August 15, 2011
Detroit turning profit on Red Wings lease, but not for much longer
There's a great, detailed article today by Bill Shea of Crain's Detroit on the finances of Joe Louis Arena, which concludes: The city is netting $2.6 million a year on the home of the Red Wings, including revenues from rent, ticket taxes, and a cut of concessions and suite sales.
Given that the arena was built in 1979 for only $30 million, that's a pretty excellent deal for the city of Detroit — which is, no doubt, one of the reasons Red Wings owner Mike Ilitch wants out of Joe Louis. Ilitch has actually already let the lease expire two years ago, but continues to operate under its terms while negotiating a new one.
(Incidentally, this should serve as a reminder to anyone who worries that teams will "have to move" once their current leases expire: No, they don't. The number of cities that have actually evicted teams is, while not exactly zero, pretty darn close to it on the major-league level.)
However, Crain's notes, "stipulations in the contract call for the city to immediately lose the ticket tax and in five years lose the surcharge on concessions and suites," so regardless of whether Ilitch gets a new arena, Detroit looks likely to see its arena revenues evaporate. Unless, of course, the city drives a hard bargain with Ilitch in negotiating a new lease — but as we've seen, that doesn't happen too often.
October 06, 2010
Detroit arena could cost $500m, require public money
As expected, the news that Mike Ilitch has the lead in buying the Detroit Pistons has led to a full-on media frenzy. Among the highlights:
- A new downtown arena to host both the Pistons and Ilitch's Red Wings would cost $500 million or more, sports consultant Marc Ganis tells the Detroit News. Ganis added, "It's next to impossible to do that without some taxpayer help."
- Detroit Free Press sports columnist Michael Rosenberg writes that the whole reason Ilitch wants the Pistons and their Auburn Hills arena is to have a threat to move the Pistons to the suburbs, in order to be able to squeeze Detroit for money for a new arena. Detroit Mayor Dave Bing nonetheless declared himself "elated" at the prospect of Ilitch owning the Pistons, which either means he doesn't think he's really going to be blackmailed for a new arena, or he's looking forward to it.
- Getting a third pro sports team to play downtown could bolster Detroit's image as an "urban adult entertainment destination," says University of Michigan professor Christopher Leinberger, who notes that the city already "boasts the third largest walkable concentration of casinos in the country, behind only Las Vegas and Atlantic City," and "has the nation's third largest number of live theater seats, trailing only New York City and Houston." (Houston?) Not to mention the other "adult entertainment" options available across the bridge in Windsor.
The virtues of making Detroit into the next Las Vegas aside, the arena battle looks like it has the potential to get really ugly really fast if Ilitch wins his bid. I'll make sure I don't have any other plans for November...
October 05, 2010
Ilitch opens 30-day window to buy Pistons, arena
And away we go: Crain's Detroit is reporting that Detroit Pistons owner Karen Davidson has opened negotiations to sell the team to Detroit Red Wings and Tigers owner Mike Ilitch. The Detroit Free Press says the two sides have agreed to an exclusive 30-day bargaining period, after which the sale could be reopened to other bidders.
Assuming the two sides work out a deal — and that's not at all certain, as Crain's previously estimated there's about a $100 million gap between what Davidson wants and what she's likely to be offered — then it will almost certainly launch a long battle over whether to build a new downtown arena for the Red Wings and Pistons, and who'd pay for it. Already, Detroit city council president Charles Pugh declared his town open for subsidy business:
Asked whether a tax incentive would be included in a pitch to bring the Pistons downtown, Council President Charles Pugh said, "I am open to whatever we have to do in the scope of the law.
"This could be the tipping point for our city. We need hope."
On the other hand, council president pro tem Gary Brown said, "It's going to be difficult to do this stadium with public dollars. There is no appetite for tax relief, even for this." Still, it's probably best not to put anything past Ilitch, given that this is the kind of fight he's won before.
August 09, 2010
Ilitch throws hat in ring to buy Pistons
Other shoe: dropped.
Sports and pizza boss Michael Ilitch said today he wants to buy the Detroit Pistons and move the team to a new arena in downtown Detroit.
The Ilitch family already owns the Detroit Tigers and the Detroit Red Wings.
The Ilitch bid is for the entire Palace Sports & Entertainment organization, not just for the basketball team itself. If successful, that means that the Ilitches would also own the Palace of Auburn Hills arena, the DTE Energy Music Theatre and other aspects of the Palace network.
You'll recall that the big question about this plan, which was originally floated about a month ago, was whether giving monopoly control over sports and concerts in the Detroit area would really generate enough money to pay for a new Detroit arena. Still nothing on that in today's coverage, though enough column-inches were spilled on it that there was room for worries that Bud Selig might thing Ilitch doesn't love him anymore.
July 06, 2010
Red Wings owner pondering Pistons purchase?
