Rose Garden arena bankruptcy

Last updated
Rose Garden. RoseGardenArenaS.jpg
Rose Garden.

The Rose Garden bankruptcy occurred in 2004 when the Rose Garden in Portland, Oregon was the subject and primary asset in a bankruptcy filing, shifting ownership of the arena from billionaire Paul Allen to a consortium of creditors.

Contents

Allen, who owned the arena's primary tenant, the Portland Trail Blazers of the NBA, financed the arena's construction in 1993 with a US $155 million loan on what Allen's representatives later characterized as unfavorable terms.

As a result of the bankruptcy, the Rose Garden was operated by its creditors for over two years, during which Allen and the creditors briefly offered the arena for sale. By April 2007 the Rose Garden was once again owned by Allen.

Background

Ground broke on the Rose Garden in 1993, and the building opened two years later in 1995. The Rose Garden cost $262 million to build, [1] $155 million of which was financed through a loan from a consortium of lenders led by pension fund TIAA-CREF. As Allen was unwilling to personally guarantee the loan, the lenders demanded an interest rate of 8.99%, with no opportunity for prepayment. [2] Other major creditors included Prudential Insurance, and Farmers Insurance. [3] A shell corporation, the Oregon Arena Corporation (OAC), was chartered to oversee the construction and operation of the Rose Garden, as well as operation of the Rose Quarter as a whole. The sole shareholder in OAC was Allen.

During the 1990s and the early 2000s (decade), the team was successful both on the court and in the box office—twice making it to the Western Conference finals—but a series of questionable and expensive player acquisitions caused many fans to sour on the team, by then derisively called the "Jail Blazers." [4] In addition, the team payroll skyrocketed to over $100 million.

In 2002, a collective bargaining agreement between the NBA and the players' union imposed a luxury tax on excessive payrolls; this tax impacted the team's finances greatly. [5] In the summer of 2003, Bob Whitsitt resigned [6] and was replaced as team president by Steve Patterson; Patterson was chartered with restoring the team's image and bringing costs under control. [7]

Bankruptcy filing

Claiming the local economy was responsible for reduced revenues which made it unable to make payments on the loans used to finance Rose Garden Construction, the Oregon Arena Corporation filed for bankruptcy on February 27, 2004. After negotiations concurrent with the bankruptcy failed to produce a settlement—Allen offered US $90 million, and creditors demanded US $198 million—the United States Bankruptcy Court ordered on November 8 of that year that the OAC transfer the Rose Garden to the creditors. [8]

Several factors contributed to the bankruptcy. Debt service on the loan was expensive due to the undesirable loan terms, [9] the Trail Blazers were not drawing as well due to negative press and a decline in quality of play. In addition, the local economy affected ticket sales, and a lawyer for the creditors noted that OAC was ineffective in luring non-basketball events to the arena. [9] Many of the corporations leasing skyboxes in the arena (a primary source of revenue) declined to renew leases. [10]

Portland Arena Management

As a result of the bankruptcy proceedings, the Oregon Arena Corporation was dissolved and their assets (primarily the Rose Garden and the underlying land) became the property of the lenders on January 1, 2005. [9] The lenders formed a new corporation, Portland Arena Management LLC ("PAM") to manage the property acquired in the bankruptcy proceedings, and hired Global Spectrum to operate the arena. [8]

For a while, the Trail Blazers (still owned by Allen) and the Portland Arena Management had a highly hostile relationship, [11] with the two entities competing for ticket sales. [12] Almost immediately after PAM took over the arena, the Trail Blazers demanded that new owners perform US $40 million in renovations to maintain the Rose Garden as a "first class facility." [9]

