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.
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.
Firstar Center is looking for investors.|
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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
"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.
"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
HIGHS & LOWS
Seemingly since it opened 25 years ago last weekend, the former
Riverfront Coliseum has been buffeted by trouble from all sides.
"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
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
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
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
"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
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
Firstar Center has seen both highs and lows
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