The Detroit Pistons are about to cut a deal to move into the Red Wings‘ new downtown arena when it opens next fall. Or not:
“Look, I think if we’re going to do it, it’s going to be soon,” [Pistons owner Tom] Gores said. “I’ve always, I think, been relatively transparent with (the media) and we’re getting close.
“We’re very close to a deal.”…
“Just so you guys are clear, we don’t have a deal. But we are talking serious,” he said.
Gores was then asked if a deal could be announced in the coming days. At that, the Pistons owner seemed to repress a slight grin.
“We’ll see, we’ll see,” he said.
The weird part here is that in moving downtown, Gores would be abandoning the Palace of Auburn Hills, which he himself owns. Gores has tried to sell the building to Oakland County for redevelopment, but the county balked at his $384 million asking price. So you’d have to think that Red Wings owner Mike Ilitch would have to offer a pretty sweet deal to make it Gores’s while, and Ilitch has little incentive to do so, so hmm. Maybe this is Gores trying to throw a scare into Oakland County that they could end up losing the Pistons and getting no new development in return — sort of a Blazing Saddles-style threat, but the only one he has available to him? Or maybe he genuinely thinks he can make more money by renting from Ilitch and redeveloping the Auburn Hills site himself than by running a separate arena and having to compete for concert acts. The only thing for sure: This trend of sports team owners giving press conferences while wearing t-shirts is spreading fast.
Good. There’s no reason for the Detroit metro area to house its 2 arena sports teams in separate arenas.
Except of course, for the fact that 23 NBA and 21 NHL teams don’t share arenas; including Detroit, there are six regions that have teams in both leagues with separate facilities. Want to try again?
Why does that make it a good reason? Or are you just citing the “All The Other Kids Have One” Doctrine?
It would be one thing if we were talking about a building in the discussion/planning stages. The fact that we’re talking about leaving one facility that is fully operational, for another that’s 60% complete. I find it funny that on a blog that opines a position against the public financing of arenas and stadia, would would take a stance against a privately financed, built, and operated arena (which continues to be among the highest rated facilities in the world).
By definition, all existing arenas are sunk costs — it doesn’t matter who plays in them once they’re built and the bills are assigned.
But I’m not arguing against the Palace, per se. Just not understanding why lots of cities having multiple arenas — usually because multiple team owners were able to demand multiple subsidies that way — makes two teams sharing one venue a bad idea.
Sometimes when teams share an arena there’s trouble over weekend dates. If the Wings and Pistons grab the weekend nights, then the concert dates become less desirable. Obviously many teams have made it work. But it’s a consideration.
I don’t think it’s been a real detriment to any of the 9 dual purpose NBA/NHL arenas in use.
Auburn Hills a pretty desirable area, so maybe redeveloping the land is a lucrative opportunity.
Here’s my line of thinking….
The Palace is a fine building and consistently makes the Pollstar list of top venues. When Davidson owned it and the Pistons he was upgrading it in some fashion about every other year. He had 41 Pistons dates guaranteed every year, plus playoffs, NCAA basketball games every three years, minor league hockey, WNBA, Arena Ball, etc. – that thing was booked as solid as could be and was a cash register.
The indoor arena non sporting event market in Detroit has been split heavily in The Palace’s favor for quite some time. Joe Louis Arena in downtown probably books about 30 percent of what The Palace has. Number of factors in this but The Palace being in the northern (richer) suburbs and aggressive management by Palace were key factors.
Gores bought the Pistons, The Palace of Auburn Hills, DTE Music Theatre (formerly Pine Knob – largest shed in the market) and booking rights to Meadowbrook (smaller shed) about 5 years ago for $350 million. Obviously, a great deal for him. That was a low point in NBA franchise values – it’s probably worth by itself at least $600 million now.
The new Little Caesar’s Arena (LCA) opens within a year. There will be increased competition for concerts and events within the market. LCA will need as many dates as possible to help service that debt. Which means real competition within the market for dates and the concert money pipeline will not be as lucrative because they will have to give better deals to acts/events.
So Gores probably figured if you can’t beat em….join em. He’ll want some sort of partnership from Illitch though. He could dump the older arena at what he paid for the whole lot five years and come out smelling like a rose. He has a great carrot in those guaranteed 41 dates to offer Illitch though.
Anyone buying The Palace without a franchise would really have to work at it to be successful.
This is why I’m thinking that Ilitch might be the right guy to buy the Palace. Or maybe get it on the cheap in exchange for a better lease for Gores or even splitting revenue at the new building 50/50. Ilitch could play both arenas off each other in order to maximize events. He’d essentially have a monopoly on major indoor events in the metro area.
If for someone reason it didn’t work out, he would just sell it for redevelopment. I’ve heard that developers looking to convert it into a business park or something along those lines have shown the most interest.
I agree with your comment, Matt, but I’m not clear why anyone (even the local municipality) would be interested in buying the Palace from Gores?
They would be relieving him of a significant burden in the event he moves his team to Illitch’s heavily subsidized arena.
It’s possible the land is worth a great deal, but once demolition or conversion (to what?) costs are factored in, it seems unlikely the city or a private developer could turn a profit if they have to pay Gores $300m plus. Seems to me the city would have a vested interest in not becoming owner of a soon to be second tier arena with no primary tenant in place.
Gores’ offer of $384M was completely laughable, and the county was right to turn it down. Trying to dump it on the county for more than twenty times what the building itself is appraising for, not to mention more than he paid for the team, and building, and the whole shebang, is the definition of chutzpah.