Note: Most of you reading this site (or interacting with me on Twitter) know that I am a Sounders fan/season-ticket holder. That aside, I pledge to write this story as a […]
Note: Most of you reading this site (or interacting with me on Twitter) know that I am a Sounders fan/season-ticket holder. That aside, I pledge to write this story as a by-the-numbers analysis of the lease, and the old-age jokes and references to garden sheds will be kept to a minimum. Promise!
Ah, Providence Park. The old gal just keeps on ticking, with the assistance of a facelift (or eight) over the years. You can head over to the Wikipedia page to get a history of the facility, so I’m not going to go over it here. Suffice it to say, she’s been around for a long time. A long, long, long time. Like your typical Succubus, the stadium manages to maintain its appearance by draining the life-force of those who spend too much time in the facility, until nothing but empty husks and beard remnants remain. Or it may be the money spent refurbishing the place; I’m still looking into that.
Okay, that’s the last joke. In 2010, an agreement was reached between the City of Portland and the Paulson group Peregrine Sports, LLC to allow Merritt Paulson III to operate a professional men’s soccer team there: the Portland Timbers. Actually, as Merritt recently revealed, it’s his father Merritt (Hank) Paulson Jr., who is the majority owner of the team (I’m not getting into who actually owns MLS teams; save it for another article). Though this was treated as a surprise at the time, anyone who looked at any of the documents when the stadium deal was being formed would have known that.
I’m going to refer to the Paulson group as Peregrine going forward, for simplicity’s sake. Anyway, the somewhat convoluted agreement approved a $31 million renovation of the stadium, with Peregrine contributing some cash, pre-paid rent and agreeing to a 7% ticket tax with minimum guarantees.
By 2017, with stadium attendance at capacity and a large waiting list, Peregrine wanted to expand, and thus requested leave to expand Providence Park by about 4000 seats. This required an amended agreement with the City to supplement the existing stadium operating agreement. After some negotiation, the agreement was ratified by the City in December 2017.
With that in mind, I’m going to separate story into two segments: looking first at the 2010 agreement, and then the 2017 amendment. As per my policy, I’m looking for language that governs relocation, breach of contract, revenue allocation, and other interesting provisions. There are some interesting things regarding the Portland Thorns, the NWSL team owned by Peregrine, so I’m going to take a look at that too.
There are two documents I’m going to run through here: The Redevelopment Agreement (RA) and the Stadium Operating Agreement (SOA). Briefly, the RA mainly memorialized the desire of the parties to give the stadium a facelift (and move the AAA baseball team elsewhere), while the SOA is basically the lease. Between them, these two documents come in at nearly 500 (!) pages. Attorneys…
Redevelopment Agreement contingent on agreement between Peregrine, MLS and SUM:
This isn’t a surprise, but I just found it interesting/amusing how SUM encompasses everything, and is even referenced in an RA.
The RA explains why the Timbers can’t expand in the place that makes the most sense: The MAC
Many people ask why Peregrine don’t just expand in the area where the Multnomah Athletic Club faces out to the stadium. The simple answer is, neither the City or the Peregrine own it, and have no rights to it.
The good news that the agreement grants Peregrine use of the easement for the life of the agreement. But there isn’t much they can do about expanding in that area. You can read the easement agreement here.
So, let’s get into the lease itself.
Relationship of the parties:
Legally, the City has come to an agreement to “employ” Peregrine as an independent contractor to manage the stadium.
This generally protects the City from any liability as a result of anything Peregrine does or says in relation to the stadium that may end up legally actionable during the Operations Term. Which, based on the Twitter content of certain members of the organization…
Speaking of the “Operations Term,” subject to any defaults, or any extensions (which we’ll talk about in a second), the term of the agreement is 25 years, from the commencement date of 2011.
Besides being amused that the Peregrine lease ends before the Chicago Fire lease, even though it started much later, an interesting quirk is that Peregrine is entitled to an extension of three years, in the event he paid for any cost overruns associated with the refurbishment of the stadium. The process for that extension is…complicated, but the basic gist of it is that if Peregrine paid the cost overruns, they get three years without having to pay the rent/license or ticket tax up to a certain amount. That’s about as simply as I can put it.
We’ll address this “extension” later in the story.
In contrast to the aforementioned Chicago Fire lease agreement, Peregrine has much more control over revenue streams.
Obviously a much better deal for Peregrine than the Fire; probably a result of Peregrine putting in some money up front (and the relatively low-cost of the City contribution).
Regarding naming rights, I found this amusing.
And I thought, “Stormy Daniels Field” at “Stadium 69” had a nice ring to it. I guess that’s why I’m not in marketing. Now, I’m sure many of these types of agreements have similar language, but what can I say: I’m a sucker for teenage humor.
The lease itself doesn’t directly account for any provisions regarding relocation, but the Redevelopment Agreement has a lengthy portion dedicated to it, in the form of a guaranty.
First, the RA requires that all games where Portland is designated as the “home” team be played at Providence Park.
The preseason provision is a little odd, I have to say. Though most preseason games are neutral venue games anyway, in warm weather cities.
Following that up, the RA then gets into the nitty-gritty regarding relocation.
A couple of things here. First, I find it amusing there’s language preventing Peregrine from even seeking to relocate, which reminds me of when I was trying to do something stupid as a kid and my mom would give me that “don’t even think about it” look. Second, the provision allowing a provisional “out” of the deal two years before expiration is an interesting section. It does allow for the team to exert some leverage in obtaining a favorable deal, while not actually allowing them to move. Which…fair enough, I guess.
