Last October, Ryan Companies US, Inc., in Chicago celebrated the end of construction and the grand opening of Sears Centre, an 11,000-seat, $65 million multi-purpose sports and entertainment arena in Hoffman Estates, a west/northwest suburb of Chicago. DBIA interviewed Jeff Smith, president of the Midwest Division of Ryan Companies US, Inc., about the project.
DBIA: What makes Sears Centre so special?
Smith: "When we first began conceptualizing Sears Centre, we envisioned a world-class, state-of-the-art arena — with all types of entertainment options — that would make it enjoyable, easy, and affordable for people to attend, and to be repeat visitors. We think we have accomplished that in the final product.
But the uniqueness or specialness of Sears Centre goes beyond the bricks and mortar. In November 2004, when we first announced the arena, I said the stars had aligned for a very special project.
We had a Village leadership that saw the real value of backing this significant, state-of-the-art project; a landowner, Sears, that was seeking to reposition its business park and support projects in keeping with its corporate image; and a developer that saw an opportunity to serve a tremendously underserved market.
All those ‘stars’ came together and worked very diligently together to make Sears Centre happen."
DBIA: Is Chicago really an "underserved" market?
Smith: "Through our due diligence process, a study concluded that Chicago — even with the United Center, AllState Arena, and Tweeter Center and a multitude of other smaller local venues — was a grossly underserved entertainment market, based on population and the number of opportunities available within a close proximity.
This is particularly true of the western and northwestern suburbs where going downtown for a major entertainment event represents a significant investment of time to get there and money to purchase tickets."
DBIA: With all that in your favor, was it as simple as it sounds?
Smith: "Not at all. Undertake a significant, high profile project under tight timelines and strict budget considerations and you open yourself up for intense scrutiny from a lot of people.
On time and on budget are words so routinely used in our business they are almost meaningless … unless you are challenged with building an arena in two-thirds the standard time, and at a cost significantly less than industry averages.
But if it was going to be done at all, those were the parameters based on the rules of the game we helped to write.
The Village of Hoffman Estates approved $50 million in bonds in the form of a first mortgage.
Anything above and beyond would come from Ryan and our partner Sears. From a timing perspective, in order to secure professional sports teams that play a winter schedule, a schedule accounting for as much as 40 percent of the dates booked in the first year, an October 2006 opening was essential. Missing the mark on the cost or the timing would have serious consequences.
You don’t reschedule Bob Dylan … or tell four new sports teams to find a home away from home."
DBIA: What specifically in your approach made it easier to execute and accomplish this vision?
Smith: "People want to single out one decision or innovation — lightening in a bottle — that saved the day and allowed a project to move forward saving a lot of time and/or money in the process.
There was no single decision at Sears Centre that paved the road. Instead, it was the result of a series of many good decisions throughout the development process. A few of the key strategies were:
- Approaching the development of the arena with Ryan’s unique design-build process saved valuable time, money, and resources;
- Purchasing a variety of construction materials in advance guaranteed certain costs;
- Maintaining a focus that was driven by providing the best entertainment experience with all stakeholders sitting around the table."
DBIA: Is this approach atypical for the development of arena and entertainment facilities?
Smith: "Our approach was to back into the design asking, "What is the best we can design and build for X dollars?" X was determined by carefully working the numbers. We knew the profit margins we needed and then determined the type of arena that was necessary to deliver those results.
A lot of other arena projects start with asking the question, ‘What do we want in an arena?’ Then they see what it costs, how it gets funded, and how long it takes to build.
Comparatively, Sears Centre came in at about two-thirds the cost of other arenas. Arenas today typically cost approximately $10,000 per seat to develop. Sears Centre cost approximately $6,500 per seat.
That type of differential would automatically, and naturally, lead one to believe sacrifices were made, that Sears Centre is not at the caliber of other arenas.
Just the opposite is true. The quality of amenities and features at Sears Centre stacks up with any arena developed in the last 10 years, from the club lounge to the concession stands, from the private suites to the restroom facilities, and from the locker rooms to the acoustical system."
