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SBJ/March 15 - 21, 2004/SBJ In Depth
Sports-driven projects a tough sell
Published March 15, 2004
The downtown revitalization that has come slowly but steadily in Cleveland since Jacobs Field and Gund Arena opened stands as a frequently cited example of sports facilities acting as catalysts for urban renewal and development. The sprawl of empty land that encircles the Ballpark at Arlington casts it as a poster child for promise unfulfilled.
All three opened 10 years ago, funded mostly by public dollars, springing up in the early stages of a sports facilities building boom driven in large part by the widely publicized success of Baltimore's Camden Yards.
Fourteen baseball parks, 18 NFL stadiums and 25 NBA and/or NHL arenas opened in U.S. cities in the last 10 years. In many cases — and particularly in markets that selected urban sites — the argument for funding the projects with public money was that they would be linchpins for growth, anchors for developers who would surround the sporting structures with hotels, restaurants, shops, office towers and housing.
In a handful of markets, such as Cleveland, Denver and, more recently, Columbus, the projects have delivered as advertised, or at least close to it, pumping life into stretches of downtown that were either dead or in disrepair.
But most developments have failed outright, underachieved or only recently begun to stir after several years of slumber. While many of those projects generate enough tax revenue to justify the cost to build them, few have proved to be the anchors that development-hungry communities had hoped for.
"It takes a concerted public and private effort, and you can't expect either one to bear the brunt of the cost," said Steve Hyman, general manager of The Mark of the Quad Cities in Moline, Ill. The $40 million, mid-size arena opened in 1993 and helped spur a $300 million to $400 million redevelopment of the Mississippi River community, headquarters of Deere & Co.
John Deere developed the Pavilion museum near The Mark of the Quad arena in Moline, Ill.
"A lot of people think you can build a $250 million arena and watch everything turn from a cesspool to rose water," Hyman said. "But if you do nothing but wait for the ripples of that cesspool to reach the shoreline, it will never happen. You have to push, pull, punch and squeeze to make it work. You have got to have serious private players."
As president of Dallas-based Southwest Sports Group and its real estate arm, Mike Cramer oversees the sports holdings of Tom Hicks, owner of the Texas Rangers and Dallas Stars. Hicks planned massive development projects around both the Ballpark at Arlington and American Airlines Center, shared by the Stars and the Dallas Mavericks.
Neither has come together as originally planned. Yet, pointing to stirrings that have come for both projects in the last six months as the economy has started to rebound, Cramer remains convinced that the strategy is viable.
"I'm bullish on sports facilities as catalysts for real estate development," Cramer said. "You need to be careful where you put it, and be careful what you put there with it, but long-term I think you're going to be OK."
Columbus catches on
Nationwide Arena serves as the focal point for the Arena District development plan in downtown Columbus.
Nationwide Arena, which opened in September 2000 as home to the NHL's Columbus Blue Jackets, is among the few examples of a sports facility combined with real estate development that actually worked according to plan, said Bill Rhoda, principal with CSL Consulting of Dallas, a firm that develops business plans for arenas and stadiums.
"There haven't been a lot of successful case studies, but Nationwide Realty did it," Rhoda said. "Columbus is like Dallas, but they actually came through with it."
Rhoda contrasted the project, backed by the real estate arm of Nationwide Insurance, to the oft-delayed "Victory" development in Dallas that was to rise from vacant stretches adjacent to American Airlines Center.
An ambitious, multiuse plan that encompasses 72 acres, Victory has been slowed by a series of setbacks, including delays in landing $43 million in future tax revenue that it needed to move forward on a $350 million retail project that eventually fell apart.
In contrast, Nationwide responded to a failed facility referendum in Columbus by paying for 90 percent of the arena itself. The local newspaper, The Columbus Dispatch, provided the balance of financing.
"It was a goodwill gesture for the city," Rhoda said. "Nationwide understated the importance of the arena compared to the overall real estate development."
In 1998, two years before the arena opened, Nationwide Realty Investors created a master plan to use its own property and acquire other land to build 1.5 million square feet of office and retail space. The total $500 million Arena District plan included the $150 million arena.
Six years later, the 95-acre Arena District has produced solid results, said Brian Ellis, president and CEO of Nationwide Realty Investors. Development to date has amounted to $519 million, with 1.1 million square feet completed or scheduled to be completed by the end of 2004. The occupancy rate is 85 percent.
