Thursday, September 14, 2000

Arena needs financial help


Owner wants to refinance $30 million debt

By Cliff Peale
The Cincinnati Enquirer

        The Firstar Center - losing money on the Cincinnati Cyclones hockey team and trying to refinance nearly $30 million in debt to Provident Bank and the Cincinnati Equity Fund - is entertaining offers to buy a stake in the downtown arena.

[photo] Firstar Center is looking for investors.
(Enquirer photo)
| ZOOM |
        Several national arena operators have offered to manage the 25-year-old building and take an ownership stake, confirmed Doug Kirchhofer, president of CEA Holdings Inc., the umbrella company that owns both the arena and the Cyclones.

        The hockey team has cut its office staff by more than half to about 20 employees during the past several years, and should slash enough costs to break even during the fiscal year that started July 1, he said.

        That would allow the company to use profits from operating the Firstar Center not to subsidize the Cyclones, but to pay off its major lenders providing the stability the arena has never enjoyed since it opened Sept. 9, 1975.

        "I'm convinced that this is working,'' said Mr. Kirchhofer, the Cyclones owner who led an investment group that bought the arena in 1997 with no public funding. "I think it's likely that we'll bring in a partner.''

        Three years after taking a huge financial risk with a $35 million purchase and renovation of the former Riverfront Coliseum, Mr. Kirchhofer and his Dallas-based financial backers are facing not only the tenuous balance sheets of minor-league hockey, but doubt in the community about the long-term viability of a coveted riverfront asset.

        "It's an important anchor,'' said Jack Rouse, head of an advisory group for riverfront development. "It brings a whole different type of demographic, and it's a truly regional asset.''

        Since buying the building, Mr. Kirchhofer's group has increased attendance to its highest level in years, with nearly 150 events scheduled for this year.

        Rumors of the Firstar Center's financial troubles have spread, even to workers in the arena.

HIGHS & LOWS
  Seemingly since it opened 25 years ago last weekend, the former Riverfront Coliseum has been buffeted by trouble from all sides.
        "As it stands now, either they will stay in the business or someone else will,'' said Dave Eviston of Local 5 of the Cincinnati Stage Employees Union, which represents more than 150 workers at Firstar Center.

        "They've done pretty well. I just wish they would sell the sporting events more. That's the problem,'' he said.

        Mr. Kirchhofer acknowledged the financial woes, starting with:

        • The Cyclones: Most of the profits from operating the Firstar Center have been used to pay the Cyclones' debt.

        The team has lost money each of the past three years.

        But along with the majority of International Hockey League teams that lost money last year, it has received a directive to cut expenses, said Doug Moss, president and chief executive officer of the Michigan-based league.

        "Some of our teams were running these franchises like they were major-league franchises,'' Mr. Moss said.

        "I would have to admit to being guilty of that,'' Mr. Kirchhofer said responded, noting that the Cyclones' revenues have been flat since 1997.

        The team had hoped the renovated arena would increase ticket and sponsorship sales. The ownership also last year added the minor-league Cincinnati Stuff basketball team.

        "Three years ago, we staffed up. We tried to bring as much talent as we could to bear on not only two professional sports teams, but the arena as well,'' he said.

        Several of those departed employees were in the corporate sales department. Mr. Kirchhofer said the team would have be more creative in its sales and marketing efforts.

        Mr. Kirchhofer rejected dumping the Cyclones, noting that the team anchors the building with dozens of annual dates.

        "No, the Cyclones aren't going away,'' he said. "They're an important piece of the success of this facility.''

        • The heavy debt load: Mr. Kirchhofer conceded that monthly payments on those two loans he would not reveal the amount have not reduced the principal in nearly four years. But even though CEA Holdings has been late on some payments, it is current on the loans and will make scheduled payments later this month, he said.

        Officials of Provident and the equity fund declined to comment.

        • Surrounding construction: Firstar Center's owners sued Hamilton County in July, charging that construction of a new Reds ballpark would hurt its attendance and revenue.

        Mr. Kirchhofer said the poor access caused by construction could hinder efforts to refinance the building by lowering the appraised value.

        • The Mighty Ducks: The Cyclones' troubles are only magnified by the competing Cincinnati Mighty Ducks, the American Hockey League team that plays at the Cincinnati Gardens.

        "Having two teams makes no sense,'' Mr. Kirchhofer said. "It never has.''

        • A troubled industry: The Firstar Center's troubles are not unique to Cincinnati.

        Operators of indoors arenas with no major-league sports tenants Firstar is among the largest in the country are having trouble everywhere.

        "Everybody without an NBA or NHL tenant is struggling,'' said Dave Siehl, director of the Nutter Center in Dayton, which hosts Wright State University and the East Coast Hockey League's Dayton Bombers. "Indoor concerts are not real strong, and the competition is absolutely huge. There just is not enough live entertainment to go around.''

        Mr. Kirchhofer said he has listened to several companies that want to invest in the building or manage it. Those include Global Spectrum, a newly formed division of Philadelphia cable giant Comcast Corp. that manages arenas including the First Union Spectrum and the First Union Center in Philadelphia.

        "We think it's a great little building,'' said Michel Sauers, president and CEO of Global Spectrum. Mr. Sauers would not comment on his company's interest in buying the Firstar Center.

        But John Kirchhofer, Doug's brother and president of the Ashton Capital unit of Stone Capital, said Global Spectrum was interested in either managing or owning a piece of the building.

        If CEA Holdings Inc. sells a share in the Firstar Center, it would be part of a larger refinancing package. The company's 1997 mortgage from Provident Bank, which totals more than $20 million, and a $6 million loan from the privately financed Equity Fund are both to be repaid over five years.

        But if the company could find a longer-term loan at a better interest rate, that would reduce annual costs and increase marketing opportunities, Mr. Kirchhofer said.

        "It should be obvious that we never planned to retire the entire debt load in five years,'' he said. "This is the way we planned it.''

Firstar Center has seen both highs and lows



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