The Rose Quarter Blooms
Will new owners tend the Rose Garden with care?
by Jacqulyn Diteman

Sixteen years ago Portland Trail Blazer owner Paul Allen had a vision. Thirteen years ago architects and backhoes helped dig into that vision. Fast forward three more years and his dream, the Rose Quarter, became a reality.

This year, he lost it.

On January 1, 2005, Portland Arena Management (PAM) took over ownership of the Rose Quarter, which includes the Rose Garden, Memorial Coliseum, the Exhibit Hall, and the Commons area. They hired Philadelphia based Global Spectrum, a subsidiary of Comcast-Spectacor, to manage the facility.

When Allen first visualized the Rose Quarter, the Blazers were on fire and getting hotter by the day. Their popularity rivaled that of 1977, the year the team went all the way. Allen dreamed of a state-of-the-art, high-tech stadium to house his beloved team.

Although Memorial Coliseum held sentimental value to thousands of Oregonians, the stadium was too small, outdated and not up to professional sports standards. Allen formed the Oregon Arena Corporation (OAC) to make the vision of a first-class sports and entertainment complex a certainty.

During this time a new trend was developing among several athletic team owners. Many owners either threatened, or followed through with threats, to move their teams to other cities if they didn’t get their way. “Their way” was to reach into the pockets of the taxpayers to finance new stadiums. Teams such as the NFL’s Cleveland Browns, Los Angeles Rams and MLB’s Seattle Mariners wanted the cities to put forth the funds necessary to build their grand new homes at taxpayer expense.

Having the city of Portland bear the $262 million burden was not an option for either Portland or for Allen. The city put up $34 million, which was repaid with user fees. There was a small bank loan, and Allen invested $46 million of his own equity. The remainder of the money, $155 million, was bonded by a group of lenders which included Prudential Insurance and pension fund TIAA-CREF.

The terms of the contract were strict and unusual, eventually forcing them into bankruptcy in February 2004.

“OAC was paying nearly 2.5 times that of any other single tenant building in North America,” says Trail Blazers president Steve Patterson.

According to bankruptcy documents, the interest rate was locked in at a staggering 8.99 percent, much higher than most other current commercial rates. There was also a clause that did not allow for an early payout. This proved to be very costly for OAC.

Entering into 2004, OAC owed the investors $193 million, even after paying almost $16 million per year for 9 years. In February of 2004, OAC filed for Chapter 11 Bankruptcy protection, stating it was unable to keep up with its debt repayment schedule and wanted to reorganize.

After months of negotiations, OAC and the lenders were unable to come to an agreement. Allen and company offered an $85 million dollar payout; the lenders rejected it stating that the stadium would be more valuable to them if they took over ownership.

On December 31, 2004, at 11:59 p.m. Allen walked away from the structure he was responsible for building. At midnight of January 1, 2005, the lenders, now having formed the Portland Arena Corporation LLC, took reign.

Global Spectrum immediately took over management responsibilities of the Rose Quarter. They are responsible for managing the arena, Rose Quarter advertising sales, courtside and preferred level seating, and suite level rentals.

This is one of the most unique leases in sports. The original lease between OAC and the Trail Blazers called for OAC to receive all that revenue. Because PAC will assume the lease with the Trail Blazers, they will gain that income. Since Allen owned both the team and OAC, people have questioned if the Blazers will suffer from this revenue loss.

“That money always went to the arena and not to the team,” Patterson says. “There was never enough for debt service operations and operations for the building. Everything went to the debt. It won’t affect the team at all.

“We receive the revenue from the majority of the seats,” he adds.

Global manages 45 other facilities throughout the United States and Canada, making them the fastest growing firm in the public assembly facility management field. According to Global, the Comcast-Spectacor subsidiary is part of one of the world’s largest sports and entertainment firms.

Comcast-Spectacor owns the Wachovia Center and Wachovia Spectrum in Pennsylvania, the Philadelphia Flyers of the National Hockey League, the Philadelphia 76ers of the National Basketball Association, the Philadelphia Phantoms of the American Hockey League, and Comcast SportsNet, a regional sports programming network. They own three minor league baseball teams and Ovations Food Services, which will provide the complex with food and drinks. They also own New Era Tickets, a full-service ticketing and marketing company for public assembly facilities.

According to Global, they have a history of success in their management endeavors. For Kansas City’s Kemper Arena and American Royal Center, Global was triumphant in generating additional revenue, bringing in more events to the facilities, reducing expenses and effectively promoting the complex.

