THE SUPERLATIVE GROUP

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The Superlative Group, Inc.

Sanford House 2843 Franklin Boulevard Cleveland, Ohio 44113 Phone: 216.592.9400 [email protected] www.superlativegroup.com

Phase I Asset Inventory & Valuation Report

THE SUPERLATIVE

GROUP

NAMING RIGHTS AND SPONSORSHIP SERVICES

Santa Clara Valley

Transportation

Authority (VTA)

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1 Executive Summary

1.1 Introduction

In December 2019, Santa Clara VTA (“VTA”) commissioned The Superlative Group (“Superlative”) to conduct an asset inventory and valuation of VTA-controlled lines, facilities and other assets that could be made available to generate revenue through Naming Rights and Corporate Sponsorships. This report, subject to review and approval by VTA personnel and its Board of Directors, presents the detailed results from Superlative’s preliminary valuation and recommendations for a strategic Naming Rights and Corporate Sponsorship sales campaign.

1.2 Background & Methodology

Although sports and entertainment venues are the traditional properties with Naming Rights Agreements, Naming Rights and corporate sponsorships have become increasingly prevalent in a range of sectors:

• Transportation

• Theatres & Convention Centers

• Academic Institutions

• Municipal Marketing

A sponsor can benefit from greater awareness, wider reach and more effective marketing via Naming Rights when compared to traditional advertising.

This is particularly true of Naming Rights associated with transportation properties. Traditional Naming Rights gives sponsors identification in one location; transportation offers Naming Rights partners exposure on freeway bridges, stations, exterior signage, directional signage, vehicles, schedules and websites.

Activation of Naming Rights and corporate sponsorship programs involves merging private and public funds to provide additional revenue while building both private and public sector brands in a manner which reflects the stability and values of the community, its people and its goals for the future.

The Superlative Group Valuation Methodology uses a combination of impressions-based valuation of media exposure and industry benchmarking to generate valuations which will form the opening negotiating position with target companies during the sales process.

Section 4 of the report provides a brief overview of the main assets of VTA, which would be the most marketable for a Naming Rights opportunity.

1.3 Signage Sponsorship

One of the key success factors is generating signage proposals that deliver the optimum balance between sponsor impact and compliance with City and State signage ordinances. This report provides photographs and renderings from three successful partnerships, delivered by The Superlative Group:

• San Diego MTS - San Diego Blue Line - University of California (UC) San Diego

• Greater Cleveland RTA - Cleveland State Line

• Greater Cleveland RTA - Healthline

Visual examples are provided on the following page of how a Sponsor ID can be subtly but impactfully included on transit vehicles. The Superlative Group will work with VTA to balance between sponsor sign impact and compliance with agency and other applicable statutes. Please refer to Appendix C for further images and renderings from the projects listed above.

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Figure 1.3.1 provides examples of how the UC San Diego logo is included on San Diego MTS Light Rail vehicles. Light Rail vehicles are not dedicated to specific lines however MTS do their best to use the two wrapped vehicles shown in Figure 1.3.1A on the Blue Line. Figure 1.3.1B shows an example of a removable sign at the front of a vehicle serving the Blue Line. Sponsor ID can also be shown on the digital signage on the front of the vehicle.

Figure 1.3.1A Figure 1.3.1B

Figure 1.3.2 below provides an example of how the Cleveland State University Logo was incorporated onto the front of dedicated vehicles, bus shelters and bus stop.

Figure 1.3.2

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1.4 Valuation Summary

A wide range of factors impact the value potential from a Naming Rights agreement, including:

• Signage size and design;

• Signage location and visibility;

• Demand and competition for advertising space;

• Population and demographics; and

• Restrictions placed on signage by city, county and/or state ordinances.

These factors are discussed in further detail in Sections 4 through 7. These sections also provide an overview of the proposed quantitative benefits and valuation assumptions for consideration by the VTA project team.

Light Rail

Section 4 provides an overview of the valuations for Light Rail assets. Table 1.4.1 provides a summary of the annual value range for each line, proposed term of the Naming Rights agreement and the total value range including a CPI escalator of 2.6%.

Table 1.4.1

One of the key factors that boosts the Blue Line valuation is visibility from major highways. As detailed in Section 4, signage visibility from highly-trafficked routes generates significant impressions, which will be highly attractive to prospective sponsors. The Orange Line serves Levi’s Stadium and benefits from the additional footfall generated by San Francisco 49ers games and other events. San Jose International Airport is located on the Green Line, which will generate premium demographic foot traffic. These individual selling points will assist the sales process to increase interest from a wide range of targets.

Bus Routes

During the project initiation phase, Superlative agreed a list of priority bus routes to be valued. The findings for these routes are presented in Section 5. Superlative has provided a fair market valuation for Express Bus Routes which are currently part of the Express Bus Partnership Program. The findings for Express Bus Routes are provided in Section 6 and summarized on the following page.

