The lease agreement between the Pirates and the Civic Center is set to expire next week and there is still no deal in sight.
Both sides expect the lease will expire before a new one is signed, but don’t appear to be too concerned at this point.
There are 33-million reasons why as renovations to the 35-year-old facility is set to begin this summer.
“It’s not a normal lease negotiation,” said Neal Pratt, Chairman of the Civic Center Trustees. “It’s tough enough to work out a deal that is reasonable for the taxpayer and (to the Pirates), but when you have an overlay of a 33 million dollar renovation project and all of the changes that will take place. We’re still trying nail down and visualize its impact.”
The current two-year lease agreement that was signed in 2010 is scheduled to expire on April 30, and one of the issues at hand is the complexity of what a new lease will look like due to the upcoming renovations to the Civic Center.
“The lease will expire before we announce a new one,” said Pirates’ managing owner/CEO Brian Petrovek. “It’s not as time sensitive as it used to be, but we’ve made it clear to our commitment to the area. I’m more focus on the process that we are going through with the building due to the renovation work because it’s a whole new world that’s going to result from this work.”
“I’m not worried about the formality of the lease expiring,” said Pratt. “It’s not going to have a bearing on us getting a deal done. The biggest challenge we have right now collectively – and it’s a good problem to have – is dealing with the magnitude of the renovations and trying to figure what that consists of financially and from a scheduling standpoint.”
The current lease requires the Pirates to pay $2,500 per game, but they receive a rebate based on the number of tickets sold during the season. According to the minutes of a recent civic center trustees meeting, the Pirates will receive a rebate in the amount of $76,000, reducing the actual amount of rent paid to $500 per game.
Discussion of a new lease is likely to be centered on what new revenue streams, such as concessions, advertising, premium seating and naming right, from the renovation will be created, and how those new sources of revenue will be divided between the Pirates and Civic Center.
The Pirates currently do not receive any income from the concessions sold at the Civic Center.Voters approved a bond to finance a 33 million dollar renovation last November, and work is scheduled to begin this summer pending final approval of the design, which could happen as soon as May when the building committee is scheduled to meet. That meeting will give the Pirates and the Civic Center a more concrete idea of what revenues will be generated once the renovation is completed by the fall of 2013.
Pratt doesn’t believe in a timeline for completing a new lease with the Pirates until they have a better understanding of revenue streams of a renovated civic center.
“It’s open ended partly because the civic center’s position is that we don’t have our arms completely around the economics,” he said. “We still don’t have a clear a picture at what (the economics) going to look like. We’ve done studies to get a broad range idea, but as we get further along in the process we want to be more clear and precise at what it will all look like. We have to know what the size of the pie is before we can determine how to cut it.”
Petrovek, who is looking for a long-term lease with the Civic Center, understands the trustees’ concerns, but indicated that his experience could help facilitate the direction of the Civic Center’s future.
“I think I know what the economics (of a renovated Civic Center) will look like, but the (trustees) are not as comfortable with that yet,” said Petrovek. “I’m ready to do a 15-year deal and the (trustees) know that. They’ve seen my structure, but if they are not comfortable with what I’m suggesting I don’t what to rush that. They need to be comfortable. They need to see more detail and I’m working through that with them to make sure we are all on the same page. This is a big undertaking and this a big responsibility because we have taxpayers dollars at stake and we need to generate revenue to pay that money back.”
In 2005, and again in 2010, the Pirates looked at potentially relocating as a bargaining chip in lease negotiations.
The Pirates nearly moved the team to Worcester, Massachusetts in 2005 before agreeing on a five-year lease with the Civic Center, and again in 2010 they were in negotiations to relocate to Albany, New York, but eventually settled on the current two-year lease agreement that is about to expire.
The Pirates have not made such overtures this time around as Petrovek believes because the Civic Center has a plan to move forward.
“There is a plan in place,” he said. “We have a commitment to renovate. We didn’t have that in 2005 and we didn’t really have that in 2010. We’ve had attempts at doing things, but never a real solution. We didn’t have anything to wrap our arms around, but now we do.”
However, Petrovek cautioned that he is not going to sign another short-term lease with the building as he feels it’s counterproductive to both entities. The trustees are still evaluating their options, but haven’t ruled out such a lease.
“I don’t intend to negotiation another short term lease,” said Petrovek. The economics of a debt service like this requires a team to be here for 15 years because you need the contractually obligated revenue from a tenant to pay the bills.”
“The hope is if the numbers bear out that we would have a lease that would have some length to it,” said Pratt. “As to the fine points of what that would look like, or how long, whether it’s a long lease or a series of shorter ones. That is still to be determined. It’s getting our arms around all of the moving parts so we can negotiate a lease that’s fair to the county and the team.”
Petrovek feels by not having a term that is at least ten years in length, he is not able to plan and make decisions on the business side of the Pirates regarding its future.
“We are going to be in situation where our offices won’t be in the civic center (once renovated),” Petrovek said in an example. “If I could take a long-term lease on office space I would get better rates. If can buy space across the street, and condoize it. I’ve built equity, but if I only have a two-year lease I can’t do that because I can’t make that type of decision. I can’t make a 10-year lease on office space when I have a two-year lease on the arena.”
Both sides believe ultimately that there is a common trust in finding a solution.
“We trust each other,” said Petrovek. “The county knows that we’ve been working to get to this point and we’re committed to this market. I love this building; always have. We will find that sweet spot where it will work for the both of us. We have too because it can’t be good for me, bad for them or vice versa. They’ll suffer and in turn we’ll suffer even if we have a good lease.”
“Both models have to agree with each other.”
“We need to be more precise in the economics because if you give away too much or don’t give enough, it’s not a good deal for either side,” said Pratt. “We’re committed to do the best deal for all parties involved.”