The current Arena District projects are a $28 million, 165,000-square-foot office building opening in November and two buildings containing 98 condominiums scheduled to open next spring, with a 1,000-vehicle garage under construction to support those structures.
Condominiums, office space and a medical building are under construction in Columbus.
And there's more. City and county officials are discussing the possibility of relocating the Class AAA Columbus Clippers to a new ballpark within the Arena District. The minor league facility would join two other entertainment attractions in the district that were not part of the original master plan but now play key roles, the eight-screen Arena Grand Theatre operated by AMC and PromoWest Pavilion, a 4,000-seat indoor/outdoor concert venue.
"As we got into the plan, we recognized the area as it was developed was not enough to create 365-day-a-year activity," said Ellis. "Even with those two components, frankly, it's still not enough. That's why there is interest in building the new ballpark."
The Arena District evolved from what Ellis said was underutilized downtown property near the Columbus Convention Center, made up mostly of parking lots and 22 acres that was once the site of the Ohio Penitentiary.
The location took advantage of existing traffic from the city's convention center that at the time attracted about 1.1 million visitors a year.
"Before we even got started with construction, we felt we had the right site from a planning and market perspective," Ellis said. "It was a well-located piece of property, as opposed to a problem area, where you hope that in building an arena, it will rejuvenate the area."
Few hits in Arlington
Nine years after the Ballpark at Arlington opened, you needed a mirror to tell whether the real estate project that was supposed to go along with it was still breathing.
Built as the centerpiece to a proposed 270-acre development, the ballpark languished alone in an open, highway-side stretch between Dallas and Fort Worth until earlier this month, when Siemens moved about 700 employees into a 234,000-square-foot complex that is split between a three-story office building and a one-story research building.
Ballpark financiers have learned the hard way that while a sports facility may add to quality of life and drive traffic on game nights, it typically is not, by itself, an impetus to build hotels, condominiums or offices. The sports projects that have come together most quickly have been integrated into communities rather than dropped into the middle of them and expected to swim on their own.
"This site is bigger than downtown Fort Worth," Cramer said. "So when you say, 'Mike, you haven't been successful,' I'd suggest that rebuilding Fort Worth has taken them a long time. And we're starting from scratch."
Cramer points to several reasons that development around the Ballpark at Arlington has remained dormant. The economic slump of the last three years slowed commercial development in Dallas, deep-sixing projects that weren't already in the pipeline. And Hicks inherited zero momentum from the Rangers' previous ownership group, which showed little interest in developing the land around the park.
Artist rendering shows Siemens Dematic building that opened earlier this year in Arlington.
Some wonder whether the Arlington project was doomed from the time the Rangers agreed to remain in a place that was neither Dallas nor Fort Worth.
"The Rangers really blew it out there in Arlington," said Chris Leinberger, a developer and CEO of the Historic District Improvement Co. in Albuquerque, which is designing the retail and commercial elements surrounding a new downtown arena in the New Mexico city.
Leinberger worked on the Baltimore redevelopment project with noted urban planner Janet Marie Smith, who is now employed by the Boston Red Sox to create revenue streams from existing property at Fenway Park.
"Their thinking [in Arlington] was that it was the architecture that was the important thing," Leinberger said. "It's the location that was important, an area with a walkable downtown. Stadiums perform better in a mixed-use downtown."
That was the plan when American Airlines Center opened in Dallas in 2001. Hicks and former Mavericks owner Ross Perot Jr. came up with Victory, a 72-acre mixed-use plan that would connect with downtown, utilizing the arena as the centerpiece with office towers and residences filling in around it.
The "Victory" project in Dallas received a boost from a planned "W" hotel, shown in this artist rendering.
Cramer said the property has attracted interest from residential developers, but it will take "a few years" to make up the ground that Victory lost during its funding quarrel with the city.
John McCutchen, Dallas-based director of business development for Hunt Construction, builder of 78 professional stadiums, knows all about the struggles that team owners have had building their facilities in the Dallas-Fort Worth Metroplex.
"You know the villain on [the television show] 'Columbo'? It's always the rich guy. People like the rich people not to get richer," McCutchen said. "In that sense, these projects are really unpopular. What you have to do is sell the tax base development, the before and after, like Pittsburgh, Cleveland, Houston, Seattle and Denver did."
