Hurricanes on PNC Arena lease negotiations: ‘The economics of the deal have to change in our favor’

[sawchuk1971]

Hurricanes on PNC Arena lease negotiations: ‘The economics of the deal have to change in our favor’

While the Carolina Hurricanes’ lease with PNC Arena is still five years away from expiration, negotiations over an extension are about to begin – and there’s a lot more on the line than last time around.

It took two years to negotiate the last five-year extension, through 2024, and this time around it figures to be more complicated and possibly more contentious.

The Hurricanes have a new owner and the building, which turns 20 next fall, is in need of massive renovations that could exceed $150 million. And the scheduling issues with N.C. State that erupted into open warfare in 2013 are still simmering behind the scenes, with the building sitting empty for three lucrative Saturdays this winter because the school and ACC blocked dates they did not end up using.

Under the current arrangement, the Hurricanes pay the Centennial Authority $2.45 million in rent in return for use by the hockey team and the right to manage the arena, making money by booking concerts, conventions and the like. But the Hurricanes have never been able to generate the kind of profits envisioned operating the arena, in part because despite its growth Raleigh still isn’t at the same level as big-city metropolitan markets, in part because the team has struggled in recent years.

The Hurricanes also argue that while their lease was generally an industry-standard deal when the building opened, it no longer is 20 years later.

“If you look around the league, for public buildings, we’re at the bottom of the league,” Hurricanes president Don Waddell said. “It’s nothing that anyone did wrong. Those were the times back in the ‘90s. But if we’re going to be a sustainable franchise in this marketplace for a long time, the lease plays an important role. The economics of the deal have to change in our favor.”

While the building’s behind-the-scenes infrastructure has been maintained at a high level by the arena authority, public-facing areas from the arena bowl to the entrances have an understandably dated look compared to state-of-the-art arenas elsewhere, and the authority has received several consultant recommendations for changes inside and outside the building.

McCormick said the renovations aren’t contingent on a lease extension, but the authority spent considerable time meeting behind closed doors discussing the latter Thursday, aware of the Hurricanes’ desire to modify the structure of the lease.

“At this time, we don’t know what the Hurricanes mean by that,” McCormick said. “This closed session today was simply to discuss the kinds of things that we could do, the authority could do, if it wanted to respond to something like that.”

This doesn’t figure to be a fast process, and it may occasionally be acrimonious at times, which is typical of this kind of negotiation, but it’s a critical one for the future of PNC Arena and the Hurricanes, and Thursday was its official beginning.

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[MNNumbers]

Hurricanes on PNC Arena lease negotiations: ‘The economics of the deal have to change in our favor’

Let's see here:
Hurricanes organization already has full privileges of managing the arena, so any profits generated thereby belong to the team.

What don't they have that they could want?
1- Lower rent? Most teams pay a nominal fee of between 500K and 1.5M to their arena owner.
Possible gains for Hurricanes: about 1M/yr.
2-More flexibility in scheduling? This seems to be the main point of contention (at least I hope). If the college basketball schedule could be finalized earlier, it would give hockey better dates and more great dates for concerts.
3- Renovations to improve the possibility of making the big bucks on premium seats/loges etc....
4- A flat subsidy as well.

My thought would be that the team is not going to profit enough from any of that except a straight subsidy.

So, this could be interesting....

 

[Mightygoose]

Yes it will be interesting to watch.

During the long sale process, Peter Karmanos frequently stated that the lease was a big selling feature of keeping the team in Raleigh, now Dundon states it needs to change in their favour.

Seems like scheduling with NC State is the main bone of contention.
Would the Canes be flexible in giving up revenue in lieu of a better priority scheduling?

There's a reason why major league sports teams sharing a building with a major school is uncommon.

 

[Negan4Coach]

Ha! When I read this in the paper the other day I was like "BOH will seize on this most rickey-tick"

The scheduling is a real pain in the ass- not to mention the presence of the State fair right next door at the beginning of the season, which almost always ends with a season crippling start out on the west coast for the team.

This may be Dundon's initial play to get us to a downtown arena, which would be so much better than having to share the place with a crappy basketball team.

 

[Dirty Old Man]

Certainly gives the Hartford and especially the Quebec people something to do for a little while here, sadly.

 

[Tryamw]

Actually I think it'll come down to Parking revenue... the Shared nature of the arena typically costs them 4 weekends a year. (ACC late schedule for BB) I'm glad that Debbie Yow is leaving because she and Dundon would both be so abrasive that I doubt a deal will get done. The new guy is more a diplomat but he won't get walked over. NC state could get a downtown arena on Centennial campus if they "had" to but both sides really sort of need the deal to work..
If Dundon wants a downtown arena that badly it won't happen by the time this lease is up... No plans and No Government money at this moment.. He's got to wait at least 1 more cycle.. (it may be shorter) He'll probably leave Raleigh... I just don't see a realistic downtown arena in the 10 year plan for Raleigh atm. in the 20? Possibly.

