Comcast Spectacor, a leading sports and entertainment company, today shared a third-party economic impact analysis, the Hunden Study, that assesses the market capacity and outcomes of a second arena in the City of Philadelphia. Hunden Partners, a real estate development advisory firm, based its analysis and projections on publicly available information known about the 76Place project – including research resources and data – the current marketplace, and regional- and macro-economic conditions.
“We felt a deep responsibility to share this report to ensure we all have the full resources at our disposal to make the right decisions about our City’s future,” said Dan Hilferty, Chairman and Chief Executive Officer of Comcast Spectacor. “We firmly believe that the best outcome for our fans and the community is the 76ers and Comcast Spectacor, united and based in South Philadelphia. To that end, we continue to offer the 76ers a 50/50 partnership of the Wells Fargo Center and have been clear that we’re open to building a new arena together at the right time. The door will always be open for the 76ers and we sincerely hope together we can create a vision for what’s best for Philadelphia.”
A copy of the Hunden Study can be found here.
EXECUTIVE SUMMARY
Hunden Partners (Hunden) was engaged to analyze the likely impacts on the City and County of Philadelphia, Pennsylvania of the proposed 76 Place Project, a dedicated NBA basketball arena for the Philadelphia 76ers. The following summarize the key findings from the report:
Headlines
- Cost: Estimates are low as costs are only rising & infrastructure needs will push higher. New NBA/NHL venues cost $1+ Billion and this number continues to increase. The initial cost of $1.3B has risen to $1.6-$1.9B due to a number of factors including inflation, cost of labor market, urban setting, raised event floor and others. This cost may be even higher when necessary SEPTA improvements and general Center City infrastructure improvements are incorporated.
- Content: There isn’t sufficient content to support two buildings. Other markets with multiple major arenas have divided up the concert/family show market, which reduces the number of events, revenue per event and viability of each venue. Ultimately the lack of events and net revenue reduces the value of the venue and in turn, creates a long-term reliance on public tax dollars for upgrades to stay competitive.
- Comparable Markets: No comparable markets have two arenas in the same city. No other market other than New York or Los Angeles (which are much larger than Philadelphia) has more than one major arena in the city. Major arenas in other markets, when there is more than one, are disbursed in different cities, typically 10 – 30 miles away from each other.
- City Revenues: Limited incremental revenue with ~6% increase in tax revenue from baseline. For markets of similar size, the average taxpayer subsidy is 46%, or ~$600 million for a $1.6+ billion project. The estimated economic value, or impact, of 76 Place to the City/County of Philadelphia over 30 years is $134 million, or a present value of $63 million. Any taxpayer contribution to the project of more than $63 million negates any positive impact.
- Cash Flows: Do not support positive return on private funding. Projected arena cash flows for 76 Place support a valuation of $545 million. The cash flows were based on current revenues of the team, as well as concerts and family shows at Wells Fargo Center (WFC), along with the requisite expenses. Existing performance at WFC and comparable national arenas were used to estimate both revenues and expenses. This suggests a necessary subsidy, private debt guarantee, or taxpayer support of approximately $800 million if 76 Place costs $1.6+ billion.
- Long-Term Viability: Limited cash flows suggest public funding likely required to maintain long-term viability & maintenance needs. By splitting the revenues flowing from one arena to two, it is expected that both major league arenas would not be able to self-fund major renovations and improvements, requiring taxpayer funding on a regular basis (every 15-20 years). Recently, the Wells Fargo Center has been able to privately finance a $400 million major redevelopment without public funding in order to keep the venue at top quality. Going forward, the value of each arena will be less than half (-58%) versus the current value and impact of one arena. Over 30 years, the public cost to keep both venues viable is easily hundreds of millions of public taxpayer dollars. These taxpayer costs are substantially higher than any minor benefit in added concert and event activity.
Positive Impacts
- City Revenue: It is expected that 76 Place would drive negligible growth in city tax revenue (~6% through 8-12 new entertainment events annually in the City) from a minimal increase in new spending to Philadelphia from those coming from outside the market to spend time and money (and generate taxes) in the City.
- Population Base: Center City has seen a resurgence in the past 15 years, with many more people living and working in the area. Many of these residents and employees have higher incomes and ability to spend on entertainment at a new arena, as well as at restaurants, bars and retailers before and after games.
- Post-Pandemic Recovery: Center City is located in the central business district of Philadelphia, and prior to the pandemic contained nearly 50,000 residents, 146,000 non-resident workers and 221,000 visitors on a daily basis. However, post-pandemic, according to the State of Center City Philadelphia 2023 report, Center City has only recovered to 84% of pre-pandemic levels. With so many working from home, the non-resident workforce is currently only 66% recovered, which has significantly impacted spending in the Center City. On the flip side, many of the urban residents may be working from home versus commuting out of Center City. 76 Place will likely provide a resurgence in activity to Center City.
Negative Impacts
- Traffic Congestion: The streets approaching and adjacent to 76 Place are narrow, many with just one lane in each direction. Gridlock is likely before and after events. Additionally, Interstates 95 and 76 commonly have traffic during rush hour, which is when attendees would be traveling to games.
- Parking: With no dedicated parking garage, 76 Place will rely on numerous existing office building parking garages to accommodate 4,700 cars per game. Attendees will need to navigate both the traffic and parking complexities, walking up to a half mile. For many who are used to the easy in/out at Wells Fargo Center, this will be a hurdle they may not be willing to make, which will negatively impact attendance at events.
- Cultural Influences: A major concern for the residents of Chinatown is gentrification. They fear rising real estate costs and the loss of family-owned businesses in the community.
