CANTLON’S CORNER: XL Center Future To Be Decided in 2018?
BY: Gerry Cantlon, Howlings
HARTFORD, CT – The long and winding road for the future of the XL Center is close to being determined. The former Hartford Civic Center building will either find a new owner with the deep pockets necessary to truly start the necessary renovation/reboot into a truly viable 21st Century arena in 2018 or there could well be a very large CLOSED sign hanging in the front entrance in the very near future.
Last Wednesday, the state bond commission formerly approved borrowing the $40 million dollars that the legislature approved for the next two years. That money will allow the CRDA to purchase the atrium and continue its patchwork maintenance process to keep the building open and functioning.
Time, however, is running out on the repair side as well as the financial side of the ledger sheet.
“We’ve been whistling past the graveyard for some time,” CRDA Executive Director Mike Freimuth stated. “I have said it in many ways, forums and places, I hope they are taking us seriously. Right now we’re in a true Catch 22 situation. We neither have the consensus to fund and renovate (the XL Center) or to shut the building down. Clearly, there are legislators totally opposed to spending another dime on the building, and there are others who support it with some apprehension, but they recognize the need to do something. We (the CRDA) have a task at hand and it’s not easy. This just another hurdle for us.”
The building operating debt exploded to nearly $3 million dollars this year. That figure is up from $800K a year ago. The reason in part is due to the declining attendance at all UConn sporting events as well as the disappointing attendance numbers for the Hartford Wolf Pack. The declining number of concert events and the loss of major flat floor events also has sent the balance sheet skidding deeper into the red.
“No doubt, we have taken a hit. We took it on the chin with a couple of concerts that didn’t materialize and the attendance at UConn and Wolf Pack events has been down significantly. We hope we have some concerts booked for 2018 and some uptick in attendance for UConn and the Wolf Pack will have a better year ahead,” Freimuth said.
The purchase of the atrium portion of the XL Center is going to be tricky. The lease is held by Northland Corporation. There is a dispute about a 30,000 square foot section above and adjoining the atrium plus another 130,000 in the atrium itself plus easements that exist within the defined area that the CRDA is currently paying an astounding $300K per year in common area charges to Northland.
Friemuth said that the negotiations on the purchase are now able to continue. “Yes, now that we have the funding, we can actually proceed ahead and negotiate and hopefully execute a deal. Without the funding, there was not much we could do. Right now, we are getting new appraisals done and hopefully, shortly after the New Year we can have some discussions with our friends in Boston.”
At its monthly meeting last Thursday, the CRDA decided to push forward with negotiating a deal. If it can be struck, they will expedite the budget caveat that was put in the bond issue regarding the XL Center to seek an outside buyer with private financing of the soon to be 43-year-old building.
Would a sale mean the state is getting out of the building business altogether or would there be a formula or equation they have in mind for a potential owner of the XL Center to live under?
“That’s a hard to question to answer at this point because we are so far away from that scenario. If we get to the finish line and have a deal in place, there probably will have to be some statutory language tweaked and changed because the law of public-private partnerships in Connecticut is very murky. Since we haven’t even started the RFP process, there is no way to answer that question without having a contract agreed to and in front of us. I hope we can get there, but we are at the beginning of the process and it’s better to start now than waiting another calendar year.”
Clearly, the CRDA feels they’re not going to be getting any significant state resources to put toward a new XL Center, so this is the ONLY route to saving the project and getting the building renovated.
“There is no appetite to handle the request right now given the budget constraints. However, I hold out hope in the future if things get brighter (economically) here that we can seek another request,” Freimuth stated. “I really believe how vitally important this project is for downtown Hartford. We have put in five long years on this and there was another five or so done before that.”
The CRDA received only limited interest outside of the one RFP it received last year.
“We did receive one, but that RFP, by statute, has expired. We did tell that company to re-submit their bid when we issue the new RFP likely sometime in early March. We’re talking only a 45-50 day window in which applications will be accepted.”
There is a wild rumor circulating that Stamford’s WWE, which has the cash available to make a bid of this nature, has contacted the CRDA. Possibly MSG or Comcast have also been floated.
“The WWE is a new one for me. We have received no other inquiries regarding the building at all, and I hope after the New Year when the RFP is issued that we will field more inquiries and interest.”
The key components for ANY “Owner” of the XL Center would be the need to immediately grapple with getting a rebuilding process underway in short order. Six months to a year maximum as the marketplace clock is ticking furiously with Springfield’s casino slated to open in September of 2018 and other regional venues finishing up their retrofits.
Then consider the needs the building has on the mechanical side. That infrastructure is already more than ten years past due. It will need to be thrown out and have new systems put in place as opposed to the current hodge-podge of band-aids that have been put in place as necessitated by the current state economic climate to put off the day of reckoning. Making those future repairs will be even more costly.
“Hey, we had a transformer blow a few weeks ago. You’re talking $30-35K to replace it. That adds to the red ink. We know that despite all the good efforts and work that is being done to keep the building open and operating, we are in a race with the mechanics of the building. It’s nothing new. Everybody knows about it. We just have to decide what we’re going to do.”
Then take into account the current debt service on the building, union labor contracts, present tenant contracts and securing those long-term as well as the depreciated value of equipment under the XL Center roof. Those are just four of the critical areas that would need to be immediately addressed by any possible new ownership group taking over.
None of the aforementioned issues are easy to deal with.
“Those are just for starters. To make this a 21st-century facility and to compete in a marketplace in the process of changing, we have a very small window of opportunity now. Its complex and the gross inefficiencies that exist at the XL is large. Here’s an example. We have to replace the entire lower bowl lighting. The return on that investment is about seven-to-eight years. However, do we have seven-to-eight years as of today? No. So we have to bypass doing some projects like that to attend to others even though it’s necessary because you get into the putting you-know-what, down the drain. These are the tough decisions you have to make in organizing and operating a building.
“Look, they just imploded the Georgia Dome in Atlanta; the Copps Coliseum in Hamilton, Ontario, which is the same age as the XL. They’re re-doing the Boston Garden, which was built in 1994, that’s at its shelf life. We need to make a decision one way or the other,” Freimuth said.
The long-term situation looks bleak, but the short-term picture has some rays of sunshine.
MSG will be signing at least a one-year extension of their lease for the AHL Wolf Pack with likely an option for another one-year deal by the end of the month. The price tag for Global will be $1.55 million next year, and if they add a second year, it will be $1.6 million. Those numbers are according to several other sources, not the CRDA Director.
“We have had many discussions. There is nothing formal yet, but I expect they will renew. I would think the contract will be a combo-structure as will the UConn deal and all will contain provisions of renegotiation in them if the building is sold,” Freimuth stated.
The UConn sports lease for both men’s and women’s basketball, as well as hockey are on a similar renewal path, but different issues need to be addressed in securing their extension.
With so many moving parts in play and with so much money needed to make this project work, where this whole thing with the XL Center ends up right now is anyone’s guess, but it’s not looking very good at this point, but that could change too.
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