The under-construction Vikings Stadium is set to open in the summer of 2016.
In the first private management deal for an National Football League stadium in more than a decade, SMG won a hotly-contested contract to manage the new Vikings Stadium in Minneapolis for the Minnesota Sports Facilities Authority.
The 10-year contract was awarded to SMG on Aug. 22 and work will begin immediately when SMG SVP Doug Thornton and team fly into town Sept. 8 for a three-day preopening planning marathon.
The deal points are done for the contract, with a five-year renewal option. Michele Kelm-Helgen, chair of the Minnesota Sports Facilities Authority, outlined the basics. SMG will pay the Authority a guaranteed $6.75 million annually from profits after revenue and expenses. SMG is paid the next $500,000 in net revenues as its fee. The next $1 million is split 50/50 between the authority and SMG and, after that, SMG receives 25 percent, the Authority 75 percent.
In addition, SMG is making a one-time capital investment of $2 million to be used at the discretion of the authority; $500,000 as a marketing fund, and $250,000 to finish out the administration offices at the stadium. Essentially, it’s a $2.75-million investment from SMG to be distributed by the Authority.
A rendering of the large glass entrance as seen from the West Plaza. (Photo by HKS/MSFA/Vikings)
Helgen said the Authority received “three strong proposals from three excellent companies” to privately manage the new $1.26-billion stadium, which opens in July 2016. “In the end, we felt SMG has the combination of everything we’re looking for.”
The fact SMG manages four National Football League stadiums, has hosted nine Super Bowls, which Vikings Stadium gets in 2018, and several NCAA Final Fours, which Vikings Stadium is bidding on for 2018, 2019 or 2020, certainly tipped the scales, she added.
“It was a very strong financial proposal,” Helgen said. With $498 million in public funding, including $348 million from the state and $150 million in city bonds, and another $526 million from the team, plus additional funds they just added to the pot to preserve the integrity of the design, the stadium is costing $1.26 billion. Asked if that number amazed her, Helgen joked that the original $975-million pricetag was the wow-factor, and that the authority certainly appreciates that the team has stepped up and added more.
Ed Bagley, executive VP, public affairs and stadium development for the Vikings, concurred that the bidding process was very competitive and it was a tough call, but “we felt SMG is the best operator for the stadium and for us. I’ve known Doug Thornton for a long time and he is an outstanding individual with a great reputation.”
Construction continues at the stadium site.
Every bidder brought his A-Game, Bagley added. Bids were received from AEG and Comcast-Spectacor/Global Spectrum. “We heard from all three that this will be the next great NFL stadium,” Bagley added, noting the fixed roof, 60 percent of which is clear glass, the location of the stadium on the east side of downtown, its connection to the Minneapolis skywalk and to light rail transportation, and the access to downtown entertainment, make it “the stadium for all seasons.”
The Vikings will make an $8.5-million annual lease payment with a three percent annual escalation fee to the authority.
The new Vikings Stadium is also connected to an urban park, which will provide opportunities for even more events. Thornton compared it to Champions Square in New Orleans outside the SMG-managed Mercedes-Benz Superdome, which is the firm’s flagship stadium. They have managed the Superdome for 37 years.
“Vikings Stadium was designed to have maximum flexibility,” Thornton said. The urban park will be used both on game day and for stand-alone events, much like Champions Square which hosts 40 live music events a year, and 35-40 indoor events. And the urban park can be staffed and outfitted on demand. “You can turn it on and off in terms of overhead,” Thornton said.
Still, it will not make much of a dent in the guarantee, which will be tied to events at Vikings Stadium other than NFL football and, most probably, Major League Soccer. That income benchmark was set by the Authority, which also adds its own $6 million to the revenue stream. With the $8.5 million from the Vikings, SMG is starting with $14.5 million. Add another $7 million in nontenant revenue, deduct expenses, and the bottom line could be well above the $6.75-million guarantee, leaving enough for SMG’s fee and further splits.
SMG did not go into this blind, benchmarking operating expenses based on other SMG-managed NFL stadiums, like NRG Park in Houston, Everbank Field in Jacksonville, Fla., and Soldier Field in Chicago, as well as the Superdome.
A rendering of the football configuration for Vikings Stadium, which will also be equipped to host hockey, Major League Soccer, concerts, and other types of events.
He projected two to three concerts a year, noting Soldier Field did four major concerts this past year and is in a similar top-tier market. SMG is also planning to create events, as it does in New Orleans and Jacksonville. Marketing funds will be available to provide incentives for special events. SMG owns Select Artists, which will help that effort, he noted.
Motorsports, soccer, major sports events, family shows — the venue will be used year-round, Thornton guaranteed. It’s just like New Orleans, which has hosted seven Super Bowls and four Final Fours, he said. “They want that expertise,” he said of the new employer.
SMG has already drafted a preopening plan. Thornton hopes to have a general manager in place in the next 90-120 days. They are putting together a transitional team, which will gather in Minneapolis Sept. 8 for a three-day planning meeting. One of them will stay behind to coordinate the transition.
Most of the design is done and now the task is to adapt operating procedures to the plan in place. New Vikings Stadium is 20 percent complete. “We already gave them a 60-page plan review which was part of the bid package,” Thornton said.
SMG, like the other two bidders, has been working on this project for more than a year informally and since the request for proposals in March, formally. Now the real process starts and none too early. It’s only 21 months until opening.
Is this likely to lead to other NFL teams outsourcing to private management? Thornton could not predict that, noting that part of the enabling legislation that made Vikings Stadium a reality called for private management. With so much taxpayer money involved, this stadium is not just for Vikings football.
There’s even a configuration for a hockey rink on the floor, perfect for a future Winter Classic.
“We have to be aggressive and we believe we can do it. The numbers are not out of line with what we generate at other facilities. We’re an open access stadium,” Thornton said.
Interviewed for this story: Michele Kelm-Helgen, (612) 735-7182; Lester Bagley, (952) 828-6500; Doug Thornton, (504) 587-3827