Rangers affiliate arena XL Center on verge of makeover
The heart of entertainment in Connecticut’s capital city could see a facelift in the upcoming years after numerous failed attempts in the last decade. Many citizens of Connecticut have seen numerous proposals and attempts to revitalize the aging hulk of cement on Trumbull Street to only fall short due to funding and lack of support. However, this year has a different tune as the XL Center has support from the state of Connecticut’s government. As a result, the arena has allocated funds to address the major deficiencies within the facility. This is not a done deal yet since the State Bond Commission has to approve the allocated funds and also purchase the atrium space from Northland Investment Corporation.
CRDA
The Capital Region Development Authority (CRDA) is currently overseeing the XL Center for the State of Connecticut. They have leased the management of the building to Spectra, beginning in the summer of 2013. To date, the agency and Spectra has seen numerous deficiencies such as outdated technology from an operational standpoint, near failing systems that requires parts that are no longer produced (the XL Center has to search across the world for replacement parts), and a negative fan experiences due to limited restrooms, point of sale locations, and lack of attractive premium seating as they are literally in the rafters of the arena. Over time the CRDA has tried to address deficiencies to keep the arena open today.
Current Building Situation
The XL Center on average lose between $2 to $3 million annually. The shortfalls are covered by the state as the operating expenses increase over the years due to increased expenses with little growth on the revenue stream. The XL Center received a $35 million renovation in the summer of 2014 to keep the building on life support essentially and figure out the long term plans for the arena.
The Previous Plan
The minor renovation brings us the the more recent attempts by the CRDA to continue the life of the arena. Let’s begin with the grand plan of a $250 million top to bottom makeover of the XL Center. This was the starting point for the new push for renovations.The grand plan began in 2015 when the CRDA sought consultants in the industry to get an idea of the future of the arena. SCI Architects, who were also involved in Madison Square Garden’s transformation were brought in to dive into new arena options in Hartford.
Options presented was to spend $250 million for a total overhaul of the arena, which must include renovating into the current space that Northland owns (the arena’s atrium/block). The other option was to spend $500 million to build a new arena on the site that does not include demolition costs. The option of renovating the arena with no expansion was not an option as there would be limited benefits and not a plausible solution. The other option was to tear down the arena which was a no go from the CRDA, the state, and the teams that play within the facility. To this date, there is an absolute refusal to shutter the XL Center. Regardless if you support or go against renovations, the arena is known to be vital to local businesses within the city. In fact, an unidentified Fortune 500 company has wrote a letter for the urge to renovate the facility to help attract younger demographics to the region.
Over the years since the plan was revealed, which included renderings and exact details of the overhaul, the CRDA has lobbied to many residents and the state to get legitimate interest in the plan. The CRDA gave a hard push given the information they were provided by the consultants. In addition to SCI, the CRDA has spent money on multiple studies regarding the XL Center from the market, economic benefits, and other various aspects surrounding the arena.
You can check out the plan here.
The efforts fell short as the state failed to consider giving the XL Center $250 million, citing the finances of the state and the yearly budget deficits. Then, the CRDA eliminated part of the renovation to reduce the cost to $100 million. That failed to gain traction within the state as well. The XL Center was back to square one, just like the previous attempts.
How We Got To The Current Plan
The current plan of the XL Center was built upon from failed attempts to reboot the facility in various aspects. After not being able to find partners or investors in the project, the state is giving a different look at the arena.
State leaders first wanted to sell off the arena recently. That was the new starting point for the CRDA. The selling option was set up where the arena would completely be off the hands of the state and essentially go into the private industry. The agreement prohibited investors or partners to buy the arena to redevelop the parcel for other land uses. The new owners would have to utilize the arena as event space. To draw interest from parties, the state allocated $40 million for the plans to “fix up” the arena. As a result, the ice rink had new boards, new chillers, and eventually a new ice chiller system. Other improvements included new LED lighting and address other areas to decrease annual expenses. Some improvements were implemented after the RFP process ended.
“When the General Assembly included $40 million for improvements at the XL’s Veteran Memorial Coliseum in its recently passed two-year state budget, it also said a buyer must be sought by June 2019”
Kenneth R. Gosselin, Hartford Courant
The time came and passed as the CRDA received one company of interest. That bid was declined as the state would have been on the hook of paying back the arena and pay interest on the renovations.
Then the state leaders wanted another study of the aging arena. They wanted to see if a large enough renovation would boost revenues enough to attract private investors. The study aimed at the financial aspect of the arena along with comparing premium seating in competing arenas in the region. The study also focused on companies and people in the area to understand the interest level of renovating the arena, plus the interest in purchasing new premium seating offerings at the arena.
