SBD/Issue 77/Franchises

Hornets Sign Lease Extension With Opt-Out Tied To Attendance

Hornets' New Lease Extension
Includes Opt-Out Clause
The state of Louisiana and the Hornets have signed a two-year extension of the club’s New Orleans Arena lease that gives the Hornets "an option to leave after the 2008-09 season" should the team average less than 14,735 in paid attendance for the final five months of this season and the entire ’08-09 season, according to Jeff Duncan of the New Orleans TIMES-PICAYUNE.  The Hornets have averaged 12,215 for eight home games since December 1, when the benchmark measurements started, and to get to the threshold in the lease extension, the team has to average 15,036 "in the remaining 76 games that will be played this season and next season." Playoff games will not be factored in. The 14,735 figure, about 86% capacity of the 17,188-seat arena, was the team's average attendance for the three seasons before Hurricane Katrina. SMG Regional VP Doug Thornton, whose group operates the arena, said, “What’s good about this deal is it forms an equal partnership between the team, the state and the fans.”  Hornets Owner George Shinn said, “We want this to be our home for a very long time, and we have great confidence that we will succeed.” Jimmy Clarke, Chief of Staff for Louisiana Gov. Kathleen Blanco, said, “This is not about an opt-out; it’s about an extension.” Shinn said that under his agreement to sell 25% of the team to Gary Chouest, Shinn “would be forced to pay back Chouest’s investment, about $62[M], if he sells or relocates the team.” However, Duncan notes a city attempting to land the Hornets “could line up another minority partner for Shinn and agree to pay part or all of his penalties.” Meanwhile, the deal also "relieves the state of its responsibility to construct" a new practice facility for the team (New Orleans TIMES-PICAYUNE, 1/10).

Shinn (l) Says Relocation Would Not Be First
Option If Attendance Threshold Not Met
SHINN SAYS HE IS COMMITTED TO CITY: In New Orleans, John Reid reports that in order for the Hornets to leave after the ’08-09 season, they would “have to announce their intentions before the end of February 2009.” However, Shinn said that if the attendance threshold is not met, he “would seek to renegotiate with the state rather than explore relocating.” The club will continue to be eligible for “financial incentives based upon ticket sales.” Also, Shinn said that he will “dismiss any employee who publicly bashes New Orleans, and he will trade a player who comments negatively about the city” (TIMES-PICAYUNE, 1/10). In New Orleans, John DeShazier writes the 14,735 figure "looks pretty distant" with the Hornets averaging far less than that this season. But Hornets President of Business Operations Hugh Weber said, “We believe in the fans here.  This benchmark, we believe, is very achievable” (TIMES-PICAYUNE, 1/10).

MOVING EXPENSES: Weber added it would cost Shinn $100M, including the $62M due to Chouest, to relocate the team after the ’08-09 season. Weber: “You’re talking about a time period that’s very tight, where George would have to pull all this together, write a $100[M] check, and then relocate. It just doesn’t happen that way” (TIMES-PICAYUNE, 1/10).  But SPORTSBUSINESSRADIO.com’s Brian Berger wrote, “There are several eager groups out there who want NBA teams and the biggest challenge is getting a team out of its current lease agreement so the team can be moved.” If the Hornets opt out after ’08-09, “you can bet there will be buyers knocking on George Shinn's door offering to buy the team and make him whole” (SPORTSBUSINESSRADIO.com, 1/9). In Oklahoma City, Darnell Mayberry notes that if the NBA denies the Sonics’ relocation proposal due to the KeyArena lease legal battle, that “could open the door for the Hornets to return” to the city. Other possible relocation cites include K.C., Las Vegas or San Jose (DAILY OKLAHOMAN, 1/10).

TIME TO RECIPROCATE: A TIMES-PICAYUNE editorial is written under the header, “Show Hornets The Love.” The Hornets and the NBA “have made a strong commitment to our recovery” by moving the team back full-time and awarding the city next month’s All-Star Game. Also, the club has the fifth-best record in the Western Conference and is “putting on a heck of a show on the court. … But fans have yet to show up in force, and it’s about time we start packing the arena” (TIMES-PICAYUNE, 1/10).

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