Global’s management of the two-year-old Everett Events Center, a $71.5 million multi- purpose center located in Everett, Wash., moved the Center immediately into the national media spotlight.

Although Global brought with them a wealth of experience, they have their work cut out for them in Portland. Embarrassing moments on and off the court left the fans of the building’s main tenant, the Trail Blazers, disenchanted. With each passing year, more and more seats sat empty. The building didn’t undergo any upgrades over its nine-year life, making it close to falling out of its first-class rating. Fewer and fewer national acts came through Portland.

The house that Allen built needed help.

Part of the bankruptcy agreement stated that PAC must upgrade the facility in order to keep it in its first-class standing.

“We would have done this for the patrons anyway,” Rose Quarter General Manager Michael Scanlon says. “We want to change with the times, keep things fresh and competitive. We want to keep the customer happy. Nothing had been done to keep it fresh,” he adds.

According to Global Spectrum, there will be millions of dollars pouring into the facility. The renovations of phase one are currently underway with a significant amount of construction to the Courtside and Club Level areas and major remodeling on the Suite Level.

Club Level improvements are planned to include two luxurious lounges on the east and west sides of the Rose Garden featuring all-inclusive food stations during all Trail Blazers games. According to Global management, this level will be gutted and stripped of its existing look, and transformed into a modern area with plasma televisions, couches, lounges, carpeting, and bars, exclusive to Club Level season ticket holders.

Planned courtside improvements include the demolition of the existing Courtside Lounge and construction of a brand new, easy access 5,500 sq. ft. private club on the event level. The club will be immediately adjacent to the Rose Garden Parking Garage.

Inside the arena bowl, the most advanced Light Emitting Diode (LED) technology will be installed to the arena’s inner ring located directly above the Club Level. The LED ring, which will replace the existing static rotating sponsor signs, will provide an interactive experience for fans and sponsors and become part of the presentation for an event or game. The latest technology can change the mood of an arena by displaying specific timely images such as a waving American Flag floating around the ring during the National Anthem. It will also allow sponsors to interact with the fans with targeted messages that can coincide with a specific moment or promotion during a game or event.

New sport lighting will also be added to the arena bowl to enhance Trail Blazers games and other sporting events. Finally, approximately 10,000 binoculars will be installed under individual seats in the Club Level, Suite Level and 300 Level.

Some Rose Quarter patrons and Blazer officials have expressed displeasure with the current improvements.

“Our point has always been that the building needs considerable upgrades,” Patterson says. “But this renovation ignores the average fan.”

Scanlon maintains that Global has been managing the building for just six months and they need more time to address the main levels.

“In order for us to not cause disruption during the sports season we would have needed to start with those plans immediately after the end of last season,” Scanlon says. “Although the exact plans have not been defined, we will be addressing the main concourse, the entryway and the concession stands during the second phase, which will begin next year.”

“But the average fan will notice a difference,” he adds. “The LED ring is a sizable investment and the lighting didn’t meet NBA requirements, now it will.”

Global Spectrum is taking an aggressive approach to filling the venue and filling the seats, which last June showed a 40 percent decline in the number of seats sold from seven years before.

The numbers are already turning around. In the July 2005 issue of Venues Today, one of the industry’s leading publications, the Rose Quarter was ranked sixth in the world for venues with a capacity of 15,001-30,000 for the period of November ’04 through May ’05. The ranking does not include hockey or basketball events and is based on the total gross ticket sales, while also highlighting key numbers such as attendance and number of shows.

“To be ranked sixth in the world is an amazing accomplishment and a credit to all of our Global Spectrum staff at the Rose Quarter,” says Scanlon.

In addition to the improvements to the stadium, a group doesn’t need to own a luxury suite at the Rose Garden to enjoy one. Single-event luxury suites are now being offered at the venue for all concerts, family shows, sporting events, and other attractions.

“We are focusing on getting big acts into Portland. These are relationship based and because of our other facilities, they are coming,” Rose Quarter Marketing Manager Eric Nemeth says. The booked acts, including U2, Paul McCartney, The Rolling Stones, Bruce Springsteen, and more, show that it is working.

“The Blazers success is our success, but when they aren’t playing, a building is only a building until we bring in new events,” Nemeth says. “We are bringing in new events, we are adding life to it.”

BrainstormNW - August 2005

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