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Royal Farms Arena redevelopment could begin in February as Baltimore spending panel reviews deal

The redevelopment of Royal Farms Arena could begin as soon as February if Baltimore’s spending board approves the deal with a partnership between a national sports and entertainment facility operator and basketball star Kevin Durant’s company.

The city’s Board of Estimates is being asked to approve at its regular meeting Wednesday a long-term lease, development and operating agreement for the aging downtown venue with Baltimore Arena Company LLC.

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Baltimore Arena Co., a joint venture of Los Angeles-based Oak View Group and Maryland-born Durant’s venture capital company, won the bid to redevelop the aging facility earlier this year. The deal pending before the city spending board would give the firm the rights to run and redevelop the city-owned arena.

If the project gets underway as planned, it could be completed in 2023, according to a copy of this week’s agenda for the Board of Estimates.

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And if the deal is approved by the spending panel, Baltimore Arena Co. would have 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, according to the agenda.

The Baltimore Development Corp., the city’s quasi-public economic development arm, is recommending the board to approve the agreement.

BDC President and CEO Colin Tarbert said the arena’s overhaul would serve as a “once in a generation” opportunity to activate the west side of Downtown Baltimore and catalyze more investment there.

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“The arena will be a game-changer for lifting up that side of town,” Tarbert said. “Coming out of COVID, but still in COVID, there’s a level of excitement to get the renovation done during this period, with the assumption that concerts and events will be back in full swing.”

City officials and business leaders have been discussing how to replace the cramped arena, which dates to 1962, for at least 20 years with little progress.

The partnership of Oak View Group and Durant’s Thirty Five Ventures will expand the arena’s capacity by about 10% to 15% and add significant exterior upgrades to the facility including balconies, an outdoor plaza, lighting and sidewalk improvements, Tarbert said. Inside, the arena will be renovated with modern seating, new food and drink vendors, and amenities for patrons.

The BDC released a request for proposals last November and received three bids from what Tarbert described as the three top stadium management and development groups in the country: Oak View Group, Spectra, and Metropolitan Development and ASM, the present operator.

The BDC’s board chose Oak View Group in June, largely due to its commitment to solicit 45% minority and women-owned business participation and reserve at least 25% of the equity investment for minority investors, including Durant’s company.

Oak View Group’s “aggressive” construction timeline and ability to shoulder all of the risk in the investment also piqued BDC’s interest, according to Wednesday’s agenda.

Tarbert said he couldn’t predict how the spending panel would vote. But Mayor Baltimore Brandon Scott, who sits on the five-member board, indicated his support Tuesday afternoon, citing the quick turnaround time for construction and commitment to minority- and women-owned business participation.

“A new state-of-the-art entertainment facility in Baltimore will improve our ability to attract top-tier events and boost downtown development,” he said.

Oak View Group is an experienced operator involved with arenas in Seattle; Elmont, New York; Palm Desert, California; Manchester, United Kingdom; and at the University of Texas at Austin.

Tarbert said coming to an agreement less than six months later and almost a year exactly to when the request for proposals went out demonstrates the private sector’s willingness to invest in Baltimore.

“There will be a significant amount of exterior upgrades, but the vast majority is really renovation or gut rehab of the interior to make it modern for today’s events,” he said. “It will be a venue of choice for touring acts.”

The agreement would require Oak View Group to host a minimum of 84 annual events at the arena, including “concerts, sporting events, civic events, family shows, trade shows, and other events,” according to the agenda. The city also may rent the space for four events each year on a “direct cost reimbursement basis.”

Based on the agreement, Baltimore Arena Co. would aim to raise $500,000 each year in charitable contributions through fundraisers and fund at least $750,000 annually in the first 10 years for 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, the agenda states.

Once the project meets an internal rate of return — or a profit — of 15% of the original investment, the city would receive a “landlord upside” of 25% of the cash that would otherwise be distributed to the 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.

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