Case Study Question for the XL Center

1. Research the useful life of an arena. Then examine any older arena renovation projects (where the arena was over 30 years old when the renovation was attempted) and whether they were worth the investment.

XL Center

Dunkin Donuts and Dillion Stadium are not alone. XL Center is also based in Hartford. The facility, built in 1975, was infamous for its roof collapsing due to a snowstorm in January 1978. It was rebuilt and served as the home for the Hartford Whalers, some Boston Celtics games, and UCONN basketball games. The facility is approaching the end of its useful life. In September of 2017, a new budget that was adopted by the state considered closing the XL Center. The prior fiscal year, the arena had a $1.6 million loss. Despite the loss, then-Governor Daniel Malloy was still committed to a $250 million renovation recommended by a consultant. These renovations included creating a second concourse, updates to premium seating, new restaurants and amenities, renovated restrooms, and new heating and cooling systems that were all to be completed over the next several years. Critics of rebuilding the XL Center said that the state has no business investing in or operating a venue, but supporters said that by failing to invest, the city would be undercutting all of its other contributions toward improving Hartfords downtown area (Gosselin, 2017b). Later in 2017, CRDAs executive director, Michael Freimuth, explained that CRDA requested a $40 million bond from the state bond commission. CRDA decided that if the bond was approved, it needed to look for a buyer sooner than 2019. Eventually, the $40 million bond was approved, and it was stated that a buyer must be sought by June 2019. The $40 million bond was intended for improvements and buying the atrium that attached the XL Centers Veterans Memorial Coliseum to the street. If no buyers were to emerge, a new long-term plan would need to be put into place (Gosselin, 2017a). More trouble was still ahead for the XL Center. A month after the bond was approved, a report audit was released showing that the XL Center owed the city $700,000 in back pay for private police details. All Freimuth could say was that the venue will make payments when it can (Vella, 2017). Initially, politicians and the quasipublic CRDA were advocating a $250 million renovation, but in the wake of continued fiscal issues across the state, they reduced the proposal to around $100 million. The new proposal was going to focus on premium seating, replacing old building systems, and cutting operating expenses. The second concourse was cut from the improvements. Along with that, the CRDA agreed to conduct a study on how the improvements in the $100 million budget would affect the surrounding area (hotels, restaurants, parking, property value, etc.) (Gosselin, 2018a). Unfortunately, in April of 2018, the XL Centers $100 million was cut from the governors proposed capital improvement budget. He told everyone that the committees vote was not the final vote and he hoped that the final budget would include the XL Center project. During the time the CRDA was looking for buyers, only one potential buyer came forward. It was Oak Street Real Estate Capital. It was offering a bid of $50 million to purchase the venue and up to $250 million for improvements. The state would need to pay a 7.5% guarantee, and this proposal came with 2% annual increases. Although this seemed promising, a decision was not expected until around 2020 (Gosselin, 2018b).