DBIA: How specifically did the design-build process benefit you in developing Sears Centre?
Smith: "Approaching Sears Centre through a unique design-build process shaved eight to nine months off the design and construction process, meaning the difference in being able to deliver the project in 2006 rather than 2007.
In reality, it probably was the difference in doing the project at all.
Under the design-build scenario, we started designing in March 2005, broke ground in July 2005, and opened in October 2006 — a 19-month span. Under more common development methods, the project would have taken as many as 28 months from design to completion, with eight to 10 months dedicated to design and competitive bidding and approximately 18 months to construct.
The benefits of such a process meant much greater flexibility:
- Construction documents, typically completed ahead of groundbreaking, were a more fluid process;
- Work on certain areas of the arena were going on while other areas were in final design and planning;
- Collaboration between design and construction teams shaved considerable time; design issues and changes were addressed in a matter of hours instead of as much as several weeks."
DBIA: Describe some of the other decisions or positions that made the development unique.
Smith: "Time savings were further enhanced by our position as owner, developer, and operator. We were in a better position, and had greater motivation to integrate operations and financial implications to any decision, which led to increased opportunities for value engineering. The team was better equipped to say, ‘Here are your options and here are the implications.’ It created an effective, streamlined process.
Our approach to material costs also paid off significantly.
It is pretty common to be able to lock in prices for everything including carpeting, concrete, steel and asphalt for a project that will be built over a six-month window. Over that time frame prices typically may fluctuate 2 to 2½ percent.
Construction pricing is much more difficult when the duration of the project is two years. From the beginning of construction at Sears Centre, for example, pricing of many items rose by 15 percent or more.
Anticipating there would be a fluctuation of better than the 2½ percent average, we hedged our bets and bought many materials — concrete, steel, drywall, glass, and roofing materials — up front, guaranteeing a fixed cost. In hindsight, it was the right thing to do. If you had to start building the arena today, construction costs would be 12 to 15 percent higher based on current price levels."
DBIA: As you developed Sears Centre, were there any regrets or things you would do differently?
Smith: "Let’s just say the bottom line in our approach always was to create the best patron experience possible at Sears Centre, without overshooting the budget.
Reducing the number or quality of restrooms and concession areas in the facility could have saved substantial money. But that would have lessened the overall experience for the audience. Instead of having restrooms and concessions on every level, allowing comfort and a total experience, guests would have had to go to a different level, perhaps missing some of the action, as is the case in many other venues.
Sears Centre’s parking was designed to be convenient. Money could have been shaved from the budget, by creating one significantly larger lot further away from the arena. It would have been at the cost of the convenience and wasn’t worth the savings.
We didn’t need to add a separate entryway, with concierge and other high end finishes, for the suite holders. But in doing so, these patrons feel they are special guests of Sears Centre. That came at a cost, but is worth the money for people who have made three- and five-year commitments to lease one of the 43 private suites. "
DBIA: Are there any regrets?
Smith: "Regrets, no. But hindsight is always 20/20, and you can look back and say, ‘If I had it to do over I would do this or that.’
It would have been nice to have operable glass walls for all of the suites. This would allow suite holders the flexibility to be part of the action or to shut out some of the crowd noise. Yet the consequences of that flexibility — a pretty significant cost and the operational issues it would create — made that an option that really wouldn’t be in anyone’s best interest.
Additionally, we were hesitant to spend the capital, up front, to build out and finish the loge boxes on the first floor. We did that prior to opening, out of sequence, by choice and, to some degree, necessity. This speaks to the popularity of the suites at the upper level, and is a good problem to have. Nonetheless, anytime you do something out of sequence you are looking at additional costs. So if we had it to do over, we probably would.
We are very pleased with the way things evolved in the planning and development of Sears Centre. It was a shared vision that has come to reality. If not for the tremendous support and cooperation of our partner Sears, and the Village of Hoffman Estates, and an approach that relied heavily on our own specialized design-build process, Sears Centre likely would still be a dream. Further, the west and northwest suburbs would still be an underserved market."
INFO: Ryan Companies US, Inc. (www.RyanCompanies.com)