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TEAM LEASE AGREEMENT BETWEEN SBH DEVELOPMENT LLC, A DELAWARE LLC (SACRAMENTO KINGS) AND CITY OF STOCKTON FOR THE USE OF THE STOCKTON ARENA AS HOME COURT FOR THEIR NBA G LEAGUE TEAM
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Authorizing the execution of a Team Lease Agreement with SBH Development LLC, a Delaware LLC, (Sacramento Kings), for the use of the Stockton Arena as the home court for the team’s NBA G League, consistant with the signed Letter of Intent; and
2. Authorizing the City Manager, or his designee, to take all the necessary and appropriate actions to carry out the purpose and intent of this resolution.
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Summary
The Sacramento Kings approached the City with an interest in moving their NBA G League team from Reno, NV to Stockton. The City has capacity in the Arena to accommodate the G League season which plays 25 home games, October through April. The City and the Kings have reached consensus on the terms of the agreement and have signed a Letter of Intent (Attachment A), pending the completion of the final Team Lease Agreement (Exhibit 1 to the Resolution). The City will not only benefit from increased rental of the Arena, but also in welcoming another home team to the City, adding yet another entertainment/recreational option for the community and creating positive exposure for Stockton.
It is recommended that Council authorize the City manager to enter into a Tenant Lease Agreement with the Sacramento Kings for the use of the Arena for their G League team and accept the lease terms as proposed.
DISCUSSION
Background
The NBA G League, formerly the NBA Development League (NBA D-League), is the NBA’s official minor league. The league prepares players, coaches, officials, trainers, and front-office staff for the NBA while acting as the league’s research and development laboratory. Featuring 26 teams, all with one-to-one affiliations with NBA franchises, the League offers elite professional basketball at an affordable price in a fun, family-friendly atmosphere. The NBA G League games air on Facebook Live, ELEVEN SPORTS, Twitch, NBA TV and ESPNU, all providing positive exposure for Stockton and the Arena. The Kings affiliate G league team has played in Reno as the Reno Bighorns, since the team’s inception in 2008. The Kings purchased the team in 2016, causing the Bighorns to become the fifteenth G League team to be directly owned by a parent team. During the 2014-15 season, the Bighorns led the NBA D-League in scoring and also in call-ups to the NBA with seven players being called up to play in NBA games. The performance of the team and players like Brady Heslip, Tajuan Porter, and Sim Bhullar garnered media attention in not only the Reno area but also on a national scale with national outlets like The Dan Patrick Show and CBS’ The Late Late Show, putting a spotlight on the team. Head coach David Arseneault Jr., and his offense, called "The System," were profiled by The Guardian in late February 2015. Professional NBA players such as Danny Green, Jeremy Lin, Hassan Whiteside, Damon Jones, and Garrett Temple also played for the Bighorns during their basketball careers.
Present Situation
The Stockton Arena was constructed in 2005 with the intent of accommodating a wide range of events and activities, including sports and family entertainment. Currently, the Arena is home to the AHL Stockton Heat hockey team, in addition to hosting various other acts throughout the year, such as Disney on Ice, StocktonCon, WWE Wrestling, and NCAA Women’s Sweet-Sixteen. The G League plays between October and April, like the AHL hockey season, however there is capacity for both uses at the Arena over similar seasons. The ice will be covered as the basketball floor is built over it for the basketball games. This practice is common in many sought-after arenas and current SMG staff are seasoned and experienced at changing over the facility.
The addition of the Sacramento Kings minor league to the Stockton Arena is a welcome expansion of arena usage and a great opportunity for the Stockton community to attend high-level basketball locally, at a reduced price. The Kings have indicated an interest in community involvement in the Stockton region and hope to make this a long partnership.
The terms of the pending Tenant Lease Agreement include, but are not limited to the following:
• Term: Three-years with three additional one-year team options
• Rent: $9,000/game with 5% annual increase
• Rent includes full use of the Arena, including storage, locker rooms, game night staffing and more
• Team to provide floor and standards and SMG will store, set-up and tear down
• Facility Fees will be collected on all single, group and partial season ticket holders
• Team to receive 15% of revenue, net of taxes on all Food and Beverage
• New Suite sales split 80% Team and 20% City, including one suite for team use
• Revenue for advertising on game nights will be sold and retained by the team
• 70 parking spaces for each home game will be provided to the team
• Office space up to 2,000 sq.ft. provided by City, tenant improvements and any ongoing costs are at the expense of the team
Approving the Team Lease Agreement will bring additional revenue to the Arena and parking operation, provide greater positive exposure to Stockton, aid in the revitalization of the waterfront and downtown area, and enhance the overall quality of life for the community.
Notification
Per the City Charter, a “Notice of Intent to Lease Real Property Interest” will be published in The Record at least ten days prior to the execution of the Team Lease Agreement.
FINANCIAL SUMMARY
The Kings will pay $9,000 per game for 25 home games per season, totaling $225,000 with a 5% annual increase. The net revenue per game varies depending on attendance and concession sales but is expected to add over $100,000 annually in net revenue to the bottom line of the Arena operating costs. The FY2018/19 proposed budget will include the anticipated increase based on this new Tenant Agreement.
Attachment A - Letter of Intent