Ilitch not renewing existing lease on Joe Louis Arena

6.26.09

Ilitches not renewing old Joe Louis lease, negotiating for new deal

By Bill Shea

The statement today that the owners of the Detroit Red Wings aren’t renewing their expiring Joe Louis Arena master lease leaves it unclear if they will pursue a new hockey arena or renovate their 30-year-old city-owned home.

The owners say they now plan to negotiate a new lease for Joe Louis, which could be a long-term commitment and what insiders say would be a $150 million renovation job, or it could be a shorter deal that buys them time to arrange financing for a new venue that could cost $300 million to $400 million.

Olympia Entertainment, which manages Joe Louis and Cobo Arena under a single lease and is owned by team owners Mike and Marian Ilitch, was required to notify the city by Tuesday of their intentions with the contract, which expires on July 1, 2010. Otherwise, it automatically renewed for 20 years.

The statement from Olympia today says the lease isn’t being renewed to allow the city to forge ahead with an expansion of Cobo Center, which is managed by the city but includes the Ilitch-run Cobo Arena.

The city needed Ilitch-owned Olympia Entertainment to renegotiate the master lease because it includes language that gives Olympia say over any project that would significantly impact Cobo Arena.

Not renewing basically turns Cobo Arena back over to the city, paving the way for the long-debated control and expansion of Cobo Center — something needed to prevent the loss of the annual North American International Auto Show.

Olympia has been negotiating for years on the lease with the Detroit Economic Development Corp., and the statement Friday said the Ilitches will continue to pursue a new lease for just Joe Louis.

“The existing lease was crafted more than three decades ago by individuals no longer associated with either Olympia Entertainment or the city,” Ilitch Holdings Inc. President and CEO Chris Ilitch is quoted as saying in the statement. “It does not fully contemplate one: the evolution of the sports and entertainment industry; two: the current economic environment in which both the city and Olympia Entertainment are operating and; three: the infrastructure replacement and repair needs of a 30-year-old building in order to meet the competitive industry standards of today.”

The statement notes that Joe Louis Arena is the fourth-oldest venue in the National Hockey League. Teams seek new arenas because modern facilities provide deeper revenue streams than older facilities.

Ilitch spokeswoman Karen Cullen said no comment would be made on the specifics of the new lease talks.

The Ilitches bought the Red Wings from former owner Bruce Norris in 1982 for $8 million, and today it’s valued by Forbes.com at $303 million.

Wayne County Executive Robert Ficano has said he’s been approached by the Ilitches about financing a new arena, but has declined to say more.

Both Comerica Park, where the Ilitch-owned Detroit Tigers play, and Ford Field, home of the National Football League’s Detroit Lions, are owned by the Detroit-Wayne County Stadium Authority, a quasi-public board of city and county appointees, and are leased to the county and then subleased to the teams.

The authority, along with the DEGC, also partially financed both ballparks.

Any use of tax dollars to subsidize stadium construction — either in the form of a direct levy or by extension of current taxes — generates fierce criticism that it’s nothing more than welfare for rich owners and players.

Speculation is that a new hockey arena would be built on Ilitch-owned land in the Foxtown area or between Grand River and Cass south of I75.

Not renewing the master lease means the Ilitches give up a cap on property taxes at Joe Louis, which limits them to $252,000 annually. Without the cap, the taxes would be about $1 million. While the city owns Joe Louis, the lease called for the Ilitches to pay the property taxes — something that could continue under a new lease, or be changed.

The lease, first negotiated under Mayor Coleman Young after the Detroit Lions and Detroit Pistons left for the suburbs, has drawn criticism, including from the Detroit City Council, that it tilts too far in favor of the Red Wings.

Detroit gets a cut of tickets, concessions, corporate and suite sales at both venues, which would have been lost if the lease was renewed. New surcharges could be negotiated under a new lease, and at a new arena.

