Teams May Move From USAir Arena
By Thomas Heath
The Pollin organization has hired Legg Mason Inc., a Baltimore-based investment and consulting company, to explore the financial feasibility of moving the teams from the USAir Arena in Landover to somewhere else in the region, according to Raymond A. "Chip" Mason, Legg Mason's chairman.
Those possibilities include Baltimore, Laurel and downtown Washington.
Pollin's representatives also have launched discussions with the Maryland Department of Economic and Employment Development on public financing for a arena, according to state officials.
Top aides to the 70-year-old Pollin have said flatly that as majority owner of the 19,000-seat USAir Arena, he is unwilling to pay for a new building out of his own pocket, as he did in 1972. Those aides say Pollin will state his intentions soon.
Pollin's decision will no doubt be complicated by politicians vying to steer any new project to their jurisdictions. Prince George's County Executive Parris N. Glendening (D), a candidate for governor, has said that state money should be used to help pay for a new home to keep the Bullets and Capitals in Maryland.
And D.C. Council member Charlene Drew Jarvis (D-Ward 4) has called the Pollin organization to suggest it bring the teams to a new arena that could be built on the site of the existing downtown convention center at Ninth and H streets NW.
The stepped-up activity comes as pre-1980s suburban facilities such as USAir Arena are increasingly seen as relics compared with state-of-the-art stadiums with dazzling video screens, club-level seating and downtown locations that exploit changing commuting patterns.
"We recognize we've got to do something. . . . We are no longer state-of-the-art," said Jerry Sachs, president of Pollin's holding company, Centre Group Limited Partnership. "We want to explore what the possibilities are."
Glendening and others said they hope Pollin will choose a major facelift of the building rather than a move. The owner has about $10 million socked away from a refinancing last year to use for renovations such as improved food courts and enlarged restrooms. But industry analysts said the high cost of renovating makes a new building more appealing.
"It's more profitable to build a new one," said Timothy G. Mueller, a sports industry consultant with the accounting firm KPMG Peat Marwick, adding that new facilities clearly draw new fans.
Mueller said he has had discussions with Capitals President Dick Patrick about the arena's problems.
Simply put, the building is in the wrong place at a time when most stadiums are built in or near business centers, Mueller said.
Any decision on the future of USAir Arena, of which Pollin is majority owner, must address the future of the two teams. Pollin and his wife own the Bullets, and he is majority owner of the Capitals.
Interviews with current and former Pollin employees, sports consultants, arena managers and government officials paint a pessimistic picture of USAir Arena. Even though average attendance at Bullets games has improved, the team sells less merchandise than any other NBA franchise.
Gross income from admissions, concessions, parking revenue and advertising has declined 10 percent in the last two years, from $51 million to $45.8 million, according to government records.
Analysts say the value of the two sports teams is diminished because they are bound to a facility bedeviled by such problems as a location far from any Metrorail line, luxury suites too far above the arena floor and poorly designed food concessions.
Rental fees paid by the teams are among the highest in professional sports, further draining their profitability, insiders say. A financial magazine in May placed the Bullets and Capitals near the bottom in terms of franchise value among 103 major professional sports clubs in the North America.
Associates say Pollin, who has lost money on his teams for years, sees the invitation from Redskins football team owner Jack Kent Cooke to build a sports complex in Laurel as an opportunity to take stock of his two franchises.
"If I were Abe, I'd be sitting there saying, 'What does this mean? What's this going to cost me? Who's involved? Who isn't involved?' " Mason said.
As part of this exercise, Pollin's longtime lawyer and confidant, Peter O'Malley, has been in contact with Mark Wasserman, secretary of the Maryland development agency, to explain his client's conclusion that a new facility is needed, state officials say.
Wasserman and O'Malley did not return phone calls concerning the discussions.
One potential source of funds that O'Malley may be eyeing is about $89 million in bonding authority held by the Maryland Stadium Authority for a National League Football stadium in downtown Baltimore. Pollin would need state legislation to free up that money for a proposed basketball-hockey arena.
"What they are searching for is a new facility in Maryland, publicly financed," one government official said. "Abe has seen what's been possible with publicly financed facilities" like Oriole Park at Camden Yards.
If Pollin takes his teams to another location, there is the question of what happens to the 21-year-old USAir Arena, located on 60 acres near the Capital Beltway and Route 202. Tax assessors peg the building's worth at about $27.5 million, but its market value could be far higher.
The Maryland-National Capital Park and Planning Commission owns the land on which the arena sits. Pollin's partnership pays the commission about $450,000 a year in rent. The facility has paid Prince George's County $51 million in property and admissions taxes since it was built.
It is not known what would happen to the facility if the sports teams moved. If Pollin broke the lease, the county and the parks commission could court to recover lost revenue.
Another possible obstacle to vacating USAir Arena would be the mortgage, which a year ago appeared to be at least $35 million, according to financial records provided by Prince George's County. About $13.5 million of that mortgage is in bonds, which apparently would have to be paid off if the teams moved. The rest is a $20 million private note on the building with terms that are not public.
Sachs declined to comment on the size of the mortgage on the facility, but he did not dispute the $35 million figure.
With a new arena and lower rents, the Capitals and Bullets franchises, estimated by Financial World magazine to be worth about $50 million each, could balloon in value. The rights to a new NBA expansion franchise in Toronto recently were bought for $125 million.
In the 1970s, when the arena was built as the Capital Centre, the area's population was bound for the suburbs, and team owners believed they should build stadiums in the path of that growth, analysts say.
But changing commuting patterns have hurt stadiums such as USAir Arena. Today, people want to get to the games quickly after work, with their clients or friends, according to Mueller and others.
For NBA teams alone, there are five arenas under construction, including the $120 million arena project in downtown Cleveland. It will replace suburban Richfield Coliseum, the home to the Cleveland Cavaliers that was built about the same time as Capital Centre.
In the right place, an arena "gets fans excited, gets a new look for the team and creates a chance to draw new fans," said Tom Chestnut, president of the Cavaliers and the coliseum.
After seeing the success of Oriole Park at Camden Yards, Pollin believes the "right place" for his teams probably is near a commuter rail line. Camden Yards, Laurel and downtown Washington all have such service.
But even if recent talk about extending Metro's Blue Line to the arena becomes reality, any new or remodeled arena also must include new kinds of creature comforts, Pollin aides said.
Arenas popping up around the country have fitness centers, restaurants, stores, waitress service for club-level seating and hundreds of luxury suites. Most of those features are absent from the Landover facility.
At the Palace of Auburn Hills in suburban Detroit, the 180 luxury suites many of them close to the basketball court bring in enough revenue to pay the building's mortgage plus some operating costs, according to Tom Wilson, president of the Pistons and the Palace.
To that end, D.C. Council member Jarvis wants to woo Pollin to the District.
"They are cautiously looking," Jarvis said, adding that no one has mentioned financing.
"We are just looking at something that's great for us, great for Abe Pollin and great for the Washington region."
© Copyright 1997 The Washington Post Company