While we're on the rumor front, there's one out of Detroit that Red Wings owner Mike Ilitch is considering buying the Pistons and the Palace of Auburn Hills as part of a scheme to get a new arena for the Wings. The upshot, as George Malik writes at MLive.com, is that Ilitches' events company would add revenues, while "essentially freeing up the Palace to hold concerts on an almost exclusive basis while encouraging investors to fund a follow-on arena which would both succeed Joe Louis Arena and see most of its use as the home facility for both the Detroit Pistons and Detroit Red Wings."
The basic notion should be familiar — it's the same one that Newark and the state of New Jersey agreed to earlier this year, in sending the Nets to room (temporarily) with the Devils while the Meadowlands focuses on concerts. The idea is that by giving one venue monopoly control over concerts, they get to charge more, while sports teams cut costs by sharing a single home.
Whether the savings would be enough to make the math pencil out is dubious: Bill Shea of Crain's Detroit Business notes that buying the Pistons and arena then building a new home for the sports teams would have "a cost approaching $1 billion," which is an awful lot to spend just to gain some leverage over Bruce Springsteen. Shea also notes that the plan would "likely will include co-investors and some level of public financing," which may be the whole point of the exercise: Would Detroit be more likely to fund a new arena if it meant not just keeping the Red Wings in town, but getting the Pistons back from the suburbs? Hard to say at this early stage, but as seen previously, it's just the sort of maneuver that Ilitch excels at.
February 24, 2010
Red Wings hire ex-Pistons exec to run arena campaign
The Detroit Red Wings new arena drive story continues to inch forward — yesterday's news was that Wings and Tigers owner Mike Ilitch had hired an arena czar to oversee the team's choice of a future home.
The man of the moment: Tom Wilson, the former Pistons president who helped oversee construction of the Palace of Auburn Hills in 1988. Asked whether, like the Palace, a new Red Wings arena would be built with private funds, Wilson replied ("with a laugh," reports the Detroit Free Press): "It won't come from my money. I don't have that much." Of course, neither does Detroit.
January 26, 2010
Detroit News: Joe Louis needs more women's restrooms, let's build a new arena
With the owners of the Detroit Red Wings having chosen to opt out of their lease at Joe Louis Arena this July, it's about time for the drumbeat of new-arena articles to begin. And indeed, they're in full swing: Last week it was speculation that the Wings could move in with the Pistons in Auburn Hills short-term, then work on building a new downtown arena together. Today, it's a report — like the earlier one, also from the Detroit News — that surveys the state of Joe Louis Arena and finds it to be "beyond repair."
The exact list of charges: The concrete steps need to be fixed, there are inadequate restrooms, seats are too cramped, and parking is inadequate. The Wings, report the News, "say it would cost them $10 million in renovations to remain at The Joe." Wait a minute — $10 million? Shouldn't that headline actually read: "As lease winds down, Joe Louis Arena could be repaired for a fraction of what a new arena would cost"?
June 27, 2009
Red Wings opt out of lease, could go short-term
Detroit Red Wings owner Mike Ilitch didn't wait till Tuesday's deadline for deciding whether to renew his lease on Joe Louis arena, instead announcing yesterday that he was opting out of the lease effective next July 1. Instead, he will likely attempt to negotiate a new short-term lease on the arena, while simultaneously working on a deal to either renovate or replace the building.
From Ilitch's perspective, this makes sense as a way of hedging his bets: He gets to keep working out a deal for a new arena, without being pressured to do so in a dismal economic climate for building arenas. What will be interesting now is whether Ilitch still gets a sweetheart deal for Joe Louis along the lines of what he would have gotten had he re-upped for 20 years, or whether Detroit drives a harder bargain knowing that he has few other options — unless you believe the rumors about moving to Auburn Hills and back again.
June 25, 2009
Red Wings face Tuesday deadline on new arena (no, really this time)
Detroit has barely buried one sports facility controversy, when another is set to rear its head: Detroit Red Wings owner Mike Ilitch (who also owns the Tigers, Little Caesar's Pizza, and a large chunk of what's left of downtown Detroit) has until Tuesday to inform the city whether he's opting out of his lease on Joe Louis Arena, or allowing it to be automatically renewed for another 20 years.
Either way, Ilitch is sitting pretty: If he renews, he loses $1 million a year in tax breaks, but gains millions more in concessions, suite rentals, and ticket taxes that he no longer has to share with the city. If he tries to move or demand renovations to Joe Louis, he gets a shot at a building with more revenue-generating options — though that would likely only make sense if he can get the city and county to help pay for it, since otherwise the construction debt would almost certainly swamp any new revenue streams from a snazzier arena. Of course, given Ilitch's track record with the Tigers and that Wayne County Executive Robert Ficano told the Detroit News regarding financing help for a new arena, "We want to do everything we can to keep the Red Wings here," he has to figure he has a pretty good shot at taxpayer help, even as the local economy collapses around his ears.
By the way, if you're wondering whether we didn't just go through all this two years ago: Apparently everybody was confused that time about when the lease expired.