Published in: Forbes.com
Author: Tom Van Riper
Description: Dr. Rishe talks about how the economy impacted the St Louis Cardinals and their ability to follow through on plans to develop Ballpark Village, the mixed use development aimed to be part of the larger redevelopment of downtown St Louis.
Fans pouring into St. Louis for the July 14 baseball All-Star Game will get to experience a beautiful three-year-old ballpark loaded with amenities. What they won't get to experience is Ballpark Village, the ambitious mixed-use redevelopment project of shops, restaurants and condos adjacent to the park, that hasn't gotten off the ground.
The village project and its expected boon to the local economy was a big selling point for the new Busch Stadium, opened in 2006 at a cost of $370 million. But it's been derailed by the bum economy, leaving an open pit next to the park (the Cardinals will temporarily dress it up and use the space for Fan Fest activities during the All Star break). The team is on the hook for 85% to 90% of the cost, including about $200 million in private bonds. The Cardinals carry $17 million in annual debt service, from which there is no help from previously expected revenue from Ballpark Village. The plan called for the team to pay for about two-thirds of the proposed $646 million project.
Cardinals officials didn't return calls for comment, but Patrick Rishe, a professor of business at Webster University in St. Louis, believes the holdup has the makings of a public relations disaster for the club, if not a financial one just yet (the Cardinals' estimated $195 million in annual revenue ranks eighth in the majors, while their $77.6 million payroll ranks 17th). The eyesore that sits next to the park is becoming a point of contention for the locals.
"The Cardinals have to do something eventually, because of the rhetoric they've been giving St. Louis residents for the past 10 years," says Rishe. He figures that Ballpark Village will happen at some point, though in scaled-down form.
St. Louis isn't the only town where sports teams are getting smacked around by the real estate hurricane. In Tampa, Lightning owner Oren Koules has yet to develop the 5.5 acres of land that were included in the $204 million price tag he paid for the NHL club last year. The Lightning are now losing money after debt service.
Down in Texas, the NFL's Dallas Cowboys and MLB's Texas Rangers are dragging their feet on a massive redevelopment project designed to overhaul the area around the Cowboys' new $1.1 billion stadium. Billed as Glorypark, the plan was to turn 1.2 million acres housing a bunch of motels and auto dealerships into an upscale playground of shops, restaurants and scenic walkways. Rangers' owner Tom Hicks, whose holding company has defaulted on some debt, has no apparent deadline for breaking ground on the project.
Tampa and Texas, both highly leveraged, are the two franchises most likely to suffer from their real estate fiascoes. The Rangers' debt to franchise value ratio of 66% is the third highest in Major League Baseball.
And in Brooklyn, N.Y., plans for the $800 million Barclays Center, part of New Jersey Nets owner Bruce Ratner's plans to create a $4 billion mix of residential and commercial properties, have been held up for years by legal hurdles from neighborhood activists. Ratner managed to win the legal battles and lined up $300 million in government financing guarantees, but the delays succeeded in dragging the project into the 2009 economic storm. The team's public line is that it's moving ahead with the project this fall. Ground has to be broken by Dec. 31, 2009, for developer Forest City Ratner to qualify for tax-exempt bonds, which they're counting on to help pay for the deal.
A lot of these held up real estate deals will happen, but in pieces, says Sports business consultant Bernie Mullin of the Atlanta-based Aspire Group. Tight credit and reluctant potential tenants make it nearly impossible to undertake these projects on a massive scale right now. "It will probably be a process of crawl, walk, run," says Mullin.
So far, the most successful of the bunch is the "LA Live" development pulled off by Anschutz Entertainment Group, owner of the Los Angeles Staples Center and its teams, the NBA Lakers, NHL Kings and WNBA Sparks. Launched in 2007, Anschutz locked in long-term leases with food and entertainment heavyweights like ABC/ESPN, Ritz Carlton, Regal Theaters and the Grammy Museum. The key to the project's success: It was underway before the credit crunch hit.
Copyright © 2010 Webster University • George Herbert Walker School of Business & Technology • 545 Garden Avenue • St. Louis, MO 63119. All Rights Reserved.
Questions or comments email us at: email@example.com.
Powered by Google.