Waldman: There are multiple factors involved. Location is important, and one size does not fit all. Even though we had Greg Carey—whose firm worked on Levi's Stadium in suburban Santa Clara, CA—and Roger Noll—who is more or less a naysayer on the economic and real estate impact of these stadiums—on the panel, even they would conclude that locating a stadium downtown, particularly in an area in need of economic development, is probably a greater recipe for success than anything. Also, dealing with an arena rather than a stadium gives you many more advantages because of the use of the facility. A football stadium is used 10 times a year for games, and you have to come up with other options to use the facility. Levi's Stadium in Santa Clara—it's up in the air whether it will be a success. Goldman Sachs put together the project for the 49-ers, and they have had the Super Bowl, stadium-series hockey and not much else going on around it.

But that's not to denigrate the possibility of going out to the suburbs. Greg and Roger would agree that suburban stadium development makes less sense than downtown development unless you're going to create your own city. A seminal suburban one is the one Robert Kraft developed for the Patriots in Foxboro, MA. It's in the middle of nowhere outside of Boston and a pain to get to, but when they developed the stadium to replace an older facility, Kraft basically decided to develop a city around it: Patriot Place, with retail and restaurants. It's a destination vs. just a stadium. Similarly, in Inglewood, CA, with the Rams facility—they're not just building a stadium but a city with retail and apartments. This may have happened without the stadium, but the stadium has had an influence on how it will be completed.

GlobeSt.com: What are some of the complex financial arrangements that are often the key to success in the construction and operation of such a facility?

Waldman: There are a number of ways to do it. A lot of it has to do with how much the municipality is willing to participate in the financial arrangements to make a project work. It depends how much of a tax burden they want to take on, how much the owner is going to contribute and, as with the NFL, how much the league is going to contribute. The developer can use tax-increment financing to deal with infrastructure costs to the extent the City doesn't want to bear the cost. They can create a public authority or some other special-purpose vehicle to lease the stadium to the team and take a portion of the revenues. Goldman Sachs will do construction financing from private investors, while companies like Citibank are doing their own financing and will refinance construction financing on completion. Or, they will combine the construction loan with permanent financing and will get an investment-grade rating on the loan. They can combine it with credit enhancement at that point to increase the rating of debt or bonds. To make it all work, you've got to have what the team is going to pay to satisfy the debt or bond. With the public authority owning a facility, it means no property tax is created, so you have to create something to satisfy the debt and create other revenue streams to repay the loan—things like naming rights, sponsorships, personal-seat licenses, etc., help municipalities avoid raising taxes to satisfy the debt.

GlobeSt.com: How do the public policies, incentives, investment objectives and economics driving stadium, ballpark and arena projects reflect in the public-private partnerships formed to execute these types of projects?

Waldman: One of the main things that's required to make these projects a success is you need a political coalition to make it work; otherwise, you're going to be just spinning your wheels and fighting back many community activists who are fighting the projects. Bringing in the public-interest players and giving them some influence on the project is needed. In Inglewood, they probably didn't have to do too much to get the mayor interested because, even without the stadium, it was probably going to be the next area in greater L.A. to merit greater economic investment because of its location. But the Rams went out of their way to bring in schools, contributing a lot of money to the school system in Inglewood. Unions get brought in because of the jobs created by the project. Look at the Miami soccer stadium that David Beckham is trying to put together—they're working hard to build a coalition, working with the school system in Miami-Dade County and nearby businesses and residents in connection with the stadium design to enhance the neighborhood. The new soccer stadium planned for L.A. near Exposition Park is viewed as something that's going to create a new environment in that community and create a lot of community benefits for South L.A. and the South Park area. It's one of the motivations that Magic Johnson has in making that deal work. Bringing the public in at the early stages tends to mitigate opposition.

Check back later today for Part 2 of this story on the Orange County page.

Part 1 of 2

IRVINE, CA—Contrary to what the movie “Field of Dreams” proclaims, when it comes to developing sports arenas and stadiums, it's not true that “if you build it, they will come,” and one size definitely does not fit all, Cox Castle & Nicholson LLP's Ira Waldman tells GlobeSt.com. At the recent American College of Real Estate Lawyers meeting in San Diego, Waldman moderated a panel entitled “Game On: The Myth and Reality of Sporting Venues and Urban and Suburban Development.” Featured panelists included Greg Carey, chairman of the public sector and infrastructure group at Goldman Sachs; Roger Noll, professor emeritus at Stanford University and the director of the program in regulatory policy in the Stanford Institute for Economic Policy Research; and Alan Ritchie, a partner at Thompson Hine. The panel participated in a lively discussion examining the many factors—and players—that are involved in the decision to locate and construct a sporting facility and the factors that indicate ultimate success or failure in the venture.