Light Rail Line Value Range

(Floor)

Value Range (Ceiling)

Term (Years)

Revenue Potential (Floor)

Revenue Potential (Ceiling)

Light Rail - Blue Line $650,000 $800,000 25 $22,492,390 $27,682,942

Light Rail - Green Line $600,000 $750,000 25 $20,762,206 $25,952,758

Light Rail - Orange Line $600,000 $750,000 25 $20,762,206 $25,952,758

TOTAL $1,850,000 $2,300,000 $64,016,803 $79,588,458

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Table 1.4.2

Please refer to Sections 5 and 6 for further detail on the individual valuations for bus route.

Stations

Section 7 presents the valuations for station assets. Superlative calculated a fair market valuation for 26 stations priority stations, as agreed with VTA. The value range for each station is provided below.

Table 1.4.3

Please refer to Section 7 for further detail on the individual valuations for each station.

Bus Line Value Range

(Floor)

Term (Years)

Rapid 500 $100,000 $150,000 10 $1,125,493 $1,688,239

Rapid 522 $175,000 $225,000 10 $1,969,613 $2,532,359

Rapid 523 $150,000 $200,000 10 $1,688,239 $2,250,986

Route 22 $150,000 $200,000 10 $1,688,239 $2,250,986

Route 23 $100,000 $150,000 10 $1,125,493 $1,688,239

Route 25 $100,000 $150,000 10 $1,125,493 $1,688,239

Route 60 $150,000 $200,000 10 $1,688,239 $2,250,986

Route 66 $150,000 $200,000 10 $1,688,239 $2,250,986

Route 68 $150,000 $200,000 10 $1,688,239 $2,250,986

Route 70 $100,000 $150,000 10 $1,125,493 $1,688,239

TOTAL $1,325,000 $1,825,000 $14,912,780 $20,540,245

Express Bus Line Value Range

(Floor)

Term (Years)

Route 101 $100,000 $150,000 10 $1,125,493 $1,688,239

Route 102 $75,000 $125,000 10 $844,120 $1,406,866

Route 103 $75,000 $125,000 10 $844,120 $1,406,866

Route 104 $75,000 $125,000 10 $844,120 $1,406,866

Route 121 $75,000 $125,000 10 $844,120 $1,406,866

TOTAL $400,000 $650,000 $4,501,971 $7,315,704

VTA Station Assets Value Range

(Floor)

Term (Years)

Great America $150,000 $200,000 10 $1,688,239 $2,250,986

Old Ironsides $50,000 $100,000 10 $562,746 $1,125,493

Lick Mill $50,000 $100,000 10 $562,746 $1,125,493

Blossom Hill (SR 85) $125,000 $175,000 10 $1,406,866 $1,969,613

Snell (SR 85) $125,000 $175,000 10 $1,406,866 $1,969,613

Cottle (SR 85) $100,000 $150,000 10 $1,125,493 $1,688,239

Virginia (SR 87) $100,000 $150,000 10 $1,125,493 $1,688,239

Tamien (SR 87) $100,000 $150,000 10 $1,125,493 $1,688,239

Curnter (SR 87) $100,000 $150,000 10 $1,125,493 $1,688,239

Capitol (SR 87) $100,000 $150,000 10 $1,125,493 $1,688,239

Branham (SR 87) $100,000 $150,000 10 $1,125,493 $1,688,239

Lockheed Martin $50,000 $100,000 10 $562,746 $1,125,493

Cisco Way $50,000 $100,000 10 $562,746 $1,125,493

Bayshore / Nasa $50,000 $100,000 10 $562,746 $1,125,493

De Anza College $50,000 $100,000 10 $562,746 $1,125,493

Children's Discovery Museum $50,000 $100,000 10 $562,746 $1,125,493

Civic Center $50,000 $100,000 10 $562,746 $1,125,493

Convention Center $50,000 $100,000 10 $562,746 $1,125,493

Metro / Airport $75,000 $125,000 10 $844,120 $1,406,866

Alum Rock $75,000 $125,000 10 $844,120 $1,406,866

Baypointe $75,000 $125,000 10 $844,120 $1,406,866

Berryessa BART $75,000 $125,000 10 $844,120 $1,406,866

Milpitas Transit Center & BART $75,000 $125,000 10 $844,120 $1,406,866

Mountain View $100,000 $150,000 10 $1,125,493 $1,688,239

Paseo de San Antonio $75,000 $125,000 10 $844,120 $1,406,866

Tasman $100,000 $150,000 10 $1,125,493 $1,688,239

TOTAL $2,100,000 $3,400,000 $23,635,350 $38,266,757

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Category Opportunities

Section 8 presents valuations for five system-wide category partnership opportunities. The value range for each category is provided below.

Table 1.4.4

1.5 Next Steps

Impact of COVID-19

Between the Project Initiation phase in January 2020 and completion of this draft Phase I Asset Inventory

& Valuation report, COVID-19 resulted in severe restrictions on travel and significant economic uncertainty.

VTA ridership decreased approximately 80% and restrictions on rail and bus capacity to comply with social distancing guidelines is likely to continue leading to higher operational costs for transit systems. It is anticipated it could take several years to return to 2019 ridership levels, as the return to normal working practices will be gradual.

