Innovative Partnerships Group Advises City of Charlotte on Sports and Entertainment District

This article was originally published in Charlotte Business Journal

Written by Erik Spanberg

City consultant Innovative Partnerships Group explained how corporate naming rights have expanded to sports- and entertainment-themed districts and how that could generate $60 million from a Brevard Street development.

Charlotte City Council’s economic development committee spent nearly three hours yesterday sifting through details of a $275 million proposal to renovate Spectrum Center and build a separate practice center for the NBA Charlotte Hornets.

The committee meeting was more of a full council meeting. Mayor Vi Lyles attended and, between the Government Center meeting room and virtual attendees, all but two of the 11 council members were present. Renee Johnson and Matt Newton were absent.

Tracy Dodson, an assistant city manager and head of the city’s economic development division, walked the mayor and council members through the following aspects of the proposal introduced last week:

  • Opportunities for sponsorship and revenue that would be granted to the city to offset the cost of paying for a $60 million Hornets practice center.
  • Prospects for redeveloping the 27-year-old Charlotte Transportation Center across the street from the arena.
  • Plans for community use of the arena, including an anticipated bid to bring back the CIAA men’s and women’s basketball tournament that was played here from 2006 through 2020 before moving to Baltimore.
  • Forecasts for ensuring that paying for the $215 million in arena upgrades with a portion of existing tourism tax revenue won’t delay or hurt other upcoming projects.
  • Expectations for including small businesses and minority-owned businesses as vendors and subcontractors on the city-funded arena renovations and practice center.
  • Efforts to gather community reaction and suggestions regarding the city’s possible funding of the $275 million worth of projects.

“I felt like it was a really good conversation,” Dodson said afterwards. “I felt like we started to chip away at some of the questions that council members addressed last week and brought up. I’m hopeful that we can continue to do this while also bringing in public comment to get us to a vote next week.

”A majority of council members must vote in favor of the proposal for it to take effect. The vote is scheduled as part of council’s regular meeting June 13.

The Hornets’ current lease at the city-owned Spectrum Center ends in 2030. As part of that agreement, city government is obligated to make periodic renovations to the building that keep the venue on par with features included in at least 50% of NBA arenas. In addition, the city must keep basic components — ventilation, seating, elevators, and so on — up to date and in good working order.

Spectrum Center opened in 2005. It cost $265 million to build, or $392 million when adjusted for inflation. The construction debt will be fully retired in 2033. If the city approves the arena renovations and the new practice center, the Hornets will extend their lease at Spectrum Center through 2045, pay $32 million in rent to the city through the end of the revised agreement, and absorb any construction overruns.

Council members spent the most time yesterday asking questions about sponsorships to fund the practice center as well as the basis for redeveloping the transportation center.

Jeff Marks, CEO at Innovative Partnerships Group, made a virtual presentation as part of yesterday’s meeting, explaining how corporate naming rights have expanded from arenas and stadiums to sports- and entertainment-themed districts. Innovative Partnerships Group, as a consultant to the city, estimated naming rights sponsorships for a fledgling district near the arena along Brevard Street could, along with related agreements, generate $60 million.

Marks’ math works like this: 

  • An estimated $2 million annually for naming rights to the district; 
  • $1 million to $2 million for naming rights to the new NBA practice center that will be part of a new transit hub that includes ground-floor retail, parking, a rooftop hotel and office towers; 
  • And similar revenue generated by selling five founding partnerships in categories such as automotive, banking and insurance. Assuming 10-year deals in all three cases, that would generate $60 million.

The consultant said variables in structuring the agreements could slightly shift the mix of rights and revenue. But, he said, the growth of Charlotte and increasing interest among companies to reach that population will sustain the projections outlined above. Dan Barrett of consulting firm CAA Icon, which represented the Hornets in the arena negotiations, was at the Government Center yesterday. Barrett told council it’s likely existing sponsors of the Hornets and arena will be interested in new sponsorship opportunities around the building.

