More Mac, Less Money

August 26, 2005
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GRAND RAPIDS — The Convention and Arena Authority wants to lower the fee it pays SMG to operate DeVos Place and Van Andel Arena on a daily basis and wants an assurance from the Philadelphia-based management firm that SMG General Manager Rich MacKeigan will remain in Grand Rapids.

Those are two objectives CAA Chairman Steven Heacock laid out last week when he announced the board would soon start negotiations to renew the five-year management agreement the panel has with SMG, a contract that runs its course at the end of June.

“SMG wants this account. They think very highly of this building,” said Heacock of SMG corporate executives and DeVos Place.

At the same time, Heacock said board members think very highly of MacKeigan and they want him to stay here if a contract with SMG is renewed. The CAA surveyed the buildings’ users and gave MacKeigan and his staff high marks. MacKeigan replaced Craig Liston as manager of the arena and the Grand Center in 1998, and has been the only SMG general manager the CAA has known.

But the fee SMG gets each year to oversee daily operations of the buildings is another matter.

“The fee is a bad deal,” said Heacock.

The current contract gives SMG a base amount, which increases by inflation every year, and an incentive based on how much excess revenue each building earns. The base amount and incentive fees to SMG for running both buildings during FY05 have been estimated at $651,599. The CAA will receive about $400,000 from both buildings for the same fiscal year

SMG collected $603,694 for its management duties in FY04, while the CAA got about $200,000 last year from the combined operations.

Heacock said a lower management fee would give the board more money to market and maintain the buildings. He also said the CAA has to cut the DeVos Place deficit, which has totaled $2.2 million over the last two fiscal years, and find enough funds to make $20 million worth of upgrades to the convention center and arena over the next 10 years. A projection shows the board is $12.7 million short of reaching that figure by today’s revenue standards.

A CAA subcommittee of Heacock, board member Joseph Tomaselli and CAA counsel Richard Wendt will meet with SMG representatives to discuss a new contract. Members want to know how SMG, which manages more than 100 buildings worldwide, can help promote the new convention center and keep it competitive.

“A larger potential for revenue lies with DeVos Place,” said Tomaselli, who saw income to the building rise by $1 million this year from the last fiscal year.

Board members also want to learn if there are other firms capable of running both buildings and, if so, how much those companies would charge to do so.

“The intention here is to stretch the dollars and extend the brand,” said Tom Connors, of the SMG Philadelphia office, about DeVos Place. “What has been accomplished here is outstanding. It has put Grand Rapids on the map.”

If the CAA renews its agreement with SMG, it would be the third contract for the firm, which took over management of the Grand Center from the city in 1996. SMG executives from Philadelphia and Pittsburgh recently spent a few days touring the facilities and the city, and meeting with Heacock and other board members.

“This is probably one of the most progressive cities we’ve seen,” said Hank Abate, SMG regional vice president, “of all the buildings that we manage.”    

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