Hey Oakland Raiders And A’s: 1,010 Room Coliseum City Hotel Is Feasible

For those who have followed the Coliseum City story closely, many of you know about my plan, which consists of two new stadiums for the Oakland Raiders and the Oakland A’s, and over 300,000 square feet of retail and a two-wing, 1,010-room hotel. People, mostly from the City of Oakland and the County of Alameda, and I’m told Marc Badain, the President of the Oakland Raiders (undoubedly influenced by at least Oakland City Administrator Claudia Cappio and Alameda County Real Estate Consultant Pat Cashman) have panned the idea of a hotel without even bothering to seriously investigate that the fiscal plan which only calls for 60 percent occupancy or 600 rooms filled of the 1,010 rooms) to break even, can, as they say “pencil out”.

The hotel is important because in my spreadsheet it throws off enough revenue to allow the construction of stadiums for both the Raiders and Athletics without public subsidies. This flies completely in the face of the Raiders call for the City of Oakland and the County of Alameda to put in public money. Fortunately, the Oakland A’s have said they don’t need government dollars – news that is to be celebrated.

If you’re reading this and involved in the local San Francisco Bay Area Hotel Industry, your jaw is dropping about now. You know the demand for new hotel rooms to be built is at an all time high, and going higher. You know Oakland, alone, as a base-level demand for 1,000 new rooms. You are shocked about now. Keep reading: it’s going to get a lot worse by the end of this post.

To put it bluntly, the parties did not even bother to run their own spreadsheets and evaluate my proposal. Moreover, it’s not even evident they have a set of computer models or spreadsheets they refer to for the Coliseum City project. Thus, my proposal, and I would venture a guess that of Floyd Kephart’s, were not subjected to true, build-your-model-and-run it, fiscal and real estate investment analysis. Indeed, the homework I did, and the involvement of Piper Jafrrey Investment Bankers, were all subjected to a group of Oakland public officials who make decisions by the seat of its collective pants, with angles and devils on its shoulders.

And all for a multi-billion dollar project that is Coliseum City.

I have said this and I’ll repeat it here: I am not seeking money or a job, but trying to move along something that should have been done years before. That Oakland has taken this long to get these stadium plans even formed is the best example of government malpractice I’ve ever seen outside the Federal Government response to Hurricane Katrina. Oaklanders who (those left) who remember a time when our city didn’t look so incompetent, should be alarmed and angry. Here’s the reason why, in the form of a recap of events, and then a discussion of the hotel demand market in the San Francisco Bay Area.

On May 18th 2015, while I was covering the Spring NFL Owners Meeting held at the San Francisco Ritz Carlton, Oakland Raiders Owner Mark Davis asked me to come up with an alternative Coliseum City Stadium Plan. The reason for his request was borne of pure frustration: there was a great deal of pressure on the Raiders from fans and the NFL to have some kind of plan from Oakland, considered the “home” city for the team in the competition to have one or two of three NFL teams in Los Angeles: St. Louis, San Diego, and Oakland.

With long-time friend and NFL Network Analyst Michael Silver as my witness when Davis made the ask, I went to work. The objective, as I’ve explained before, was to form a plan that includes new facilities for both the Raiders and the Athletics, and to do this without public money – that means no subsidy or no use of a municipal government’s general fund to cover bond issue defaults.

To to this, I brought my experience in real estate development fiscal and economic planning (a by-product of my training in urban planning at Texas-Arlington and Berkeley), my experience in making system dynamics models for various clients, and the processes developed and installed in my classroom-used “Oakland Baseball Simworld” educational computer sim that was the cornerstone of my company Sports Business Simulations, and started from scratch and went back to the original Coliseum City design that Frank Dobson, Bob Leste, and Steve Lowe developed, with the help of Oakland real estate developer John Protopapas.

That plan, which I have presented in a 30-minute video I created while I was on the Sports and Entertainment Task Force of Oakland Mayor Ron Dellums in 2009 – 2010, called just for retail and a new baseball stadium at the Coliseum, leaving the current facility to be completely refurbished for the Raiders.

The idea never came to see the light of day, mainly because Oakland District 7 City Councilmember Larry Reid used Dobson’s idea as the basis for a more ambitious plan that was to comprise 800 acres and almost a million square feet of mixed use development and 4,000 housing units – a city within the city of Oakland. Coliseum City, because of its sheer size, and Oakland’s new, unstable, post-Rank-Choice Voting landacape, became a project in seemingly perpetual limbo. Floyd Kephart, the last person to represent a jettisoned development group, once told me he had to deal with not less than five Oakland Chief Administrative Officers over the period of his involvement with Coliseum City from 2011 to 2015.

