only to Majestic Realty and Los Angeles Stadium in City of Industry, but also to the Oakland Raiders, who have snuck into contention as Los Angeles Stadium's anchor tenant, a situation that we will begin to review in full this week. The once invincible AEG is now not only having difficulties in China but Los Angeles as well.
References From Footballphds.com:
Relocation Fees for Los Angeles (12/2011)
Our Interview With TouchdownLA.com (12/2011)
AEG in China (12/2011)
Financing Santa Clara Stadium, Part 1 (12/2011)
Financing Santa Clara Stadium, Part 2 (12/2011)
Nuts and Bolts of LA Stadium (10/2011)
Majestic Realty and LA Stadium Primer (10/2011)
Remembering the Staples Center Deal (07/2011)
AB 900 and SB 292 (09/2011)
AEG versus Majestic Realty (06/2011)
Farmers Field’s Winged Roof (11/2011)
Gensler and Populous (08/2011)
Yahoo! Sports, Jason Cole (10/2011)