The Atlanta Business Chronicle recently wrote that the lack of fans at Braves games has Liberty Media in a “tough financial spot,” and as a result the company “may have to make [the] difficult decision” to liquidate assets at the Battery—the mixed-use real estate project tied to Truist Park. A comment from Liberty Media CEO Greg Maffei during a recent earnings call spawned the speculation. Braves Development Co. (BDC) President and CEO Mike Plant tells JohnWallStreet by Sportico that Maffei’s statement was “taken out of context” and that it “shouldn’t lead to [the] assumption [the company is] in the market to sell [Battery] assets (beyond the residential component they already unloaded as planned). There have not been any internal discussions—at all—[about it].” While that may be the case in Atlanta, with fan attendance expected to be significantly reduced (or non-existent) at venues across the country for the foreseeable future it is reasonable to wonder if COVID-19 will impact any other stadium projects.
Our Take: There are a number of stadium-focused development projects in progress right now (including ones in Los Angeles, Arlington and Hawaii), and it is fair to assume none planned for a scenario where attendance was limited. But that doesn’t mean the Coronavirus is going to derail construction. Unless a team/project owner is overextended (in terms of liquidity), Hank Ratner expects projects already underway would be completed. The former President and CEO of Madison Square Garden said, “If the project checked all of the boxes before the pandemic, [it is] going to check again [on the other side of the pandemic].” That’s certainly how the Braves are operating. Plant said his project (in the midst of Phase Two) is “full-speed [ahead].”
To be clear, none of the executives we spoke to were aware of any mixed-use stadium projects currently in financial danger. Though, Bill Rhoda (President of Global Planning, Legends) said he wouldn’t be surprised if “there were quite a few [owners] out there who [would] borrow money to strengthen their balance sheet [in order] to get through this.” For contextual purposes, Rhoda means through the 2020 season. He’s expecting to see fans back in buildings in 2021.
For organizations still in the drawing board stage, one could argue it makes sense to slow the development process down until there is a bit more clarity around the timeline for a COVID-19 vaccine (and by proxy fans returning to stadiums and arenas en masse). Then again, if the organization has yet to break ground, they’re at least a few years away from opening up a new venue. “If the horizon [for completion] is two to five years, [the project] doesn’t necessarily need to change (particularly if it is located in a growing market like Nashville),” Rhoda said. “Two-to-three years is enough time for things to settle [as it relates to the virus]. The ability to have a large amount of people congregating before and after events is attractive to developers, and I think it will [still] be attractive to developers post-pandemic.” It’s also worth mentioning that the current environment has provided for an opportunity to save on development costs as “the subs are all hungry for work,” Rhoda said.
Opening a new mixed-use sports and entertainment district in the midst of a pandemic (as the Rams and Rangers are doing) is certainly not ideal. But having a diversified base of revenue streams can help organizations through a rough patch (see: BATRA’s Q2 revenue fell -95% YoY). In fact, Plant says the Battery will “have a very positive margin and NOI at the end of the year—even through these challenging times” (other than “one pop-up restaurant,” the Battery has been able to maintain all of its tenants). The BDC President explained, “People [in Georgia] are going out to restaurants and staying in hotels. [Despite the lack of baseball], Thursday, Friday and Saturday nights, the place is packed, and all of our office tenants are paying their rent because they are up and working.” Rhoda tells a similar story in Dallas. “You go over to The Star [in Frisco] on a Thursday night, and you wouldn’t know there was a pandemic [going on] . As long as [the team] creates a destination where people want to go, those [mixed-use sports & entertainment projects] can be successful.”
Of course, “the longer the pandemic goes on, the more financial havoc it’s going to [leave behind] in the industries that support mixed-use development,” Rhoda said, “which then correlates directly to the financial viability of these developments.” The Legends executive asked: “How much more development space [does a city] really need if 50% of restaurants, retail and entertainment going under?” The answer is likely not much, and with a lack of demand and excess occupancies, a new venue is not going to be able to command the premium rent pricing it would have anticipated.
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