If the Ilitches, who have a year to work out a new lease, decide to pursue a new arena, financing options include particular-use taxes, use fees built into ticket prices, new lottery games, or the city and/or county issuing revenue bonds. Private money from the owners and from corporate investment, especially from naming rights, also will finance any new stadium.

Building a publicly owned stadium and leasing it to the team, which was done for the Tigers and Lions, is also an option — but one that carries political risks because it would require tax dollars in economically tough times.

Debt financing by the team is also iffy because banks are hesitant to loan money at the favorable rates from even a year ago, something that’s hampered stadium projects elsewhere in the country.

A new short-term lease at Joe Louis buys time for the markets to improve.

Ilitch must announce intentions for Joe Louis Arena June 30

Bill Shea at Crain's Detroit Business blogs:

... Mike and Marian Ilitch, the franchise’s owners [Detroit Red Wings] since 1982, have until June 30 to tell Detroit if they will modernize the 30-year-old, city-owned Joe Louis Arena or construct a new venue that likely would cost $300 million to $400 million.

Renovating Joe Louis reportedly could cost $180 million or more.

The lease expires July 1, 2010, but the Ilitches are contractually obligated to tell the city a year ahead of time their intentions. Doing nothing renews the lease for 20 years.

The team and city have been hush-hush about their Joe Louis talks. Scuttlebutt says the Ilitches want an extension to continue negotiations while they map out a plan for a new venue — likely on the land in the Foxtown area they’ve been buying up in recent years. (Full Post)

Ilitch uses taxpayer subsidies to level more Foxtown buildings

3.19.09

Spaces for Final Four
Buildings razed to open room for new parking lots

Louis Aguilar / The Detroit News

DETROIT -- To create more parking for the throngs anticipated for next month's NCCA Final Four basketball championship, Ilitch Holdings Inc. is using state Super Bowl XL funds to quickly demolish five empty downtown buildings.

In less than two weeks, four buildings have been razed, including the former Chin Tiki, a Polynesian-themed restaurant featured in the Eminem film "8 Mile." The other demolished structures are a former apartment complex on West Grand River; an office building on West Columbia; and the former Egyptian building on Cass.

The last one to go is a parking garage at 145 W. Elizabeth, bought by an Ilitch executive in 2007 through a private company, which listed the Ilitches' Fox Theatre headquarters as its address. That was the period in which the Ilitch family quietly increased control of a rundown patch of downtown long considered a potential site for a new hockey arena for the Ilitch-owned Detroit Red Wings.

Mike Ilitch, co-founder of the Little Caesars Pizza chain that started the family's billion-dollar sports, real estate and business empire, has hinted he prefers building a new hockey arena near the Fox.

No decision has been made about that.

The flurry of demolition is all about "added safety and security," said Ilitch spokeswoman Karen Cullen.

"The structures in question were not suitable for long-term redevelopment," Cullen said. "The ability to move forward and remove non-viable buildings from the area ... greatly enhances the appearance for surrounding property owners and their venues."

In December, the city's Downtown Development Authority approved $2.5 million for the demolitions. The money came from state funding originally intended to level empty buildings in time for Super Bowl XL, three years ago.

The properties will become paved parking lots to accommodate the more than 100,000 people who will converge downtown during the first week of April for the NCAA Final Four.

"Yes, that's still the goal," said Fred Beal, president of J.C. Beal Construction Inc, who lobbied on behalf of the Ilitches to obtain the state money.

You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com

TVT Note: A comprehensive map of properties believed to be owned or controlled by the Ilitch family in Foxtown is available here.

To renovate or abandon historic Joe Louis Arena

Originally published 3.22.09 as a sidebar to comprehensive coverage surrounding a Crain's Detroit Business story, "Where will Wings roost? Joe Louis Arena lease nears end:"

RENOVATE OR MOVE?

• Speculation on a site for a new arena include property west of Woodward Avenue behind the Ilitch-owned Fox Theatre, where the family already owns land; along Temple Street between the Ilitch-owned MotorCity Casino and the Ilitch-operated Masonic Temple; and the triangular site between Grand River, Cass Avenue and south of I-75.