In part 1 of a two-part story, we spoke exclusively with Waldman about what it takes and what it means to construct a sporting facility and the factors that distinguish the winners from the losers. In part 2, we will examine the coalition of support necessary in the success of these projects and explore several examples of how projects like these have positively impacted their surrounding areas.

GlobeSt.com: What are the factors involved in the decision to locate and construct a sporting facility, and which factors indicate ultimate success or failure of the project?

Waldman: There are multiple factors involved. Location is important, and one size does not fit all. Even though we had Greg Carey—whose firm worked on Levi's Stadium in suburban Santa Clara, CA—and Roger Noll—who is more or less a naysayer on the economic and real estate impact of these stadiums—on the panel, even they would conclude that locating a stadium downtown, particularly in an area in need of economic development, is probably a greater recipe for success than anything. Also, dealing with an arena rather than a stadium gives you many more advantages because of the use of the facility. A football stadium is used 10 times a year for games, and you have to come up with other options to use the facility. Levi's Stadium in Santa Clara—it's up in the air whether it will be a success. Goldman Sachs put together the project for the 49-ers, and they have had the Super Bowl, stadium-series hockey and not much else going on around it.

But that's not to denigrate the possibility of going out to the suburbs. Greg and Roger would agree that suburban stadium development makes less sense than downtown development unless you're going to create your own city. A seminal suburban one is the one Robert Kraft developed for the Patriots in Foxboro, MA. It's in the middle of nowhere outside of Boston and a pain to get to, but when they developed the stadium to replace an older facility, Kraft basically decided to develop a city around it: Patriot Place, with retail and restaurants. It's a destination vs. just a stadium. Similarly, in Inglewood, CA, with the Rams facility—they're not just building a stadium but a city with retail and apartments. This may have happened without the stadium, but the stadium has had an influence on how it will be completed.

GlobeSt.com: What are some of the complex financial arrangements that are often the key to success in the construction and operation of such a facility?

Waldman: There are a number of ways to do it. A lot of it has to do with how much the municipality is willing to participate in the financial arrangements to make a project work. It depends how much of a tax burden they want to take on, how much the owner is going to contribute and, as with the NFL, how much the league is going to contribute. The developer can use tax-increment financing to deal with infrastructure costs to the extent the City doesn't want to bear the cost. They can create a public authority or some other special-purpose vehicle to lease the stadium to the team and take a portion of the revenues. Goldman Sachs will do construction financing from private investors, while companies like Citibank are doing their own financing and will refinance construction financing on completion. Or, they will combine the construction loan with permanent financing and will get an investment-grade rating on the loan. They can combine it with credit enhancement at that point to increase the rating of debt or bonds. To make it all work, you've got to have what the team is going to pay to satisfy the debt or bond. With the public authority owning a facility, it means no property tax is created, so you have to create something to satisfy the debt and create other revenue streams to repay the loan—things like naming rights, sponsorships, personal-seat licenses, etc., help municipalities avoid raising taxes to satisfy the debt.

GlobeSt.com: How do the public policies, incentives, investment objectives and economics driving stadium, ballpark and arena projects reflect in the public-private partnerships formed to execute these types of projects?

Waldman: One of the main things that's required to make these projects a success is you need a political coalition to make it work; otherwise, you're going to be just spinning your wheels and fighting back many community activists who are fighting the projects. Bringing in the public-interest players and giving them some influence on the project is needed. In Inglewood, they probably didn't have to do too much to get the mayor interested because, even without the stadium, it was probably going to be the next area in greater L.A. to merit greater economic investment because of its location. But the Rams went out of their way to bring in schools, contributing a lot of money to the school system in Inglewood. Unions get brought in because of the jobs created by the project. Look at the Miami soccer stadium that David Beckham is trying to put together—they're working hard to build a coalition, working with the school system in Miami-Dade County and nearby businesses and residents in connection with the stadium design to enhance the neighborhood. The new soccer stadium planned for L.A. near Exposition Park is viewed as something that's going to create a new environment in that community and create a lot of community benefits for South L.A. and the South Park area. It's one of the motivations that Magic Johnson has in making that deal work. Bringing the public in at the early stages tends to mitigate opposition.

Check back later today for Part 2 of this story on the Orange County page.