Effects

One year after the Rose Garden was transferred to creditors, Larry Conn, an executive at Vulcan Inc. gave an interview in which he claimed that "all options were on the table" concerning the Trail Blazers as the "economic model" was broken, and noted that without a "public-private partnership", "no businessperson can sustain losses of that kind". [13] Conn noted that the lease agreement with Portland Arena Management gave PAM all revenue from the arena's premium seating (the black courtside seats, as well as luxury box revenue), concessions, and parking, as well as all arena-related revenue for events other than Trail Blazer games. The Trail Blazers retained the revenue for non-premium seating (the arena's red seats) for Blazer games. [14] Paul Allen repeated the claim in an interview in March. [15] Team officials were vague about specifics, leading to much media speculation that Allen might sell the team, attempt to move it, or was lobbying for increased public financing of Trail Blazer operations. [16] In addition to the lease concerns, that season the Blazers posted the league's worst record (21-61), [17] and attendance was below average. [18]

While the financial model may have been broken for the Trail Blazers, it was anything but for Portland Arena Management. Rose Quarter GM Mike Scanlon of Global Spectrum stated that the company was "very happy with how things are going at the Rose Garden", and referred to Global's stewardship of the Garden as a "very positive experience". He noted that the arena did 45 concerts in 2005, and that same year landed another sports tenant, the Portland LumberJax of the National Lacrosse League. [12]

Trail Blazers and arena go up for sale

Throughout the spring of 2006, NBA commissioner David Stern met with both Blazer management and PAM in an attempt to repair the relationship. [14] In the spring of 2006, Allen and PAM agreed to jointly market the team and the arena for sale. [19] Fourteen investor groups (including one fronted by Terry Porter) expressed interest, and paid a US$100,000 application fee. The highest initial bids were in the US$300–$325 million range. [14] However, Allen unexpectedly pulled the team off the market. [20]

It was speculated that Allen agreed to sell the team to learn what price Portland Arena Management would accept from a third party. [14] Others suspected that he had advance knowledge of the upcoming purchase of the Seattle SuperSonics by Oklahoma City businessman Clay Bennett, and that Allen saw an opportunity to move the Blazers to his hometown of Seattle should the Sonics move to the Sooner State. [21] In an interview, Allen indicated that the Blazers' strong 2006 draft, including 2006 NBA Rookie of the Year Brandon Roy, caused him to change his mind about selling the team. [14]

Public reaction

The bankruptcy filing was widely criticized in the local media and elsewhere. [14] Helen Jung, a reporter for The Oregonian described the affair as a game of "chicken" and as "bankruptcy as a business strategy", and noted Allen may have worsened his position by taking the arena into bankruptcy rather than offering a higher settlement. [3] Lewis & Clark College law professor and noted local blogger Jack Bogdanski was even more unkind, attacking the morality and "character" of a billionaire "weaseling" his way out of a debt that he could easily repay personally, especially at a time when the team was putting an emphasis on the off-court behavior of his players. [22]

Claims concerning the "broken financial model" were similarly mocked. After Blazer management complained about having the "worst lease in pro sports", [13] Dwight Jaynes of the Portland Tribune noted that the situation was largely the team's own fault. [23] Helen Jung noted that teams regularly complain about losing money, and suspected that such claims were often a ruse to obtain public financing. [24]

During the bankruptcy period, the team and the state's largest newspaper, The Oregonian , had an especially troubled relationship. Oregonian columnist John Canzano and then-Trail Blazers president Steve Patterson were deeply distrustful of each other. The paper hired an outside editor to investigate the relationship between the paper's sports department and the team. [14]

The Trail Blazers, for their part, maintained throughout putting Oregon Arena Corp. into bankruptcy was the best option for the team. Paul Allen stated that the debt service on the loan was greater than the revenues earned by the stadium, especially in the face of declining attendance. Allen also noted that the creditors, on a loan of $155 million, had recouped $195 million in cash over the years, plus the arena, which the bankruptcy court valued at US$60 million. [15]

Paul Allen re-acquires the arena

On February 2, 2007, Allen (through his subsidiary Vulcan) and PAM announced that the parties had signed a letter-of-intent for Allen to repurchase the arena. [25] On April 2 of that year, the deal was completed. At that point, a new Allen-owned corporation, Vulcan Sports and Entertainment, was chartered to operate Allen's sports-related properties, including the arena, the Trail Blazers, and the Seattle Seahawks. Terms of the purchase agreement were not disclosed.