Dodson and Marks assured council members the city would maintain control over the scope of sponsorship rights as well as which companies the city will, or will not, work with. Marks noted companies have embraced the broader range of programs and platforms, including environmental causes and product tie-ins, that a district can offer, as opposed to a stand-alone sports venue.

Ed Driggs, the committee’s vice chair, asked about the arena naming rights with Charter Communications Inc.’s (NASDAQ: CHTR) Spectrum. Dodson responded that those rights are controlled by the Hornets. She added the city intentionally steered clear of seeking any sponsorship revenue inside the arena.

The Hornets manage Spectrum Center as part of their lease with the city. That arrangement means the NBA franchise pays all operating expenses and receives all operating profits — and absorbs any losses.

Driggs and other council members asked in several ways and several times whether they would have a chance to parse the language and terms of prospective sponsorships and were told they would. Without the sponsor revenue, the city would have to find alternative funding, Dodson said.

Questions surfaced about the viability and likelihood of success for redeveloping the transportation center, the spot targeted for the Hornets’ training center. 

Charlotte Area Transit System controls the 2.6-acre publicly owned property that has been home to the bus center since 1995. It is bounded by the light-rail line and East Fourth, South Brevard, and East Trade streets.

In 2019, the city granted development rights for the property to Charlotte-based White Point Partners and Dallas real estate investment firm Dart Interests. White Point and Dart secured those rights after a competitive bidding process. The catch, as Dodson reiterated several times yesterday: The site must remain a transit hub first and foremost.

Transit chief John Lewis told the committee the transportation center is antiquated and would need to be replaced with or without the companion private development and investment by White Point/Dart. Private investment, the Hornets’ practice center, and a subterranean bus station form the nexus of transit needs and economic development aspirations, he said.

The developers’ pitch was considerably strengthened because they own vacant land across the street that can be used as a temporary transit hub while the existing transportation center is rebuilt, Lewis added. Minimizing disruptions and inconvenience for riders is a big part of CATS’ considerations, city and transit leaders said.

“The CTC is a transit project first,” Dodson said.

Some on council remain skeptical of the NBA arena’s ability to foster an entertainment district and nearby private investment. Council member Braxton Winston told the committee that little to no development has occurred in the area since the arena opened in 2005. “It pretty much looks the same,” he said.

Much of the property around Spectrum Center is controlled by local or state government, meaning the lack of activity is attributable to government, not the private sector, councilman Larken Egleston said. 

In addition, the EpiCentre, a nearby, privately held entertainment complex that is going to be auctioned next month, could shift interest and momentum in the area, too.

Council member Tariq Bokhari, a frequent critic of the transit agency, expressed doubt and reservations about CATS’ ability to spur redevelopment. Bokhari asked Dodson for more detail about the city’s fallback plan — building the practice center on a city-owned gravel lot behind the arena — before the vote.

Barrett, the team consultant, and the city’s arena consultants, David Abrams (Inner Circle Sports) and Steve Patterson (Pro Sports Consultants), all emphasized the need to upgrade the arena to keep pace with neighboring cities and buildings competing for the same concerts and other events that generate revenue and visitor spending. Abrams and Patterson, like Barrett, came to Charlotte to appear before council yesterday.

To cite one nearby example, Raleigh’s NHL arena is being pitched for up to $200 million in upgrades.

Malcolm Graham, the committee chair, and committee member Dimple Ajmera pronounced themselves satisfied with pledges from Charlotte Regional Visitors Authority CEO Tom Murray to bid aggressively for the CIAA Tournament when it is next available. The soonest it could return is 2026.Other concerns raised yesterday included possible impact on anticipated requests such as a major makeover of the city-owned Discovery Place Science museum on North Tryon Streetand long-term funding for arts and culture organizations.

Dodson pointed out that, in the case of Discovery Place, the museum controls adjacent property that could be sold or converted into a commercial project to generate additional revenue to help pay for renovation costs. Council member Julie Eiselt, a lead player in the city’s public-private campaign to increase grants for museums and theaters, told Dodson and others that she has yet to receive data from the city comparing the economic benefits of arts and sports.

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