Heating up in Arizona
"For the most part, it's not enough just to put up a building and expect that to be the drawing card to spur development," said Jerry Colangelo, owner of the Phoenix Suns and Arizona Diamondbacks and a major player on that city's downtown development front. "It has to fit into the fabric of a plan.
"If a downtown has a plan that would involve housing and entertainment and office construction — a plan that would create density — if you are part of that fabric and part of that plan, and then you put the right structures in that kind of a setting, absolutely it will have considerable impact. It will lift up a city. But not as a stand-alone."
America West Arena was an impetus for downtown development when it opened in 1992, paired with the nearby Arizona Center, a restaurant and shopping complex that includes a 14-screen movie theater. Bank One Ballpark followed in 1998.
The sports facilities brought life back to a decaying downtown on game nights and during the Diamondbacks' World Series run in 2001, but it will take more to turn the city's core into the vibrant, sustaining place that Colangelo and others envision.
With that as a goal, Colangelo and a group of business owners recently spent about $1 million to hire urban planner The Jerde Partnership of Venice, Calif., to develop a downtown design in conjunction with the city. The group has begun a series of town meetings in which it will review those findings and collect input.
Colangelo cites as evidence of progress a long list of projects, all of which are supposed to be completed by 2009: a $600 million expansion that will triple the size of the downtown convention center; a 1,000-room hotel that is expected to come along with that project; 50,000 to 75,000 square feet of retail that he has committed to develop across from the hotel; a 15,000-student downtown campus for Arizona State University; condo projects planned near the ballpark; and a light rail system meant to integrate the area into the rest of a sprawling city.
"I'm totally passionate and committed to trying to make it a dense, 24/7 downtown," Colangelo said. "We've got a lot of things in the pipeline and a lot more in the think tank. What we've done in the last 10 years is great. In the next 10 years, it's going to be terrific."
On Phoenix's northwestern border, a fast-growing suburb has a plan of its own.
Glendale Arena serves as an anchor to a proposed 450-acre project known as "Westgate City Center."
The first commercial tenants for what is called the "Entertainment Village" committed to the project in December: five high-end and themed restaurants and Loews Cineplex, which will build a 20-screen movie theater.
"I'm building a city with 6.5 million square feet," said Ellman. "It's a 10-year project. It's basically planned as a real estate development with an arena stuck in the middle. We went out in the middle of where Phoenix is growing and we're building a destination totally different from an in-fill. There is nothing across the street. We divided the property to create 'across the street.'"
Westgate is viewed as a 10-year project.
Glendale Mayor Elaine Scruggs has trust and faith in Westgate. She helped negotiate the deal in April 2001 for the Coyotes to build in her town. She said the first 1.6 million square feet of mixed-use development will generate enough tax dollars to pay off the city's bond debt and produce a minimum of $100 million in additional revenue over a 30-year period. The city paid $180 million to build Glendale Arena, with the Coyotes contributing $40 million to ensure the facility would open on time.
City architects are reviewing designs of the initial 600,000 square feet of development. The contract between Glendale and the Coyotes includes Ellman paying a $1 million penalty if he doesn't fully develop the first 800,000 square feet by early summer.
"Obviously, that's not going to happen," Scruggs said.
"The mixed use is coming in slower than we had hoped and planned and agreed to. But given the massive size of this undertaking and the 9/11 impact on America, personally, I feel it's impressive and amazing that it's at a point where it is right now."
Only part of the game plan
As he runs through the trinity of successful downtown sports projects — Camden Yards, Coors Field and the Jake/Gund — the man who originally spearheaded development around the facilities in Cleveland likes to point out a clear distinction.
"You have to remember that in Baltimore, the ballpark was built at the end of a [redevelopment] plan, and Denver was in the middle of one," said David Goss, former vice president of economic development for Gateway Economic Development Corp., the nonprofit group formed to oversee construction of the stadiums. "We were the stimulators of it."
The sports venues in Cleveland were part of a huge downtown revitalization push that also included the Rock and Roll Hall of Fame and Museum, built nearby on the downtown lakefront.
The projects delivered the sort of immediate bounce that you'd expect. Restaurants and bars sprouted up on corner after corner. The wildly popular Jacobs Field and the music showplace emerged as tourist destinations.