Related Research Articles

<span class="mw-page-title-main">Portland Trail Blazers</span> National Basketball Association team in Portland, Oregon

The Portland Trail Blazers are an American professional basketball team based in Portland, Oregon. The Trail Blazers compete in the National Basketball Association (NBA) as a member of the Northwest Division of the Western Conference. The team played its home games in the Memorial Coliseum before moving to the Moda Center in 1995. The franchise entered the league as an expansion team in 1970, and has enjoyed a strong following: from 1977 through 1995, the team sold out 814 consecutive home games, the longest such streak in American major professional sports at the time, and which has only since been surpassed by the Boston Red Sox and the Dallas Mavericks. The Trail Blazers are the only NBA team based in the Pacific Northwest, after the Vancouver Grizzlies relocated to Memphis and became the Memphis Grizzlies in 2001 and the Seattle SuperSonics relocated to Oklahoma City and became the Oklahoma City Thunder in 2008.

<span class="mw-page-title-main">Moda Center</span> Sports arena in Portland, Oregon

Moda Center, formerly known as the Rose Garden, is the primary indoor sports arena in Portland, Oregon, United States. It is used for basketball, ice hockey, rodeos, circuses, conventions, ice shows, concerts, and dramatic productions. The arena has a capacity of 19,393 spectators when configured for basketball. It is equipped with state-of-the-art acoustics and other amenities.

<span class="mw-page-title-main">Salt Lake City Stars</span> American professional basketball team of the NBA G League

The Salt Lake City Stars are an American minor-league professional basketball team. They are a member of the NBA G League, based in West Valley City, Utah, and are affiliated with the Utah Jazz. Before the 2016-17 season, they were based in Boise, Idaho. Playing their home games at the Maverik Center, the Stars serve as a developmental platform for aspiring basketball players.

<span class="mw-page-title-main">Veterans Memorial Coliseum (Portland, Oregon)</span> Multi-use indoor arena in Portland, Oregon

The Veterans Memorial Coliseum is an indoor arena located in the oldest part of the Rose Quarter area in Portland, Oregon. The arena is the home of the Portland Winterhawks, a major junior ice hockey team, and was the original home of the Portland Trail Blazers of the National Basketball Association. It has been included on the National Register of Historic Places in recognition of its architectural significance.

<span class="mw-page-title-main">Bill Schonely</span> American sports announcer (1929–2023)

William W. Schonely, nicknamed "The Schonz", was an American sports broadcaster who was the play-by-play announcer for the Portland Trail Blazers for almost three decades, from the team's launch in 1970 until 1998. A native of Pennsylvania, he worked in radio in Louisiana and Seattle before settling in Portland, Oregon. In addition to his work for the Blazers, he was a sportscaster for Major League Baseball games, several minor league baseball teams, college sports, National Hockey League games, and junior ice hockey.

<span class="mw-page-title-main">Chris Dudley</span> American basketball player

Christen Guilford Dudley is an American former professional basketball player and politician. He played 886 games across 16 seasons in the NBA for the Cleveland Cavaliers, New Jersey Nets, Portland Trail Blazers, New York Knicks, and Phoenix Suns. A journeyman center, he was known primarily for his defensive skill as a rebounder and shot blocker. In his second season with the Knicks, he played in the 1999 NBA Finals.

Kevin Lee Pritchard is an American basketball executive, and a former player and coach, who is currently the president of basketball operations for the Indiana Pacers. Pritchard played 4 seasons in the NBA as a player, and was also the general manager of the Portland Trail Blazers, and the Indiana Pacers.

<span class="mw-page-title-main">Chiles Center</span> Building on the University of Portland campus in Portland, Oregon, U.S.

The Earle A. & Virginia H. Chiles Center is a 4,852-seat multi-purpose arena in Portland, Oregon, USA. The arena opened in 1984. It is home to the University of Portland Pilots men's and women's basketball teams as well as the women's volleyball team. It hosted the West Coast Conference men's basketball tournament in 1992 and 2007. Starting with the 2023–2024 season, the Chiles Center hosts the Portland Trail Blazers' NBA G League team, the Rip City Remix.