 

[VaCaps Fan]

PNC with the great NC sports complex’s 10 dollar parking for life!

 

[DaveG]

Scheduling has to be the big one. The ACC being so damn late about getting its schedule out screws the Canes not just out of prime weekend dates that otherwise might not be taken for hockey, but also out of dates for major concerts that may come through the area.

 

[CHRDANHUTCH]

Certainly gives the Hartford and especially the Quebec people something to do for a little while here, sadly.

Providence College basketball actually plays games at the Dunkin'Center (AHL-PRO)

 

[GuelphStormer]

"The economics of the deal have to change in our favor." Entitled much?

 

[cbcwpg]

Officials Pitch Future PNC Arena Renovation - Arena Digest

A potential PNC Arena renovation floated by officials would introduce new fan amenities, while enticing a longer commitment from the Carolina Hurricanes.

 

[BKIslandersFan]

"The economics of the deal have to change in our favor." Entitled much?

Entitled what? God forbid as a business entity they want a better deal.

 

[tony d]

Sounds interesting. Dundon seems to be Melnyk lite. Could be a very interesting team to watch off ice for the next while.

 

[Major4Boarding]

Scheduling has to be the big one. The ACC being so damn late about getting its schedule out screws the Canes not just out of prime weekend dates that otherwise might not be taken for hockey, but also out of dates for major concerts that may come through the area.

Out of curiosity, how many dates does the late scheduling impact? I've known about the NC State side of scheduling impacts, but I've never known just how many. As an outsider, one would think that the Canes and concert schedules would be plugged in first and then men's basketball scheduling around that. Strictly speaking from a revenue standpoint.

 

[DaveG]

Out of curiosity, how many dates does the late scheduling impact? I've known about the NC State side of scheduling impacts, but I've never known just how many. As an outsider, one would think that the Canes and concert schedules would be plugged in first and then men's basketball scheduling around that. Strictly speaking from a revenue standpoint.

I'd have to do some digging to find out the exact numbers of what can and can't be blocked off, but from what I've read at least this year there were at least 3 saturday dates that were completely blocked off by State where the arena went unused because the ACC ended up not using those dates and there was no concert or the like that could be found to fill the time slot with the kind of turnaround that was available after the ACC released its schedule. There may have been a few others instances where replacement acts were able to be booked for those dates with acts that would be of lower impact than what would have been available if the NCSU schedule had been known ahead of time. That's what I'd have to do my digging to find out. But simply put to make the arena stronger economically it needs to become the case where State and the ACC have to schedule around the Canes, not the other way around. They just simply can't be able to block off even close to the number of dates that they currently are able to.

 

[Ted Hoffman]

"The economics of the deal have to change in our favor." Entitled much?

Spoiler: Rant about entitlement and businesses

Corporate America has long been entitled. It's why I chortle at every time some company talks about the "exorbitant" or "outrageous" taxes they have to pay, which often touts the stated rates and totally ignores the actual rates they pay. Between property tax subsidies, income tax offsets, and other goodies that state and local governments throw at businesses to attract or keep them, there's damn little reason for not being able to be competitive around the world other than "we're rank morons and can't run a business even semi-properly" or "we offer goods that no one has any interest in."

I get the aggravation with scheduling at PNC. There's zero reason the ACC [or other schools] can't put together a basketball schedule for the upcoming season by say June 1 [if not sooner], especially when a number of them are basketball-only and are by and large available much of the time. It's not like academic schedules aren't already known, or that availability of venues due to things like commencements isn't already planned out and known, or so on. We're talking 15 teams and 18 games, so 135 total playing dates - and a number of those dates are relatively set because of league/school preferences. All you're really doing is deciding H/A and pairings for a chunk of those, and even that could be constrained by looking at the past year's schedule as a starting point.

[I'll give everyone a free guess on the biggest issue with setting schedules ahead of time. Those of you who've been around for a while, it should be fairly obvious.]

 

[Major4Boarding]

I'd have to do some digging to find out the exact numbers of what can and can't be blocked off, but from what I've read at least this year there were at least 3 saturday dates that were completely blocked off by State where the arena went unused because the ACC ended up not using those dates and there was no concert or the like that could be found to fill the time slot with the kind of turnaround that was available after the ACC released its schedule. There may have been a few others instances where replacement acts were able to be booked for those dates with acts that would be of lower impact than what would have been available if the NCSU schedule had been known ahead of time. That's what I'd have to do my digging to find out. But simply put to make the arena stronger economically it needs to become the case where State and the ACC have to schedule around the Canes, not the other way around. They just simply can't be able to block off even close to the number of dates that they currently are able to.

