Hurricanes, Centennial Authority agree to extend PNC Arena lease for five years
The Centennial Authority voted Thursday to extend the PNC Arena lease with the Carolina Hurricanes for five years, through July 1, 2029.
The authority, an appointed group representing the city, county and state that oversees the arena, approved a term sheet on the extension in a virtual meeting after an extended closed session. The motion passed by a 16-3 vote, with authority members Steve Stroud, Perry Safran and Bill Mullins in opposition. The Hurricanes approved the term sheet in April.
Provisions of the term sheet include:
▪ An agreement by the Hurricanes not to relocate the franchise during the current lease.
▪ The Hurricanes to receive lease termination rights on the lease as of June 30, 2024.
▪ A guarantee by the Hurricanes that their player payroll be above the midpoint of the NHL salary cap each year.
▪ An agreement the authority will pay 50 percent of the arena operating costs each year, up to $3.885 million.
▪ A reduction of the rent for fiscal 2020 of $1.78 million and no rent in following years.
“One of our goals was to get the Hurricanes to be in an average lease situation in the NHL,” authority chairman Tom McCormick said in an interview Thursday. “And they clearly had one of the worst leases in the league. Their cost-to-occupy and so forth were higher than they should be.”
Possible expansion of PNC Arena?
Don Waddell, Hurricanes president and general manager, noted the two sides had been discussing a new extension for more than a year; however, the past few months and the sudden challenges of the coronavirus pandemic caused some delays and readjustments.
“It has been a very professional, ongoing (process) and the end result is something I think we’re both very excited about,” Waddell said in a media briefing Thursday at PNC Arena.
Waddell said there were multiple pluses for the Hurricanes in the extension, financially and otherwise.
“We’re talking with the Centennial Authority about the expansion of this building and property around the building,” Waddell said. “It gives us an avenue to pursue that and also potentially look at other sites to determine what’s the best place for this building to be for the next 25 years.”
There is language in the profit-sharing section of the term sheet that mentions “if the parties reach a long-term agreement (major renovation or new arena).” It also makes a reference to Canes majority owner Tom Dundon’s team purchase agreement and how money would be repaid by Dundon should there be a transfer in the majority ownership.
“It’s great to get to the point where we are right now but we do have a long way to go,” McCormick said. “We’ve got to take this term sheet and we’ve got to convert that into an actual contract lease amendment. It’s the first step of doing that.
“The authority believes the Hurricanes are very important to the community. That’s why we worked really hard to keep them here. ... I think it’s a fair deal for the Hurricanes and a fair deal for the community.”
Coronavirus pandemic slows term sheet approval
McCormick would not characterize the objections to the term sheet, saying, “I think it’s like anything else in life now, people are concerned about COVID-19 and what that does with our lives going forward. I think it was based on that more than anything else.”
The authority serves as the arena landlord while the arena is operated and managed by Gale Force Sports and Entertainment, the Canes’ umbrella company. N.C. State shares the arena with the Canes, playing its men’s basketball games and holding commencement exercises in the building opened in 1999.
The quick spread of the coronavirus resulted in the suspension of the NHL regular season on March 12 and the cancellation of the Canes’ last eight home games. Concerts and other events at the arena were canceled or postponed.
McCormick said the term sheet likely would have been approved in April had the group not had to cancel a meeting because of COVID-19 concerns.
Authority asks for possible renovation options
The authority had asked architects Ratio and HOK to recommend possible renovation options but will reconsider any moves until it has a better sense of the economy. The authority had been promised $9 million per year in hotel and restaurant tax revenue through 2034.
The term sheet states that is contingent on the authority receiving the $9 million per year.
“We want to focus on a long-term plan,” Dundon said Thursday. “That’s why this was important. It gave everybody the time and the breathing room to focus on the long term.”
The authority hired a consultant from CAA Icon, Dan Barrett, to represent it in the negotiations. Barrett asked for, and received access to the Hurricanes’ finances for assessment and compared it to other NHL leases.
“People always say ‘we know they’re losing money’ or ‘we know they’re making money’ but you don’t know until you see,” McCormick said. “Dan did a great job for us.”
The authority last met in person as a group on March 13, a special meeting to discuss the proposed term sheet in closed session. Its next scheduled meeting, on April 2, was canceled.
Later in April, the authority’s building and construction committee met by phone and cut its capital project budget for the next fiscal year by $2.6 million because of the lack of events in the building and expected decrease in tax funding.
Under the arena lease arrangement with Gale Force, the Centennial Authority was to receive additional rent should Gale Force top a $60 million threshold. Under the new agreement the Canes no longer would pay additional rent.
“What we did today, to quote (Winston) Churchill, this is just the end of the beginning,” McCormick said. “We’ve got a long way to go here. We’ve got to take this term sheet and reduce it to actual lease agreement contract language.”
This story was originally published May 28, 2020 at 1:13 PM with the headline "Hurricanes, Centennial Authority agree to extend PNC Arena lease for five years."