• A new stadium could cost $200 million-$300 million.


• Renovating Joe Louis reportedly could cost $180 million or more.

Highlights of current Ilitch hockey arena lease

Originally published 3.22.09 as a sidebar to comprehensive coverage surrounding a Crain's Detroit Business story, "Where will Wings roost? Joe Louis Arena lease nears end:"

THE JOE LOUIS LEASE

The Ilitch family’s lease for its Red Wings to play at Joe Louis Arena is part of the Cobo Arena master lease. The deal includes:

• The city provides free police and landscaping services, including snow removal, for both the Joe Louis Arena and Cobo Arena, and up to $500,000 annually for capital improvements for the hockey venue.


• The Ilitches pay property taxes on city-owned Joe Louis, but they are capped at $252,000 annually. Without the cap, the tax would be about $1 million.


• The Ilitches pay $25,000 monthly rent for Joe Louis and $12,500 for Cobo.


• Detroit collects a 10 percent ticket tax for Joe Louis events and a 7.5 percent ticket tax for Cobo events. The city collects a surcharge of 10 percent on concessions and 7 percent on suite sales.


• If the lease is renewed, the city immediately loses the ticket taxes and in five years loses the surcharge on concessions and suites.


• A new arena would mean the city could charge for police and snow services and collect full property taxes on the venue. The city also could lose its ticket, concession and suites surcharges. All this depends, of course, on a new lease or stadium deal, its financing and who owns the new venue.

Latest comprehensive update on Ilitch hockey arena saga

3.22.09

Where will Wings roost? Joe Louis Arena lease nears end
Cobo expansion complicates plans for Joe Louis

By Bill Shea

Mike Ilitch has until June 30 to say if he’ll modernize The Joe or build a new facility.

The ongoing saga of whether to renovate the Joe Louis Arena or build a new home elsewhere in the city for the Detroit Red Wings has entered its version of hockey's third period — and the team owner can force overtime by negotiating an extension on a lease with the city.

Mike Ilitch, the team's owner since 1982, has until June 30 to tell Detroit if he will modernize the 30-year-old, city-owned arena or construct a new venue that likely would cost $200 million to $300 million.

Talks have been ongoing for several years between the Ilitch organization and the quasi-public Detroit Economic Growth Corp.

Even with the clock ticking, no offers are on the table, those involved say.

Adding spice to the drama... (Original Story & extras)

Several other property owners present obstacles to Ilitch plans for Foxtown hockey arena

Ilitch Holdings, Inc. apparently has yet to take control of three properties fronting Cass Avenue between W. Montcalm Street and W. Columbia Street in the Foxtown area of downtown Detroit. Ilitch entities control the properties on the west side of Cass Avenue including the former Chin Tiki bar and restaurant used in the Eminem film "8 Mile," the historic Detroit Moose Lodge and the Ancient Egyptian Arabic Order of Noble Mythic Shrine.

The properties noted as #201, #202 & #203 in the graphic below combined with parcels controlled by Freda Alibri, #180, form the better part of almost 1 square block in an area predominately controlled by various Ilitch enterprises and located behind the Ilitch-owned Fox Theater. Speculative reports have suggested the area behind the Fox Theater could possibly be the site of a new hockey arena to replace Detroit's Joe Louis Arena.

click graphic for detailed map

Ilitch controls Cass Avenue LLC; and what about Cass Avenue Development properties

John Kotlar, Vice President of Tax Affairs at Ilitch Holdings, Inc. is the registered agent of record with the Michigan Department of Labor & Economic Growth (DL&EG) for an entity known as Cass Avenue, LLC. Kotlar is also agent of record for Ilitch Holdings, Inc. and Ilitch-owned Olympia Development of Michigan LLC.