Alas, the report explains that a $100 million renovation would significantly reduce the annual deficit, but will not make the arena profitable or attract private investors. The CRDA presented the report and findings to the state to gain understanding of the situation.
“It is not anticipated that private financing will be a viable source of project funding”
CSL
Despite the expected response, the state is beginning to understand the situation and realize the renovation has been far pushed off. It lead to a director of the CRDA to consider the unthinkable option of closing down the facility.
“We’re not sustainable right now. We will be looking at closing it. We’re kind of on borrowed time right now”
Mike W. Freimuth, CRDA
Add in to the concern of an actual closure, the state is legitimately considering the $100 million plan on focusing on the lower bowl of the arena despite rejecting to do so initially. The plan includes premium seating, upgrades to concession, bathrooms, updating the bowels of the arena (electrical, plumbing, HVAC, etc.), and bringing technology up to the 21st century. The thinking behind the plan is to decrease expenses while increasing revenue streams. This is a starting point. However, the building will still be losing money annually, The shortfall would be around $500,000 which is better to keep the arena staying open. That is the new goal for the CRDA, rather than arguing with the state for more funds considering how long it has take to finally give the XL Center a breath of fresh air.
You can check out the report here.
As of now…
The state have approved a bond package that includes funding for the XL Center in recent weeks. In the first year of the package, the arena will receive $27.5 million an in the second year, $37.5 million for a grand total of $65 million. Add in the previous funds that were approved to purchase the atrium space plus upgrading aspects of the arena, the total is up to $105 million (previous allocated funds approved were $40 million). Given the usage of some funds already in the previous package, the XL Center may have around $90-$100 million to play with for renovations.
The next steps is for the bond packaging items to get passed through the State Bond Commission. March’s meeting has been cancelled. When the commission actually meets, they are expected to approve the XL Center package along with other bonding packages.
Atrium Drama
Northland Investment Corporation continues to play cat and mouse with the CRDA. The state agency wants to purchase the atrium space, which essentially is the block of empty space on Trumbull Street. There is no common ground between the two parties despite multiple offerings and appraisals. The CRDA is offering the legitimate value of the parcel while Northland wants a significant higher value. As a result, the state has given CRDA the tool of imminent domain to take land. The CRDA has backed off from using the tool as the legal process could take years and is not a guarantee to get the atrium space.
Northland managed the arena in earlier years with AEG (Now ASM Global). Northland eventually pulled out of the arena operations while maintaining a stronghold on the atrium space plus the Trumbull street block. Since Northland purchased the land around the XL Center, the empty storefronts has been vacant since. Despite a successful residential tower near the arena, Northland has not done a whole lot regarding the commercial spaces at the XL, along with other properties around downtown Hartford.
The next steps in purchasing the atrium space will be quite telling. Now the CRDA and state will have allocated money for a legitimate renovation. How will Northland respond will be the key. Are they willing to sell off the parcel at a lower value? Will they increase the value? Are we going to see imminent domain authorized by state leaders? This vital aspect must be solved so both parties can be happy.
Renovated Arena Impacts Rangers Affiliate
When and if the arena is completed with renovations, the lease structure will have to be modified as well. Currently with Madison Sqaure Garden, the CRDA and Spectra have given the Wolf Pack a lease that goes year to year in a 5 year deal.
The 2018-19 and 2019-20 season were guaranteed. The remaining 3 years will have to be agreed upon after each season. The reason behind the structure is due to the arena itself and the unknown of what will happen.
The 2020-21 season is the first year of the one year options that is offered. That was agreed upon last December. I expect both parties to complete a different lease structure in place after the 2022-23 season. If renovated, the CRDA will likely give the Rangers affiliate a long term deal. In recent years, the Rangers have expressed extreme satisfaction with being in Hartford. The lease allows the Rangers to focus on hockey operations while giving the off ice operations to Spectra. The Rangers in return receive an affiliation fee yearly that is well north of $1.5 million (highest in the AHL).
The CRDA has ensured that the Wolf Pack and UConn tenants are happy despite the building struggling. In the renovations that occurred in 2014, the Wolf Pack and UConn tenants were given new or renovated locker rooms that is up to date in modern sports.
I believe the XL Center will have a future, finally. There is reasons to be optimistic as the arena will get funds to overhaul areas and give people and tenants somewhat of a modern feel. There is still work to do, but the change in tone from the state is promising. Stay tuned for additional updates.
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