The deal also requires Peregrine to continue operations at the stadium throughout the term, subject to a couple of outcomes.
There are several references to the “failure” of MLS in these documents; did they know something we didn’t in 2010? This agreement also includes any changes to the Franchise Arrangement, or to MLS as an entity.
Remedies upon breach:
In the event of a breach of contract, the City of Portland has similar options as Bridgeview (and likely, every municipality who has such an agreement). Those include, money damages and specific performance in relevant part. And breach of the RA constitutes a breach of the Stadium Operating Agreement.
Football, Futbol, Soccer:
The other thing people ask about is: why isn’t grass installed on the field? Putting aside any cost and structural issues (drainage, grow lights, etc.), the reason often cited is the existence of the college football team, Portland State Vikings (PSU). Besides playing in a *terrible* football conference (that’s some FCS smack-talk; go Spiders), Providence Park is the home to PSU. Given there are no prospects for a new home for the team, they’ll be playing there for the foreseeable future. And until there is a viable new place for them, the City made sure that’s the way it will be.
By these terms, it doesn’t seem as if Peregrine has any ability to boot PSU out. Aside from probably being a PR nightmare, it seems that the remedy if the parties can’t agree is the terms will be dictated through Dispute Resolution. So I’m not sure what could be done here, aside from PSU finding a new home. And good luck raising those funds. As far as grass, Peregrine is authorized to install it…at their own cost.
Operations and Maintenance:
Likely as a result of Peregrine being able to control most revenue streams, they’re also on the hook for management and maintenance of the stadium.
Again, this isn’t much of a surprise given the nature of the relationship (Peregrine as independent contractor controlling revenue streams), but that still can cause issues in the context of stadium upkeep (ask the folks in Columbus about that). This segues nicely into the issue of turf, which bizarrely the parties thought would last for eight (!) years.
That’s just a crazy-pants projection, and it…didn’t happen. So they were forced to renegotiate this part of the deal, since the turf failed three years in. I was going to bring this up later, but I have not been able to find that 2014 amendment. Apparently it was passed “administratively,” but it’s still not accessible anywhere, even though it’s referenced in the amended agreements.
But this is probably a good place to move off the 2010 agreement. There is so much there, this could end up being a 5000-word story. So let’s move on to 2017, when Peregrine decided they wanted to expand Providence Park. The 2010 deal allows for them to proceed with major face-lift, with the agreement of the City. So to the city they went with a proposal, which was ratified in December 2017. But that required an amendment to the 2010 deal.
When the expansion was ratified, we had three particularly important documents: An Expansion Redevelopment Agreement (which talks about the 4,000 seat addition), an Amendment to the Use Guaranty Agreement (governing relocation as discussed above) and a Second Amendment to the Stadium Operation Agreement (Lease). As I said, I cannot find the First Amendment which apparently had to do with changing the terms under which the turf was replaced.
The Expansion Redevelopment Agreement doesn’t have much that’s interesting. And thank goodness, as this story is long enough as is. So let’s look at the Portland Thorns.
When the Thorns came in and joined the NWSL, it’s fair to say they took Women’s soccer (and soccer generally) by storm. The crowds have been amazing by historical standards in Women’s soccer in the United States, and there is certainly a MLS team or three who’d love their crowds. The team is owned by Peregrine along with the Timbers. As they entered the scene after the 2010 agreement was signed, I assume some use agreement was entered with the City, but I don’t have any confirmation of that. In any case, along with the agreement to expand Providence, some additional things needed to be addressed.
Not surprisingly, the agreement calls for all Thorns home games to be played at Providence Park, though with written notice, one home game can be played elsewhere.
I’ve no idea why they’d want to give up a home game in Portland to play elsewhere, but it’s not my team. Much more interesting is the terms under which Peregrine can cancel this agreement entirely.
Sections (a) and (c) are hardly surprises, but seeing Peregrine move the Thorns is tough to imagine, even more so them dropping in average ticket sales to 7,000 or 4,000. Though I suppose if the Thorns are ever struggling that much, it’s probably tough to see the league as viable at that point, which would probably have us worrying about (a) more than anything else. I am curious if there was any previous agreement that included the Thorns prior to this. If there is, I haven’t been able to find it.
Amendment to the Stadium Operation Agreement (Lease):
With the construction of the additional seating (the “Arcade”) the parties then executed this amendment to account for the changes. Right off the bat, the agreement confirms that Peregrine did in fact fund cost-overruns, which makes them eligible for the extension on the lease (with no payment of rent/fees):
This basically replaces the section from 2010 regarding a potential extension of the lease for three years, acknowledging that Peregrine is eligible, and establishing the terms under which they can exercise this “option.”
Additionally, there was a modification to the stadium maintenance agreement. Peregrine is still responsible for the costs, though some language was changed.
Still about the same. Finally, the issue regarding the payment of ticket revenues and “licenses” on the expanded stadium. At the time, Peregrine wanted to be exempt from paying the City the ticket revenue for 10 years. The premise of the argument is that, since without the expansion, the city wouldn’t be getting anything, the city isn’t losing out on any money. It makes some sense, in a greedy kind of way. But I suppose if I was dropping $50 million on an expansion to a stadium, I’d like to recoup that money as soon as possible. Anyway, the parties negotiated and came to an agreement.
This all basically conforms to the request by Peregrine to be exempt from paying those amounts to the city; as they are on schedule it sounds like, I doubt there will be any issues regarding these final provisions.
So there you go! This agreement seems to be much more even-handed than the Chicago Fire lease with Bridgeview, which is about as one-sided an agreement (in favor of the City) as you could find. That is two down, and a lot more to go.