X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

ORLANDO-Independent hotelier Harris Rosen will propose a new funding plan this month to local government officials and Orlando Magic executives that would preserve city and county dollars and give the team an additional $217 million in additional concessions, retail and concert revenue on a 15-year, no-rent payment lease with the city.

GlobeSt.com obtained a draft of the proposal from sources close to the hotel developer. But Rosen himself would not comment to GlobeSt.com on its contents until the plan has been approved by the Value Engineering Committee set up by the local hospitality industry, Orange County, the city of Orlando and the Magic.

Magic executives and government officials haven’t seen the plan, GlobeSt.com was told by hospitality consultants intimate with its draft.

At issue for the past two months has been the retrofit funding for the 12-year-old, 17,200-seat, 350,000-sf TD Waterhouse Centre Downtown. Magic executives maintain the retrofit will cost $75 million and they are unwilling to commit a set amount for the project until they can cut a new lease with the city. The new Rosen plan suggests the actual construction cost will be no more than $55 million and possibly only $45 million.

The county, meanwhile, is offering to contribute up to $40 million from the annual $100 million tourist tax kitty. No taxpayer dollars are involved. Like the Magic, the city has not pledged a specific dollar amount.

The Rosen plan, however, shows the city and the county need not contribute a penny to the project. The Magic and the state would pay for it all.

Here is how the Magic would do it:

–Florida’s sales tax account in Tallahassee already contains about $30 million for projects of this caliber. Annual net revenue to the Magic would be $2.5 million or $37.5 million over 15 years.

–The Magic would contribute $15 million cash, just as billionaire owner Richard DeVos did in his home town of Grand Rapids, MI for a new convention center.

–Magic officials could negotiate a new naming rights lease, increasing the current lease from about $1.5 million per year to $3 million per year. Over 15 years, the lease could generate $45 million and could be discounted quickly for about $20 million if the Magic needed the money early.

–The Magic could create an additional cash flow by deducting 4% of every ticket sale and generating about $25 million over 15 years. This cash flow could also be discounted for about $12.5 million.

The four options would give the Magic about $77.5 million in cash.

If the Magic agrees to self-finance the retrofit, the city might be persuaded to negotiate a new 15-year lease after the current 10-year lease expires in 2004. The Magic currently pays the city $14,000 per-game rent or about $560,000 on a 40-home-game schedule.

Instead of paying rent, however, the new Rosen plan proposes no lease payments or debt service by the Magic. Instead, the team would pocket 100% of all food and beverage revenue; all retail sales; and all concert and other entertainment revenue.

The new lease would generate an additional $14 million in annual net revenue for the Magic or about $217 million over 15 years. “A very attractive return on the Magic’s retrofit investment,” a hospitality consultant close to the principal players tells GlobeSt.com on condition of anonymity.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt. NET LEASE 2020Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information
 

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.