The plan that Kephart’s team came up with, ultimately, was both unsound and unworkable. It was completely obvious the team had never created a stadium fiscal plan before, let alone an overall development fiscal plan. Plus, they were focused on a land plan and not a stadium plan – something that particularly bothered NFL Executive Vice President Eric Grubman.

To the end of creating a plan that achieved the objectives I described, I settled on trying to identify as many truly possible revenue streams the Coliseum City project could throw off. I came up with ten different revenue sources, all of which are detailed in a spreadsheet that is for public view (again) at the bottom of this post. But the hotel estimate of 1,010 rooms has the City of Oakland / Alameda County types in a weird tizzy.

The plan calls for 1,010 rooms in two wings: one at 610 rooms for the Raiders Stadium and connected to it, such that the South End Zone is the hotel entrance, and overlooks the field, and the other at 400 rooms and overlooks the A’s baseball stadium. You could walk from the Raiders stadium to the A’s stadium through the hotel complex. There’s nothing like it in America and certainly not the SF Bay Area.

The basics are 610 rooms and 400 rooms, with a construction cost of $265,000 per room or $600 per square foot, 325 square feet per room, and Average Room Rate of $230 with an operating cost of $75 per room. The model was the fiscal template for a high-end hotel in accordance with HVS Hotel Consultants and FIXR.com – I replicated the spreadsheet for my use and then bumped up the numbers to reflect what would be a W-Hotel or JW Marriott style complex, perfect for sports tourism. The total cost of the two-wing complex: $270.5 million.

What’s neat is the Raiders hotel room wing, alone, throws off a new operating revenue of over $401 million over a 40-year bond period, $220 million of which would be used for stadium construction. Plus, the Raiders and the A’s and the City and County can get a hotel partner to help with luxury box sales. Indeed, Piper Jaffrey had put their hotel development specialist on this, in addition to a six-person deal team. Folks, I set the table for the City and the County and the Raiders by cold-calling Piper Jaffrey, and that firm holding a series of conference calls as they know a well-put-together plan – and the government did nothing. Nada. Zip.

Except make noise that my hotel plan would not draw enough people. Let’s look at that idea.

First, one person with Alameda County told me that there’s no demand for a 1,000 room hotel. That is what this person – someone involved in Coliseum City in the form of evaluating proposals – told me. Meanwhile, Allson Best, the head of Visit Oakland, the Oakland Convention and Visitors Bureau, said, this year, that Oakland has demand that could fill 1,000 new hotel rooms. And in its hotel demand evaluation document that costs $500 to have, but I nailed down via an Internet search, HVS’ “Best Of The West” paper by Aaron Solaimani, and Kathryn Gritt, said this:

“The San Francisco lodging supply currently includes approximately 215 properties with over 33,000 guestrooms. Room count has remained generally flat for the past 10 years. Compared to other cities of similar size and stature, very few new hotels have been built from the ground up, due to the area’s high barriers to entry (high development costs, fierce competition for developable land, lengthy city approval process, and labor issues) and relative scarcity in construction financing. New development is pushing out from the traditionally established lodging areas of the city (Union Square and Financial District), providing opportunities for new hotels in such urban infill neighborhoods as SoMa and Mission Bay.

Meanwhile, SF Hotelier Rick Swig told the San Francisco Business Times that a new 1,000-room hotel would be barely helpful and said that even at 5,000 new rooms there would still be room demand. All of this spills over to Oakland and the East Bay. And note that we never even talked about hotel room demand created by sports events to this point.

While estimates are hard to come by. I estimate total visitors to the Oakland Coliseum at about 4.2 million people per annum – assuming a conservative room demand of two nights, that comes to 8.4 million room nights per annum. By contrast, the hotel has 1,010 rooms, which throws off a base-level room demand of 365 room nights per room, or 737,300 room nights per annum. Thus, the Coliseum City Hotel Complex would be filled such that the hotel operator could capture a fair percentage over the standard ARR – by a factor of about 40 percent in some cases.

So, now we combine Ms. Best’s claim that Oakland already has a demand gap of 1,000 rooms, with San Francisco’s spill over and the demand by sports teams playing at the Coliseum, not to mention concerts and events, and we have a 1,010-room hotel complex that will perform well financially at Coliseum City. In my Coliseum City spreadsheet the hotel has allowed me to drop Raiders PSLs to what would be an NFL low, and to have no PSLs for the Oakland Athletics stadium.

Meanwhile, the Raiders President reportedly is more interested in counting on an iffy personal seat license plan that has never been tried and is mega-expensive in a region, Los Angeles, which hasn’t had to pay for an NFL Football game since 1994.

Yeah. Right.