Is the Stadium Deal a Home Run for the Angels?

www.ocregister.com

An expiring lease, an opt-out clause, an aging building in need of millions in capital improvements, a beloved sports franchise, a negotiating deadline - all under the scrutiny of a wary public - unfolded this week in Anaheim, California as the Los Angeles Angels of Anaheim forged an agreement with the city. The deal is subject to council approval and a vote will be held on December 20th, 2019.

As reported by the Orange County Register on December 5, 2019 - called for is a sale of the roughly 153 acres including the stadium to a partnership which includes the owner of the baseball franchise. The price tag? $325,000,000! Not chump change for sure. But did the city of Anaheim leave runners on base when the game ended?

What follows is this columnist’s take on the merits of the commercial real estate deal.

The facts: Obligated to play through 2029 - unless the Angels opted out of their lease - which they did last year setting up the negotiations this year. Although specific points of the Stadium lease are fuzzy - we know Anaheim contributes a high six figure annual total to a maintenance fund for the venue, receives little in the way of property tax revenue from the parcels, funds the remaining debt of a convention space deal gone bad, benefits from seasonal ticket sales in excess of 2,600,000, and uses the approximately $3,600,000 from the Angels each year to defray the cost of a private public partnership investment for stadium remodeling forged in 1996. Anaheim’s portion was over $20,000,000.

The Net? Approximately $626,000 per year returned to city coffers since 1996 when the renovations were completed. Certainly, the city derives sales tax revenue for merchandise and food sales as well. Dramatic infrastructure improvements were needed - to the tune of $150,000,000 - to enhance the fan experience and continue the draw - thus persuading the Angels to stay.

The valuation. Without getting too deeply into the weeds - a commercial appraisal considers three things in determining value - COMPS, income, and replacement. Additionally you have appraisals occurring to determine fair market value - which is the case with the Stadium - or an appraisal to justify a purchase - which happens when a buyer and seller agree to a price through negotiations. 

With Angel Stadium - my guess is the appraiser leaned heavily upon the income a development could generate as no significant land comps exist and replacing the stadium would be secondary to a development of the entire acreage. 

Therefore - certain assumptions would have been made as to projected rents, density - number of units, product type - office, residential, retail, etc. 

All in. Was it a good deal or an undervalued deal? Depends. Without the Stadium - the site is probably worth more. But, to get to that value would have required severing ties with the Angels, a lengthy bid process, a vacancy, downtime, etc. With the Angels as the buyer - costly stadium upgrades are avoided, a huge boost in property taxes is achieved and a new development can be centered around the Stadium, Artic, Honda Center, etc. 

  

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.com.