Thanks DG.

Wondering too if there was something in the lease that couldn't be traded off for one another (i.e. concession). You'd think that with all this time they've been there, even with the last negotiation, the flip-flop of priority couldn't be negotiated. Maybe I'm just trying to shoehorn this in too much perhaps

I mean, the Canes pay much more rent than most teams (Lightning's case it was around $580K 6 years ago last I checked) that the building isn't theirs, so unless Capital Expenditures are majorly (or wholly) handled by CA then there has to be something else to it.

Just a headscratcher to me because Georgetown and the Caps have had no issues like this, same with St. John's. That last one though, no offense to Red Storm fans but... I mean Knicks, Rangers, and concerts so they wouldn't have much sway regarding scheduling priority correct?

My point is, there's plenty of other examples where scheduling isn't an issue in NCAA co-habitated arenas.

 

[Fenway]

The Canes situation has changed in one big way as Dundon is now carrying more debt than Karmanos had.

The ACC is stuck in their ways and it ripples down to leagues you wouldn't expect - one example is Hockey East as BC basketball and hockey share the same arena. Delaying the Hockey East schedule frustrates Boston University that does rent their arena out for concerts.

Calendar | Agganis Arena

The Carrier Dome in Syracuse has the same problem.

 

[golfortennis]

I'm not defending the ACC here, because well, they're the ACC, but how much of it is TV? ESPN is always coming up with these non-conference "clashes" but never has it finalized until the last minute. And unfortunately for the Hurricanes, ESPN throws big money at the schools for this stuff.

I can't recall the history. Were the Canes there and then the arena was built, or was the arena built first with the idea that NC State was the main tenant? From everyone's perspective(including NC State), they should have built an on campus arena, IMHO.

 

[Centrum Hockey]

Sounds interesting. Dundon seems to be Melnyk lite. Could be a very interesting team to watch off ice for the next while.

There is no open arena in the east besides Quebec that Dundon can threaten to move to.the bog whould probably side against a us team going to Quebec City

 

[MNNumbers]

There is no open arena in the east besides Quebec that Dundon can threaten to move to.the bog whould probably side against a us team going to Quebec City

There are a couple of angles to this....

One, if no US team will ever move to Quebec City, then there is no hope of a team ever playing there. I don't know that I completely agree with that. (Which is NOT saying I think they are soon moving there. I don't think that.)

Two, while it would be a completely unfair thing to be the only ETZ team playing in the West, the same does NOT go the other way. So, for example, if Carolina moved to Houston, I am very sure that Chicago would be happy to play in the East (although they would likely choose the Atlantic rather than the Metro for a division).

 

[the halleJOKEL]

I'm not defending the ACC here, because well, they're the ACC, but how much of it is TV? ESPN is always coming up with these non-conference "clashes" but never has it finalized until the last minute. And unfortunately for the Hurricanes, ESPN throws big money at the schools for this stuff.

I can't recall the history. Were the Canes there and then the arena was built, or was the arena built first with the idea that NC State was the main tenant? From everyone's perspective(including NC State), they should have built an on campus arena, IMHO.

the canes and ncsu built the arena together

technically, the arena is on-campus as the football arena is in the same parking lot. the vet school campus is right there also

 

[Centrum Hockey]

There are a couple of angles to this....

One, if no US team will ever move to Quebec City, then there is no hope of a team ever playing there. I don't know that I completely agree with that. (Which is NOT saying I think they are soon moving there. I don't think that.)

Two, while it would be a completely unfair thing to be the only ETZ team playing in the West, the same does NOT go the other way. So, for example, if Carolina moved to Houston, I am very sure that Chicago would be happy to play in the East (although they would likely choose the Atlantic rather than the Metro for a division).

People where speculating In December that the sens whould go rouge and move to Quebec City after this season Can the NHL STOP Melnyk from moving to Quebec City ( or anywhere else )?

 

[MNNumbers]

People where speculating In December that the sens whould go rouge and move to Quebec City after this season Fugu's Business of Hockey Forum

I am well aware of that speculation. However, I think there is FAR too much desire for an arena deal to be made at LeBreton for such a move to occur.

And, tbh, if Melnyk went rouge and sold to Quebec, that would seal the Hurricanes out of that market well before there was a chance to use it at leverage, right?

 

[Centrum Hockey]

I am well aware of that speculation. However, I think there is FAR too much desire for an arena deal to be made at LeBreton for such a move to occur.

And, tbh, if Melnyk went rouge and sold to Quebec, that would seal the Hurricanes out of that market well before there was a chance to use it at leverage, right?

It whould pretty much take the only open eastern market off the table if the sens went to Quebec City