SBJ/January 19 - 25, 2004/Facilities

Firms form joint venture to build 3 arenas

Global Spectrum, Hunt Construction Group and facility developer Arena Management and Construction have formed a nonprofit corporation to privately finance, build and operate 10,000-seat hockey arenas in Albuquerque, N.M.; Toledo, Ohio; and Tucson, Ariz., said representatives of the firms.

The financial structure allows for the construction of a new arena with a minimum of upfront public spending, which may make it an increasingly popular choice for both localities and the companies submitting bids to get their arena-related contracts.

In Toledo, the joint venture won unanimous approval through a request-for-proposal process. The new arena is part of a 125-acre, $200 million marina district development featuring other entertainment and retail elements.

Steve Best, city commissioner of real estate, said Toledo has spent 10 years trying to build a facility to replace 56-year-old Toledo Sports Arena without burdening taxpayers.

In Albuquerque, the partnership worked directly with the city without going through a formal bid process, said Zev Buffman, managing partner of Arena Management and Construction, the lead contact for the joint venture. The city still has to acquire the land targeted for the arena.

Tucson officials are expected to determine on Jan. 26 whether the development of the arena project should be put out for bid. Buffman said it would be part of an existing convention center complex.The arenas range in cost from about $48 million in Albuquerque and Tucson to $63 million in Toledo, which Buffman said is more expensive because additional structural support is required for the waterfront site.

Buffman, a general partner of the NBA's Miami Heat until team owner Micky Arison bought his share in 1996, said the three primary partners will invest about $6 million in equity in each of the three projects.

Selecting architects for the three arenas is "at the discretion of Hunt Construction," he added.

Toledo has a hockey team, the ECHL's Toledo Storm, on board with the plan, but the Albuquerque and Tucson venues would have to find hockey tenants. Buffman said discussions would soon begin with the owners of the Central Hockey League's New Mexico Scorpions, who play at Tingley Coliseum at the state fairgrounds in Albuquerque. Tucson does not now have pro hockey.

Gladieux
Tim Gladieux, a Toledo partner in the joint venture, is the majority owner of the Storm and also owns Toledo Sports Arena and V/Gladieux Inc., the venue's food concessions firm. Gladieux plans to sell the 25-acre sports arena property to the city, which he said would contribute $4 million toward new construction.

"I would sell my properties to that entity with the proceeds going to leverage the financing of the facility," he said. "I understand the risk, and it's one I'm willing to take as a developer and stakeholder."

V/Gladieux Inc., pending a bid process, would operate concessions at the new arena, signing a management fee contract just like Global Spectrum.

Gladieux doesn't mind selling the hockey team to the nonprofit. "When you think about it, the arena business is really all about concessions and parking," he said. "That's always been my core business, and that's the part I want to hold on to."

Russo
The business model has been used elsewhere in the world, including England and Germany, said Frank Russo, senior vice president with Global Spectrum. Domestically, the University of Oregon is working on a similar arrangement to build a new arena in Eugene.

"When I was with Ogden Entertainment, that was the way we won contracts in Europe," Russo said. The nonprofit entities are created to sell tax-exempt bonds to pay all or part of the initial debt incurred from construction costs. The nonprofit assumes ownership of the facility and its sports tenants and has a board of directors that controls the overall operation. Third-party firms such as Global Spectrum sign management fee contracts with the nonprofits as clients.

When the bonds are paid off in 20 to 30 years through such traditional arena revenue streams as concessions, parking, premium seating and sponsorships, the nonprofits turn the facilities over to the communities for public ownership.

"All the revenues go into one pot," said Buffman. "There is only one organization, unlike a typical arena."

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Related Topics:

ECHL, Hunt Sports Group, Miami Heat

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