Allen Finessed Public-Private Deal In Portland -- $262 Million Rose Garden Cost Taxpayers Only $34.5 Million
Seattle Times Staff Reporter
One year after buying the Portland Trail Blazers in 1988, Paul Allen set about to build a state-of-the-art arena - and he succeeded grandly by guiding an innovative partnership of private and public money.
That may prove to be a valuable history lesson for Seattle, which faces the thorny problem of trying to bring the 20-year-old Kingdome up to National Football League standards while also paying for a new baseball stadium.
Allen's plan in Portland netted the city the Rose Garden, a state-of-the-art $262 million stadium, with only $34.5 million of taxpayer money for public improvements - and the city is expected to be repaid within the next six years from parking revenues and a 6 percent user fee on ticket sales. Allen owns the building, the Blazers and the concessions. The city has a commitment that the franchise will stay in Portland for the next three decades.
Here's a look at how Allen got it done.
Beginning in 1989, Allen's Oregon Arena Corp. (OAC) began trying to win over skeptical citizens, wary politicians and investors.
By late 1991, the Blazers had agreed to raise most of the money for the new arena. Allen stayed in the background but stabilized the project from the beginning.
"These things usually are driven by an owner's ego, and owners typically are so busy, they want to take shortcuts," Marshall Glickman, a former Blazer official who oversaw the project recently told The Oregonian.
"So they march into the mayor's office and say, `Here's my list, are you going to give me what I want? And if you don't, I might be in Nashville next week.' But thankfully, Paul wasn't like that."
Allen paid for the design process, which cost well over $1 million and is normally completed by the developer.
In October 1992, the Portland City Council approved a series of agreements that launched the arena project.
OAC then sought $170 million in private financing, which turned out to be the easiest part. Within a month, nine investors committed about $155 million in first mortgage term notes with a 27-year maturity.
It was an uncommon deal. No collateral was put up by Allen or his companies. And to make their enormous debt payments, the Blazers must keep the arena nearly sold out.
But investors liked the signs: All 70 luxury suites had already been leased, most on nine-year contracts; more than half of the preferred seats were sold; a number of large advertising contracts were in place; the arena lease was for 30 years; an agreement with the city was almost complete.
The Blazers also had a track record of success and a large fan base, and the proposal had earned solid investment-grade ratings.
With the private financing, the public money, a loan and Allen's $46 million in equity, the $262 million was in place.
The official groundbreaking for the 20,654-seat arena took place on July 12, 1993. The arena opened last fall to raves. A $2 million water- and fire-spouting fountain, Allen's idea, sits outside. Inside are 710 television sets, a mammoth scoreboard and four 23-foot ad towers.
The building was also designed to accommodate hockey and an Olympic-sized pool.
Luxury seating is seen as the key to success in today's market, and the Rose Garden has it in great supply. Its 70 executive suites range from $65,000 to $135,000 a season. Courtside seats range from $5,375 to $12,900 annually, and a "preferred" seating area ranges in price from $3,500 to $4,000 annually.
More than 3,000 seats are priced at $15 or less per game, with some priced at $5 per game.
The $262 million also paid for the nearby One Center Court entertainment complex with Blazer offices and three restaurants. One of them features a 36-square-foot video wall, two 10-foot digital screens and three 53-inch televisions.
OAC agreed to manage the Coliseum, the Blazers' old home, which also received seismic upgrades.
Allen stands to do well with the lucrative Rose Garden concessions contract. The profit margin, sources say, is 45 percent. The annual revenue from food and drink alone is estimated at $8 million.
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