<span class="mw-page-title-main">LaMarcus Aldridge</span> American basketball player (born 1985)

LaMarcus Nurae Aldridge is an American former professional basketball player. He played college basketball for two seasons with the Texas Longhorns. Aldridge was selected second overall in the 2006 NBA draft. After spending nine seasons with the Portland Trail Blazers, he signed with the San Antonio Spurs in 2015. In March 2021, he signed with the Brooklyn Nets after the Spurs bought out his contract. He retired after two weeks due to an irregular heartbeat, but returned to the Nets the following season after receiving medical clearance.

Teufel Nursery is a family-owned landscaping company based in Hillsboro, Oregon, United States. Founded in 1890, the company maintains existing and installs new landscaping for commercial, government, and residential customers. The company has about 200 employees. It was based in Portland until the 1940s, then in the unincorporated Cedar Mill area until 2007. Its headquarters have been in eastern Hillsboro since fall 2011.

Ronald T. Murphy is a retired American basketball player. Born in Dover, Delaware, Murphy played one season in the National Basketball Association (NBA) for the Portland Trail Blazers. He was drafted by Portland in the first round of the 1987 NBA draft out of Jacksonville University, where he played for four years. Listed at 6 feet 5 inches (1.96 m) and 235 pounds (107 kg), Murphy played one season in the NBA (1987–88) as a guard-forward appearing in a total of 18 games with an average of 2.0 points 0.6 rebounds per game. His rookie season ended after he fractured his fifth metatarsal bone during a practice in March 1988.

The Oregon Lottery is run by the government of the U.S. state of Oregon. It is a member of the Multi-State Lottery Association (MUSL).

<span class="mw-page-title-main">Rose Quarter</span>

The Rose Quarter is a 30-acre (12-hectare) sports and entertainment district located in Portland's Lloyd District on the east bank of the Willamette River, just east of downtown. The Rose Quarter is bounded on the west by NE Interstate Avenue, on the north by NE Broadway and NE Weidler Streets, on the east by Interstate 5, and on the south by NE Holladay Street. The site contains two multipurpose arenas, the Moda Center and the Memorial Coliseum. Nearby landmarks include the Steel and Broadway bridges, the Oregon Convention Center, and the Eastbank Esplanade.

The Portland Trail Blazers are a professional basketball team in the Western Conference of the National Basketball Association. The Trail Blazers are currently celebrating their 50th NBA season. The franchise owner is Jody Allen, who assumed ownership upon the death of her brother Microsoft co-founder and Vulcan Inc. chairman Paul Allen, in 2018.

<span class="mw-page-title-main">Larry Miller (sports executive)</span>

Larry G. Miller is an American business executive for Nike, Inc. He spent five years as the team president of the Portland Trail Blazers in the National Basketball Association (NBA). In his memoir, Jump: My Secret Journey From the Streets to the Boardroom, Miller writes that he was involved in a gang when he was 16, committing the murder of another teenager.

NBC Sports Northwest was an American regional sports network owned by the NBC Sports Group unit of NBCUniversal, as an affiliate of NBC Sports Regional Networks. The network broadcast regional coverage of professional sports events throughout the Pacific Northwest, focusing primarily on the NBA's Portland Trail Blazers and college sports events involving the Oregon Ducks. It also covered other sports events involving teams within the northwestern United States, including those featuring college and high school teams.

The 2009–10 Portland Trail Blazers season was the 40th season of the franchise in the National Basketball Association (NBA). In the playoffs, the Trail Blazers lost to the Phoenix Suns in six games in the First Round.

There are several well-known and commonly used nicknames referring to Portland, Oregon.

<span class="mw-page-title-main">Moda Health</span>

Moda Health is a health insurance company based in Portland, Oregon. The company provides medical and dental insurance in Oregon, Alaska and Texas. The Moda Center, a sports arena that is home to the Portland Trail Blazers, and Moda Tower, the tenth-tallest building in Portland, are both named after the company. Moda Health is a member of Delta Dental.

