OC Fairgrounds: Sum of the Parts Worth More Than the Whole

The pending sale of the Orange County Fair and Evens Center (OCFEC) (aka OC Fairgrounds) has many people who work at the facility nervous and community leaders either excited or nervous.

The RFP that was released says the property will go to the highest bidder who can complete the deal and the State receives profit participation after the sale.  Sales of property like this are rarely an all cash sale, especially when profit participation is on the table.  

There are two extreme ends of the deal.  One is to leave the Fairgrounds intact and continue to operate everything the way it is done now. This is unlikely because this does not result in a sufficiently high price for the property in order to be the winning bid. The current cash flows for the property are rather low due to the seasonal operation of the Pacific Amphitheater and OC Fair.  

The other extreme is to knock down every building and create mixed use residential and shopping. Think something like downtown Pasadena - high end residential over shops, with some higher end retail in the mix. This may bring the biggest cash flows and result in the highest potential profit participation for the State because of the rents.  However, this scenario is unlikely because of the zoning battle that would ensue.  Costa Mesa planning commission, city council and residents would have to agree to the higher density zoning. Even if the planning commission and city council agreed, there would certainly be an outcry and subsequent legal maneuvering from the residents to block the deal. 

One scenario is to "part out" the Fairgrounds. 

• The Pacific Amphitheater could be sold (or leased long term) to a company like AEG or the House of Blues, for example. The cash flows from the venue operator would be split with the State.  Ideally, the venue operator would to bring money to the table to help close the deal.  However, to make this deal work the Amphitheater would have to book many more dates than it does now.  In prior years, longer and more frequent concerts have caused Costa Mesa residents to go to court over noise.  
• The Equestrian Center could be converted to high end residential or a mixed used district or an entertainment district.  

Again, a partner in this deal could share the proceeds with the State.  And, a partner could bring money to the table to help close the deal. 

The fair buildings could be kept intact and upgraded to something closer to a convention center.  Again, the operator of these buildings would bring cash to the table to close the deal.  Upgrading the facilities would attract more shows to the facilities because the Fairgrounds could eventually become an alternative to the Anaheim Convention Center for some shows.  The proximity to John Wayne Airport makes the property attractive to conventions and large corporate meetings.  Additionally, the smaller footprint of show space could attract shows and corporate meetings which find using larger facilities to not be cost effective.  

More parking could be created by building multi-parking garages.  The additional parking would generate revenue, which could be shared with the State.  Additionally,  a parking lot or two to be could be developed into a hotel or a restaurant district.  The addition of a hotel or restaurant district would be very attractive to the operators of the Pacific Amphitheater and upgraded Fair/convention center facility.

The deal could be structured to maintain a much coveted tax break for agricultural land on as many acres as possible.  This would save the developers and operators money every year, if they are able to pull it off.

This is one of several scenarios for the eventual development of the OC Fairgrounds.  Unless there is a big bond issue hiding somewhere, it could be unlikely the Fairgrounds stays as it is for many more years.