CAA chairman likes larger arena expansion

September 21, 2009
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Two items highlighted the Convention and Arena Authority’s annual report recently to the Kent County Board of Commissioners. The conservative fiscal management of DeVos Place and Van Andel Arena was one. The other was an expansion of the arena’s northwest concourse.

“Our goal is to at least break even in the next 10 to 15 years of the arena, which is the revenue provider,” said Steven Heacock, CAA chairman for eight of the board’s 10-year existence and former Kent County commission chairman.

Heacock told county commissioners recently that convention centers normally lose operating revenue during the course of a typical year, and DeVos Place lost an unaudited $521,000 this past year. The arena, though, generated a preliminary operational surplus of $1.35 million for the year and that revenue covers the losses from the convention center.

CAA Executive Director Rich MacKeigan, also SMG regional general manager of both buildings, said the total operations number “continues to be a healthy number.” He added that the bottom line isn’t as strong as he would like it to be, but he also noted that business has been better here than in many comparable markets considering the economic climate.

Heacock said the CAA has a reserve of roughly $22 million the board has designated for capital improvements and maintenance at the buildings. He said the arena, in an accounting sense, has a shelf life of 30 to 40 years and the building has almost reached middle age, having opened in October 1996.

“We believe we can cover the next 10 to 15 years,” he said of replacement projects and maintenance through the board’s reserve fund.

MacKeigan explained to commissioners that the CAA has a capital-improvement budget of $1.9 million for this year, but one line item for $1.2 million is likely to be changed. Those dollars were set aside for an electronic ribbon board that would be mounted on the arena’s interior façade that separates the upper and lower bowls.

Instead of buying that board, MacKeigan said the CAA is leaning toward purchasing a smaller $200,000 LED board that would hang beneath the scoreboard, and then use the remainder of those funds to expand the northwest corner of the concourse, which gets very congested about 60 times a year when attendance at arena events reaches 8,000.

The CAA is deliberating between two expansion options. One would add 1,900 square feet to that corner at a cost of $425,000. The other adds 3,100 square feet at $875,000. The latter option leaves enough room for a 60-seat food court, but it also extends outside of the arena and changes the building’s exterior design.

“I thought this would be more expensive,” said MacKeigan of the larger design. “There is some revenue enhancement available from this type of option.”

Heacock told the Business Journal that an expansion corrects a design flaw and creates a more pleasant experience for those who attend events at the arena.

“If we can get it done, it will provide easier, cleaner and more rapid access to concessions, food and those kinds of things. It also expands that alley and just makes it easier to get through,” he said. “So I’m actually excited about the potential of it and I’m very anxious to move on with the next steps of the project.”

Heacock said he thought the CAA would make a final decision on the expansion within the next three or four months.

“Then it will move rather rapidly after that. Given the current environment, I have a feeling, once we’re ready to go, there will be lots of people lined up that will want to do the work,” he said.

Of the two expansion options, Heacock said he favored the larger one even though the design changes the exterior of the building.

“It’s funny because when I initially saw the drawings, I really didn’t like the bump-out, and I’ve grown to like that. I really like that because it gives us so much more room operationally, and I’ve come to have a better perception of the external look with the bump-out,” he said.

“The internal-only takes that air space, which I don’t particularly like. While it solves the problem, it’s sort of a compromise to me. The other (option) really, truly solves the problem, and solves it for the long term.”

The concession and merchandise stands in the northwest corner account for up to 25 percent of the building’s sales in those categories each year and adding a food court to that area could increase ancillary revenue. The cost for the smaller LED board and either one of the expansion projects is less than the $1.2 million-expense for ribbon board.

MacKeigan said the next step is for board members to visit the Palace of Auburn Hills, a building also designed by lead arena architect Rossetti & Associates. The architectural firm has designed a couple of similar expansion projects at the Palace that also reach beyond the building’s interior, and MacKeigan said the CAA wants to take a close look at the finished products there before going any further here.

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