References

  1. ↑ "Company History: Portland Trail Blazers". Funding Universe. 2003. Retrieved 2007-10-24.
  2. ↑ "Rose Garden woes may wilt arena financings". Puget Sound Business Journal. 2004-03-12. Retrieved 2007-10-24.
  3. 1 2 Helen Jung (2007-02-05). "Bankruptcy as a business strategy". The Oregonian . Retrieved 2007-10-24.
  4. ↑ Joe Lago (2002-12-11). "Fans won't forgive but ready to forget Blazers". ESPN . Retrieved 2009-03-08.
  5. ↑ "Free agents to benefit from cap increase". Associated Press. 2003-07-15. Archived from the original on 2007-06-07. Retrieved 2007-10-25.
  6. ↑ Anne M. Peterson (2003-05-08). "Blazers general manager Whitsitt resigns". Salem Statesman-Journal. Archived from the original on 2004-01-28. Retrieved 2007-10-25.
  7. ↑ Liz Robbins (2003-12-06). "BASKETBALL; Trail Blazers Trying to Fix a Troubled Family". New York Times . Retrieved 2007-10-15.
  8. 1 2 Matt Cunningham (2004-11-10). "Global Spectrum takes over the Rose Garden". Entertainment Management Online. Archived from the original on 2011-08-18. Retrieved 2004-10-24.
  9. 1 2 3 4 Todd Murphy (2005-01-04). "Paul Allen's Rose Garden: Under new ownership". Archived from the original on 2011-06-08. Retrieved 2007-10-24.
  10. ↑ Jeanie Senior (2005-04-01). "Rose Garden seeks suite success". Portland Tribune. Archived from the original on 2011-07-17. Retrieved 2007-10-24.
  11. ↑ Brian Berger (2007-01-13). "Portland Arena Management vs Blazers Owner Paul Allen". Sports Business Radio. Retrieved 2007-10-24.
  12. 1 2 Kerry Eggers (2005-11-22). "Allen: I'll buy back arena for right sum". Portland Tribune. Retrieved 2007-10-24.
  13. 1 2 Loren Jorgenson (2006-02-26). "The not-so-great Northwest". Deseret Morning News. Retrieved 2007-10-24.
  14. 1 2 3 4 5 6 7 Chris Sheridan (2006-11-17). "Blazers owner foresees a "few turns in the road"". ESPN . Retrieved 2007-10-25.
  15. 1 2 "A Conversation with Paul Allen". nba.com. National Basketball Association. 2006-03-11. Retrieved 2007-10-24.
  16. ↑ Hal Bernton (2006-02-25). "Allen's Trail Blazers seek help to stay in Portland". Seattle Times . Archived from the original on 2007-11-03. Retrieved 2007-10-25.
  17. ↑ "2005-06 Portland Trail Blazers". basketballreference.com. Retrieved 2007-10-25.
  18. ↑ Kerry Eggers (2005-02-01). "Rose Garden numbers don't add up". Portland Tribune. Archived from the original on 2010-06-26. Retrieved 2007-10-25.
  19. ↑ Helen Jung (2006-06-07). "It's official: Blazers and Rose Garden are for sale". The Oregonian. Retrieved 2007-10-24.
  20. ↑ Helen Jung (2006-08-03). "Rose Garden statement on no sale of Blazers". The Oregonian. Retrieved 2007-10-24.
  21. ↑ Brian Berger (2006-07-19). "How the Sonics Sale Effects the Landscape of the NBA". Sports Business Radio. Archived from the original on 2008-09-18. Retrieved 2007-10-25.
  22. ↑ Jack Bogdanski (2004-02-29). "Bankruptcy and the Billionaire". Jack Bog's Blog.
  23. ↑ Dwight Jaynes (2006-03-03). "State of Blazers is their own fault". Portland Tribune . Retrieved 2007-10-24.
  24. ↑ Helen Jung (2004-06-24). "Broken financial model?". The Oregonian . Retrieved 2007-10-24.
  25. ↑ Rose Garden deal done - Playbooks and Profits from OregonLive.com
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.