That wasn't enough for critics who expected more activity between dawn and dusk. Many wondered whether the Gateway district should be gauged a success without something more.
That something came in a way that was not originally envisioned.
"The interesting thing that happened is this sense of neighborhood that has been created," Goss said. "Our initial idea was to create office space. But the office market went into the dumper. So the focus became housing and entertainment. Housing is what's happening now."
Tom Yablonsky, executive director of Historic Gateway Neighborhood Corp., points to $320 million in development and redevelopment in the district since 1995. Five new hotels, all of which incorporated existing buildings, delivered 996 rooms. A neighborhood that had about six full-service restaurants 10 years ago now has about 35, with a House of Blues and more restaurants still on the docket.
The final piece of the puzzle and the true fiber of Gateway's success has been its emergence as a neighborhood. Ten housing projects incorporating 16 historic buildings have yielded 698 units, putting the neighborhood only slightly behind Cleveland's thriving warehouse district, which recently reached sufficient size to begin attracting grocers and other traditional retail outlets.
The project has succeeded, Yablonsky said, because its developers and caretakers were able to integrate existing structures, rather than starting from scratch, offering tax breaks to those who reuse historic buildings. The neighborhood has been able to respond to market changes that might have dissuaded investors who were trying to build from the ground up.
"These projects happen incrementally," Yablonsky said. "If you think that you're going to get the big bang, you're set up for disappointment."
Goss, who now serves as transportation director of the Greater Cleveland Growth Association, says that the best lesson to be taken from Gateway is that sports can serve as a spark, but shouldn't be leaned on for any more than that.
"It shouldn't be seen as an end in itself, but as a stimulator for whatever goals you have," Goss said. "It attracts a lot of people. But there's a history that people come and go, but they don't stay. Sports is a starting point, but there has to be more to do."
Plans change with time
Earl Santee, principal at HOK Sport in Kansas City, mentioned Coors Field, located in Denver's revived lower downtown district, as a model of real estate development working hand-in-hand with a new urban sports facility. The area around the ballpark was previously underdeveloped.
Once Coors Field was built, property values in that section of downtown increased from $10 to $80 a square foot, Santee said. Vacancy rates for commercial property adjacent to the ballpark fell from 40 percent to 10 percent. About 1,500 housing units sprung up within a 10- to 15-minute walk of the ballpark.
The commercial, retail and entertainment areas near Coors Field were not part of a single master plan. Instead project officials considered all master plans within a half-mile of the ballpark. "There were 10 different plans going on," Santee said. "It was a matter of consolidating those master plans so they didn't conflict. We were sharing resources."
Rarely do projects develop exactly as planned. Those that adapt have the best chance of succeeding. As Hyman said, "Somebody's lying through their teeth if they tell you they knew where it all goes and everything all fell into place. You have to be realistic and realize that it's a work in progress."
The arena built in Miami in 1988 for the NBA Heat was supposed to revitalize a bad neighborhood on the northern edge of town and link the area to the Bayside retail and entertainment district.
The plan never fully materialized and "sadly, the arena sits there underused," after AmericanAirlines Arena opened in 1996, said Zev Buffman, former co-owner of the Heat. He now owns an arena construction and development company with projects in Albuquerque, N.M.; Tucson, Ariz.; and Toledo and Youngstown, Ohio.
Heat owners believed an arena could create economic development by bringing housing and light industry to the neighborhood, preventing further deterioration. "In those days, it was a war zone, a staging area for Miami riots," Buffman said.
The ownership group envisioned a turnaround that would edge slowly toward the trendy Bayside entertainment and shopping complex on the waterfront six blocks away.
The city paved the way with a new federal courthouse and office buildings and a rail system created with a stop in front of the arena and Dade Community College. But the revitalization effort veered in the opposite direction, north of the arena instead of south toward Bayside.
"There were 100,000 square feet of businesses opening in the area," Buffman said, "but they didn't turn out to be wonderful, sexy retail."
Buffman sold his shares in the Heat in 1996, one year before the team landed its deal to relocate to another new, publicly financed arena. AmericanAirlines Arena was built on the waterfront and, unlike its predecessor, had the ability to generate revenue from a full array of premium seating.
"It's the same as always with real estate: location, location, location," said Yablonsky, the official with Gateway in Cleveland.
"You can't stick it in a downtrodden neighborhood and hope it's going to pull everything up."