More arena owners may choose to finance new construction with 100 percent private funding if their arenas are part of larger mixed-use development projects, said Brandon Dowling, director of sports and entertainment at Johnson Consulting.
“Shifting from a standalone venue to utilizing the sports venue as a catalyst for adjacent mixed-use developments will allow team owners to capture additional revenue streams and value beyond the venue itself,” said Dowling, who specializes in market and financial analysis for convention, hospitality, sporting arenas and mixed use developments. “Being able to capture more revenue perhaps could shift the overall funding strategy of the venue itself.”
Dowling said the rise of mixed-use developments with arenas as centerpieces also could lead some arena owners weighing whether to renovate or start anew to choose the latter and work to situate their new facility in the type of entertainment district that will be home for Little Caesars Arena, Detroit and the Wisconsin Entertainment and Sports Center, Milwaukee. For those who opt to renovate, however, he said the need for public-private partnerships remains apparent. For these types of efforts, he said, the net operating dollars of the arena are not sufficient to cover the cost of the capital — “thus the public dollars are needed to close the gap.”
“Much of that is looking at were there proper capital reserve placements at the beginning of that development?” Dowling said. “Were there small investments along the way or were there not? Some of the larger renovations that you see are probably ones that were struggling to update the amenities year after year. Now, all of a sudden, they’re 15 years down the road, and to really be a competitive venue again and attract the events they want to attract, they’re going to have to make that significant investment.”
At the Honda Center, Anaheim, the emphasis on steady, targeted renovation has allowed the arena to avoid that type of comprehensive renovation project while still maintaining a contemporary, fresh atmosphere. Tim Ryan, president of the Honda Center, said he takes his inspiration from down the road at Disneyland, which he called the gold standard for maintaining existing facilities while perpetually upgrading the property.
Ryan said keys to making the ongoing renovation approach work for the Honda Center has been the support of ownership and careful timing of when to take on major projects without causing disarray to operations. Projects have included such work as adding a new indoor/outdoor terrace that seats more than 1,000, expanding the Anaheim Ducks team store to three times its previous size, adding a new restaurant and installing a new scoreboard, new sound system and 500 HD monitors. Currently, Ryan said the facility is adding 10,000 square feet to a new plaza entry for the arena.
Ryan said the Honda Center has maintained “a constant upgrade mentality, both inside and outside the facility.” The facility operates with a rotating 10-year capital expenditure plan.
“We could have waited and poured hundreds of millions of dollars into an overall renovation,” Ryan said. “We chose to keep the facility looking like new while adding a number of amenities along the way.”
Ryan takes pride in the number of visitors who express surprise that the arena dates to 1993.
“The day that someone comes in here and says this building looks older than 10 years, then I’ll think we haven’t done our job,” Ryan said.
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PRIVATE FINANCING GAINS FAVOR
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