The Delicate Legal Art of Financing, Building, and Naming a Stadium in America: Part 2 - Building
Image via NYT
Have you ever looked at your local professional sports stadium and wondered how it came to be? It’s easy to overlook just how monumental a task it is for such a building to come into existence - a confluence of perfect conditions, plus hundreds of hours of due diligence, hard-nosed negotiations, countless contracts, and more goes on behind the scenes before such a dream can become a reality. Three key areas that should be explored are the financing of the stadium, the land use for building the stadium, and the naming rights. In this second article of a three-part series, we’ll dive into the basics of actually building a stadium.
Putting hammer to nail notwithstanding, the name of the game when building a stadium, from a legal perspective, is “land.” Land, on which a stadium would be built, can make or break a stadium deal before it has had a chance to make it to paper.
An initial key step in building a stadium is location and area assessment. Various considerations go into an assessment such as this - proximity to public transit stations, availability of parking, capacity for a stadium, infrastructure, visibility, just to name a few. Generally, the mission is to get an idea of the possibilities and constraints that a potential site maintains. This also includes environmental considerations, site topography, and neighboring community interests. Importantly, the zoning regulations must be checked to ensure that the area in question allows for stadium development.
The second step is in-depth market analysis. This is a very fact intensive analysis that can cover any number of areas. Two good places to start would be supply and demand. Supply could refer to any competing venues, other entertainment in the area, the public interest in a new stadium, other sports teams in the area, and other market saturation factors. Demand would include things such as the potential size of the fanbase, the expected revenue from that fanbase, what people would be willing to pay to get into the stadium, and what that would say about the matchday atmosphere. Further, the political, social, economic, demographic, and technological aspects of a population might play a part in a decision to pursue a site, and public surveys can help aid in this process. Consider things such as capital growth or decay in the area, purchasing power of potential stadium visitors, government support for the sport infrastructure, and input from existing fan groups.
Another crucial step is a comprehensive conceptualization, design, and feasibility plan for the stadium. This includes considerations both inside and outside of the stadium, with an eye on what will fit in the space, both physically, legally in terms of zoning and area restrictions, and in the context of the surrounding area. The stakeholders must settle on a vision for what they want the stadium to look like, and a design firm must be hired to create renderings that can be worked and re-worked until the parties think it’s just right. This goes far beyond the color and style of the exterior, and dives into topics such as general seating capacity, VIP box system, food vendor and bathroom layouts, jumbotrons and other screens, and more. How many floodlights will be needed, and from what angle? Will the stadium be a closed top, a retractable roof, or open air? What material is the playing surface - e.g. turf or grass? Where will the media stations be set up to get the best camera angles of the action while not restricting sightlines of attendees? These questions are just the start. Further, a possibility that may arise is the multi-use potential of the site. This includes both within the stadium (i.e., different sports being played in the same arena), but also other developments on the site outside the stadium, such as housing, retail, and entertainment projects all in one.
Finally, the fourth step is legally securing the land necessary, on which the stadium will be built. At times, this may be a relatively straightforward transaction - one party has land for sale, the other has the funds to secure it. For example, to build what would eventually become SoFi Stadium, Stan Kroenke bought a 60 acre lot in Inglewood, California for a reported total of around $100 million. Other times, it’s not as simple. Take, for example, New York City Football Club’s goal of bringing a soccer-specific stadium to the Bronx. One hurdle standing in their way was acquiring a pocket of land within eyesight of Yankee Stadium, a plot of land which currently holds a parking garage. Ultimately, negotiations for the purchase of the land fell apart over concerns regarding the parking spots that the New York Yankees required, and were contractually promised. Disputes may arise over zoning, what the development is used for, logistical or infrastructure concerns, price negotiations, or any other hitch under the sun. Land, particularly in a major metropolitan area like New York, is a hot commodity, and not without its fair share of complications. Negotiation before a sale of property is natural, and a very fact intensive analysis with all interested parties is key, but in theory it is not a zero sum game, and these agreements can be fleshed out amicably.
Interestingly, a handful of city governments across the country have used their Constitutional eminent domain powers to secure land for a stadium, including for projects in Brooklyn, Washington, DC, and Los Angeles. In these situations it is paramount that the rights of the private property owner are respected and upheld. The exercise of eminent domain to secure lands for a sports stadium is a controversial practice, and generally seen as a last resort when holdout landowners refuse to sell the land necessary for a stadium project to begin. While the government then must negotiate a fair market price for the land, the intangible value is often impossible to replace. Still, the practice persists, and is admittedly likely a pleasing option from a professional team’s point-of-view.
With the (properly thoroughly researched) land secured, the design plans approved, the market factors weighed, and the paperwork complete, construction is set to begin. One of the major questions still remaining is… what (and how) does the stadium get named? Stay tuned for part three in this series, where naming rights will be looked at in further detail.
Jason Re, George Washington University Law School 3L