An entity recorded as Cass Avenue Development -- but not registered with the Michigan DL&EG -- holds title to at least 8 parcels (see below) in downtown Detroit near the historic Detroit Masonic Temple. The parcels encompass nearly two square blocks. (see map)

click graphic for larger view

Is Cass Avenue Development a d/b/a for Ilitch-controlled Cass Avenue, LLC; although no entity by that name is registered as such with the DL&EG.

It has been reported that Ilitch Holdings, Inc. (Olympia Entertainment) has been in negotiations to take over the management of Detroit's Masonic Temple Theater, currently under management of Nederlander Co. LLC.

MAP of properties controlled by Cass Avenue Development.

Detroit forum affirms Ilitch paid record price for .17 acre Foxtown parcel

On 12.24.07 a forum participant, 3rdworldcity, posted the following affirmation of a previous TVT post in a forum thread, "Motown site (Woodward/75) back in the news:"

Dennis K [Keffalinos] was paid $1,600,000 for the .17 acre parcel on Grand River. That's $234/sq. ft., not a bad price. (Price reported by Verifiable on this forum, which I verified from the seller.) What is amazing is that the Ilitch entity took no steps to prevent the public from seeing the purchase price, such as filing a Valuation Affidavit. Unbelievable. That [apparent] slip-up will cost them a fortune when negotiating future purchases and may sink an arena behind the Fox if they have much more land to acquire.

Will Ilitch build hockey arena on site of Berry Gordy's failed Motown entertainment complex

12.04.07

Motown entertainment complex plans fall through
Berry Gordy's group couldn't raise money to build $28M facility north of the Fox Theatre.

Robert Snell / The Detroit News

...Hockey arena a possibility?

The three Woodward properties faced foreclosure April 1, 2008, because Motown Center owed about $14,000 in unpaid property taxes dating to 2005, according to the Wayne County Treasurer's office.

The back taxes were paid Nov. 29, days after The Detroit News first called Heidelberg-Yopp, asking about the delinquency.

The Woodward land could be combined with the other parcels owned by the Economic Development Corp. and the city, and sold to a developer, Papapanos said.

The city and the Detroit Economic Development Corp. own about half of the land within the first four blocks north of I-75, between Woodward and Park.

But the cost of acquiring other parcels and offering the space for one development has been too expensive, said Brian Holdwick, the growth corporation's vice president of business and financial services.

The city has marketed some of its land to prospective developers, perhaps for a mixed-use development, Holdwick said. The nearly four-block area has been called an ideal spot for a new Detroit Red Wings hockey arena according to one development expert. But Ilitch Holdings spokeswoman Karen Cullen declined to discuss specific locations for a new arena.

One development official suspects the land would give Mike and Marian Ilitch, owners of the Red Wings, an option other than building behind the Fox Theatre, where the family empire has acquired a wide swath of land.

"Ilitch always has two or three areas (in mind) to stay ahead of the speculators," said Patrick Dorn, executive director of the Cass Corridor Neighborhood Development Corp. "You can't get a better, sweeter spot for an arena," than the Motown Center land and surrounding properties.

Cullen acknowledges the company is considering more than one location. She was unaware of the Motown Center property, but wouldn't rule it out.

"In the broadest sense, I don't want to get into various sites," she said. "We haven't made a decision on the arena and are still considering all of our options, both whether to renovate (Joe Louis Arena) or build new."

James Canning, spokesman for Mayor Kwame Kilpatrick, has not heard of any city effort to offer the land to Ilitch for a new hockey arena.

"It's a great parcel of land and our development guys will go out and market it," Canning said.

Though the Motown project won't be built, Canning said: "We have an awesome Motown museum (on West Grand Boulevard). The community needs to continue to embrace that location."

You can reach Robert Snell at (313) 222-2028 or rsnell@detnews.com.

http://detnews.com/apps/pbcs.dll/article?AID=/20071204/ENT04/712040388/1424/ENT04

Speculation about Ilitch Family real estate development projects

Note: a map of some 160 downtown Detroit properties controlled by the Ilitch Family is available at maps.live.com

11.28.07

Ilitches chart Foxtown moves
New hockey arena relocation downplayed; family turns to lots behind Fox Theatre.

