Baltimore spending panel approves Royal Farms Arena deal, setting up ‘aggressive’ redevelopment timeline

Baltimore’s spending panel approved the deal Wednesday that sets the stage for a $150 million redevelopment of Royal Farms Arena in downtown Baltimore.

The Board of Estimates’ approval sets in motion an “aggressive” construction plan for the aging facility, which is scheduled to start in late February and be completed in about 11 months. The quick turnaround is meant to ensure that Baltimore can stick to its agreement to host the 2022 and 2023 Central Intercollegiate Athletic Association basketball tournaments.

Construction would begin after this season’s tournament, which runs Feb. 21 to Feb. 26.

The five-member board voted 4-1 in favor of the city’s lease, development and operating agreement with Baltimore Arena Company LLC, a partnership between a national sports and entertainment facility operator and Maryland-raised basketball star Kevin Durant’s venture capital company.

City Council President Nick Mosby, who heads the board, was the sole dissenting vote. He said the agreement didn’t have a strong enough contingency plan should the construction timeline be delayed, potentially jeopardizing the city’s ability to host the 2023 CIAA tournament.

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Before and after images of what the Royal Farms Arena will look like after the proposed renovations. (SCI Architects)

“I believe in Murphy’s law: If something can go wrong, it will go wrong,” said Mosby, adding that the building’s condition and age, and national supply chain problems, could make the reconstruction difficult, especially on a tight schedule.

Steve Collins, chief operating officer at Oak View Group, the development firm that won the bidding to redevelop the arena earlier this year, said the company is experienced with stadium renovation work, citing previous ventures in cities such as New York, Seattle and Austin, Texas. Contractors have spent as many as 20 days on site, he said, examining the structure and preparing for the work, which he called realistic and on par with other projects they’ve handled.

The group would begin ordering materials within “days,” Collins added, which would lock in their prices and help meet the deadline.

“We fully appreciate, respect and signed up for the CIAA tournament, and we want to be doing Drake and Lady Gaga and all that good stuff right after CIAA, and start to get the return on our investment,” he said. “No one wants this building to open more than we do. We’re ready to go when we push the button.”

Baltimore Mayor Brandon Scott, who sits on the spending board and voted for the deal, said he would ask Ted Carter, deputy mayor for community and economic development, to meet weekly with the development team to ensure the project stays on track.

Mosby, who asked to be kept engaged as well, also voiced concern over the agreement’s commitment to solicit 45% overall minority- and women-owned business participation. He said the commitment is overly broad and may exclude businesses of color and women-led companies from winning bids to do catering or concessions inside the arena, which tend to go to large, often white-owned businesses, he said.

The procurement commitment is included in the lease agreement, said Colin Tarbert, president and CEO of the Baltimore Development Corp., the city’s quasi-public economic development arm. But how Oak View Group meets the goal is up to the company.

The company also has committed to solicit at least 27% minority business and 10% women-owned business for the project’s construction and is on track to meet that goal, according to Wednesday’s agenda.

With the agreement officially approved, Oak View Group has a 30-year lease for the Royal Farms Arena, with first right of negotiation for two 10-year extensions. The firm is committing to spend at least $150 million on the facility’s overhaul, primarily from private equity investors and debt financing, and with no funds contributed from the city’s coffers.

Under the agreement, the venue would be obligated to host at least 84 events each year, including concerts, trade shows, sporting and civic events, and family shows. Developers plan to expand the arena’s capacity by as much as 10% to 15% and add significant exterior upgrades, including balconies, a plaza, lighting and sidewalk improvements.

Inside, the arena will be renovated with modern seating, new food and drink vendors, and more amenities for patrons.

Tarbert called the facility’s overhaul a “once in a generation” opportunity that would buoy downtown’s west side and catalyze more investment there. Scott, who became mayor in December, said several of his predecessors endeavored to reach this milestone, recognizing its importance in enhancing the city.

Al Hutchinson, president and CEO of Visit Baltimore, said during Wednesday’s meeting that the renovated facility will be a boon to the city’s economy.

“We’re excited about the renovation, because that can help us continue to keep the CIAA tournament for years to come, in addition to attracting other events to Baltimore,” said Hutchinson, adding that it will create a platform to “showcase” the city to visitors.

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After the BDC released a request for proposals for the arena last November, its board chose Oak View Group in June, largely due to its commitment to minority- and women-owned business participation and minority investors, Tarbert said.

The organization received three bids from what Tarbert described as the top three stadium management and development groups in the country: Oak View Group, Spectra and Metropolitan Development, and ASM, the arena’s current operator. Oak View’s plan afforded no financial risks to the city, he said, and offered a competitive timeline, too.

Tarbert said coming to an agreement in less than six months, and about a year after the requests for proposals went out, demonstrates the private sector’s willingness to invest in Baltimore.

Based on the agreement, Baltimore Arena Co. will spend at least $750,000 annually during the first decade on ongoing capital improvements and replacements. After the first 10 years, the partnership would be obligated to fund at least $1.5 million a year for such upgrades.

Once the project meets an internal rate of return — or profit — of 15% on the original investment, the city will receive a “landlord upside” of 25% of the cash that is distributed to equity owners.

In turn, any taxes generated for the city above $1.75 million would go back to the arena as the “support contribution.” The tax threshold before the city surrenders the support contribution would increase each year by the lesser of a 2% escalation rate or the consumer price index.

Along with Scott, Baltimore City Comptroller Bill Henry, City Solicitor Jim Shea and Department of Public Works Director Jason Mitchell also voted to approve the deal. It also has been approved by the city’s law department.