As it relates to Naming Rights and Sponsorships, it is important to think in terms of decades. Naming Rights for VTA Light Rail lines has been proposed as a 25-year agreement and 10 years for stations. The Superlative valuation model incorporates numerous sources of impressions and accounts for internal and external variables that could have an impact on the value of partnerships over time. It is a common belief that ridership is a key function of annual Naming Rights and partnership value. While it is important, it is one of many audiences that comprise a wide range of impressions that justify partnership investment and is not the sole selling point. This means that if ridership or vehicular traffic should shift due to social distancing over the next 12-18 months, our valuation model will still capture impressions from signage through drive-by traffic, as well as online, social and printed media.

Base and Variable Partnership Model

Superlative recommends that the Naming Rights valuations in this report should be based on 2019 ridership and traffic data as, over the course of a Naming Rights agreement, trust in public transportation will recover, vaccines will be created and ridership will recover to 2019 levels. Our proposed strategy if reduced ridership levels proves to be a significant issue during the sales campaign is to offer targets a Base and Variable Partnership model until such time as ridership recovers.

An example of how this model could work for VTA Light Rail assets is provided below:

• Base Partnership: Each year of the partnership would have a “base” investment of $300,000 -

$400,000 depending on the assets included. This base investment assumes Sponsor Exposure from Station Signage, Printed Materials and Online Media with reduced ridership at 20% of 2019 levels. The agreement would include a 2.6% annual escalator over the term of the partnership.

• Variable Partnership; Ridership metrics each year would be monitored to increase the investment in alignment with activity on the VTA Light Rail service. Agreed increments in Naming Rights revenues from Sponsor to VTA would be paid as ridership milestones are met. Once all milestones have been met the partnership would normalize at the full Naming Rights valuations.

Table 1.5.1 provides an example of how this concept could work in practice, using the VTA Blue Line as an example. The Base Partnership of $300,000 - $400,000 assumes ridership at 20% of 2019 levels. At the end of Year 1, ridership has recovered to 40% of 2019 levels and the variable component of $100,000 to

$125,000 is added to the annual Naming Rights fee from the Sponsor to VTA. By the end of Year 3, ridership has recovered to 100% of 2019 levels and the original valuation figures are used, subject to annual

Category Opportunities Value Range (Floor)

Term (Years)

Paratransit Fleet $250,000 $400,000 10 $2,813,732 $4,501,971

Technology & Telecoms $150,000 $300,000 5 $790,027 $1,580,055

Energy $100,000 $200,000 5 $526,685 $1,053,370

Parking $100,000 $200,000 10 $1,125,493 $2,250,986

TOTAL $600,000 $1,100,000 $5,255,937 $9,386,381

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Table 1.5.1

Sales Strategy

Although VTA ridership may take years to recover, the financial recovery of many organizations in the technology and financial sector is already taking place. COVID-19 created new economic winners and losers and many technology organizations which provide connectivity and facilitate flexible working practices have seen significant increases in demand. The process of planning a sales campaign involves compiling a list of targets, drafting sales letters and preparing promotional materials. This process can take approximately three months and Superlative expects that within this timeframe, many of the key targets for the sales campaign will be back to work and ready to discuss Naming Rights Opportunities.

Due to the number of potential opportunities, there will be a need to prioritize opportunities, based on the estimated revenue potential and most saleable opportunities. Superlative provides its initial views on priority opportunities below:

Priority Opportunities i. VTA Light Rail Lines;

ii. Great America Station; and

iii. Priority Bus Routes, e.g., Rapid 522.

Second Tier Opportunities iv. Light Rail Stations on SR 85;

v. Light Rail Stations on SR 87; and

vi. Category Partnerships (Paratransit Fleet, Technology & Telecommunications, Parking, etc.).

Sales Process

The Superlative Sales Strategy is to always approach the marketplace with the most valuable asset first.

The Superlative Group uses a systematic approach for contacting potential sponsorship partners. This is completed in five distinct steps to ensure comprehensive coverage:

i. Utilize contact database of Superlative’s regional, national & international corporate contacts;

ii. Identify and research prospective corporations through subscribed databases to match the marketing needs of corporations with the logical and most valuable transit assets;

iii. Collaborate closely with VTA and maintain communication on any recommendations and/or existing relationships;

iv. Promote revenue-generating campaigns with a description of assets and initiatives;

v. Create presentation material to provide specific information for potential partnerships with VTA as a part of the Corporate Sponsorship, Naming Rights and marketing programs, including;

Blue Line Ridership Level Value Range

(Floor)

Full Valuation 100.00% $650,000 $800,000

Base Partnership 20.00% $300,000 $400,000

Variable Partnership Year 1 20.00% $100,000 $125,000

Total Partnership Year 1 40.00% $400,000 $525,000

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o Market/demographic data;

o Measured media value;

o Value justification for unmeasured media;

o Sponsorship benefits and options;

o Options for renewal; and o Financial investment.

The Superlative Group will develop sales strategy materials and ensure that VTA is provided with the appropriate timeline and to review and comment.