Louis Aguilar and Joel J. Smith

The Detroit News

With the MotorCity Casino complex nearly finished, the powerful Ilitch family will most likely focus on the empty lots and buildings they've steadily acquired behind their Fox Theatre headquarters in downtown Detroit, Marian Ilitch, matriarch of the billion-dollar family empire, indicated Tuesday.

But plans for that roughly 10-block area west of Woodward Avenue may not include a new hockey arena for the Detroit Red Wings, owned by Marian's husband, Mike Ilitch.

At a Tuesday press conference about the opening of her MotorCity Casino Hotel, Marian Ilitch was asked about the family's downtown properties.

"Most likely it will be to expand property behind the Fox Theatre. It may not turn out to be everything that everybody expects -- for instance, an arena -- however, it will be the best when it gets done," she said.

Marian Ilitch owns the MotorCity Casino. Together, she and her husband own Ilitch Holdings Inc., the Little Caesars Pizza chain and numerous downtown Detroit properties, ranging from concert venues like the Fox, restaurants like the Hockey Town Cafe and empty buildings and parcels.

"You have to be very careful about announcing future projects because if they don't come true you end up with egg on your face. But we do have other plans," Ilitch said.

Ilitch Holdings executives are deciding whether to renew the lease for the city-owned Joe Louis Arena, where the Wings now play, when it expires in 2009, or build a new facility. Speculation the Ilitches might build a new arena near the Fox Theatre has swirled as branches of Ilitch Holdings gained land and buildings behind the theater.

But that land certainly isn't the only empty space around the Fox Theatre and nearby Comerica Park, home of the Mike Ilitch-owned Detroit Tigers. The city of Detroit controls many parcels in the area.

In the past, the Ilitches have said they were in discussions with several national retailers about moving to the area, which the Ilitches have played a crucial role in helping rebuild.

Ilitch's comment Tuesday doesn't mean a decision has been made about building any new arena or what to do with the area behind the Fox, said Karen Cullen, spokeswoman for Ilitch Holdings.

"We've always said it's our neighborhood and we would like to continue to enhance it," Cullen said. "What specifically we will do there has not been decided."

You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com.

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Detroit casino gaming has not led to any noticeable redevelopment downtown

9.30.07

A gamble on casinos seems to be paying off

BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER

As the MGM Grand Detroit, the first of Detroit's permanent casinos, prepares to open this week, supporters of gaming say Detroit's three casinos have fulfilled most of their early promises and disproved most of the early doubts.

On the positive side, casinos have proved themselves to be the municipal cash cows that state and local officials fervently hoped when MGM Grand opened the city's first temporary casino in 1999.

In another positive, it's now clear that the widely predicted problems of mob infiltration and street crime related to gaming never materialized.

On the negative side, social service agencies have had to help more people with gambling problems since the first casino opened.

And in another negative, hoped-for spin-off development near the casinos, in the form of restaurants and other amenities, did not occur.

Record mostly positive

Overall, the record remains mostly positive, said Larry Marantette, an economic development consultant from Detroit who was part of an early advisory task force on casinos.

"It's been substantially more positive than negative -- and don't forget the jobs," said Marantette, a partner in Taktix Solutions. "They have provided large numbers of jobs with benefits in a whole range of salaries."

Christopher Baum, senior vice president for sales and marketing of the Metro Detroit Convention and Visitors Bureau, said the casinos also have helped make Detroit a more attractive city for conventions and trade shows. That should prove even truer as the three new casino-hotels open and add 1,200 rooms to the downtown market.

"It's a major extra point of leverage for Detroit," Baum said.

Keeping the money here

Getting casinos in Detroit was not easy. Voters had repeatedly turned down casino gaming. But once a casino opened in Windsor in 1994, advocates of gaming in Detroit could play an unbeatable hand: why should all that money go to Canada?

"The No. 1 factor always was retention of the dollars," said Jake Miklojcik, an economic development consultant based in Lansing who works with casinos.

Once the Detroit casinos opened, money began to pour into government treasuries, thanks to a state law requiring the casinos to pay 24% of gross revenues to the city and state. As an incentive to invest in the larger venues, that amount drops to 21% once the permanent casinos open.

Since 1999, the three gaming houses have turned over slightly more than $1 billion in taxes and service fees to the City of Detroit, and almost that much to the State of Michigan.

The money has proved critical to both a city and a state struggling with chronic budget shortfalls.

Crime fears unfounded

During the casino debates of the 1990s, many people cited a fear of crime as a reason to keep casinos out of Detroit.

Opponents predicted that organized crime would infiltrate the casinos, and that pickpocketing and other petty crimes would flourish.

Neither happened, the Michigan Gaming Control Board said. There has never been a hint of mob infiltration. Street crime has proved less of a problem near the casinos than in the rest of the region, probably thanks to the large numbers of police who patrol inside and outside the gaming palaces.

Problem gamblers

But one predicted problem did happen: Opponents said casinos would create more problem gamblers in southeast Michigan.

Last year, some 33,000 people called the gambling help line of the Neighborhood Service Organization, a nonprofit human services agency based in Detroit.

Many calls dealt with lottery questions and issues not related to a gambling problem. But LaNeice Jones, the agency's vice president for programs, said thousands of the callers did report personal and financial problems stemming from gambling.

"The number of people who identified themselves as problem gamblers has certainly increased with three casinos in the city," she said.

Economic spin-offs lacking

The three temporary casinos hired several thousand of their own workers plus many outside vendors, creating as many as 6,000 spin-off jobs in the local service industry, Miklojcik said.

Many of the 6,400 direct casino jobs are unionized and pay health and other benefits.

But casino gaming has not led to any noticeable redevelopment downtown.

Two of the three gaming sites, MGM Grand and MotorCity Casino, stand as isolated islands. The third, Greektown Casino, is in the midst of one of the city's hottest tourist areas, but even there the economic spin-off has been limited.

MGM's planned opening Tuesday is the first of the permanent facilities with hotels.

MotorCity's opening is scheduled in November.

Greektown's expansion and hotel are to open next year.

Todd Stern, owner of the Small Plates restaurant on Broadway downtown, said casinos don't provide any business for him, mostly because gamblers enter a casino, eat and gamble there and then go home. Other nearby restaurant managers agreed.

Laurie Volk, an economic development consultant based in New Jersey, said casinos do little to attract the highly educated younger workers who are considered crucial to urban redevelopment. Those workers prefer more cultural amenities and meeting places such as coffee shops and casual restaurants.

"I don't know if casinos help at all, frankly," she said.

Downtown has, of course, seen a lot of loft residential development and some new retail in recent years, as well as the new Campus Martius Park, the RiverWalk, and other amenities. But planners say those happened independently of the casinos, and reflect a trend toward downtown revitalization rather than casino spin-offs.

The lack of spin-off benefits may stem from a failure in Detroit to cluster the three casinos, as occurred on the Las Vegas Strip and in some other casino cities. In Detroit, attempts to create a casino district, either along the east riverfront or in the downtown area, failed for a variety of reasons.

"The most positive street impact comes when casinos are clustered and the gamers go from one to the next and in between stop and shop and dine," Marantette said. "We just don't have that structure in Detroit."

Ann Lang, president of the civic group Downtown Detroit Partnership, is hopeful that downtown spin-offs may yet come as the permanent casinos open.

"It used to be that visitors would come for a Tiger game and go home," she said. "And now, much more often, they come early or stay late, go to a restaurant, visit the riverfront. And it's conceivable to me that that same kind of activity could happen around the casinos. We're just not there yet."

Contact JOHN GALLAGHER at 313-222-5173 or gallagher@freepress.com.


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