The company that operates Gila River Arena, home of the Arizona Coyotes, for Glendale for the last two years will be in the job for five years longer than originally planned.
The city has extended its contract with AEG Facilities to manage the arena until June 30, 2026, AEG announced Wednesday.
The city, in 2016, approved a five-year contract with AEG with an option for the city manager to extend the contract another five years. Glendale City Manager Kevin Phelps said Wednesday he has approved that extension with a condition that AEG install a high-tech LED lighting system in the arena.
The details of the original contract, such as the revenue-sharing agreement between the parties, will remain the same, Phelps said. The city pays AEG $5.6 million annually to manage the arena, which is offset by the shared arena revenues.
Three years still remain on the original contract, but Phelps said AEG was interested in securing the longer-term contract now.
Dale Adams, who manages the arena for the Los Angeles-basedAEG, said the company realizes the huge potential for the arena, Westgate Entertainment District and Glendale, and wants to be involved.
“In my eyes,” he said, “It was pretty simple. There is so much potential for growth in this area.”
Phelps said the city has been pleased with the arrangement, especially after bringing in more revenue from the arrangement than expected for the last two years.
The city collected $1.6 million after the first season and $1.68 million after the second season, after expecting $1 million. Because it paid $5.6 million in management fees each year, its net loss was $4 million the first year and $3.92 million the second.
That’s a sizable improvement from a net loss of just under $10 million in fiscal 2015 and a net loss of $22.8 million in fiscal 2011, which The Arizona Republic previously reported.
The city also pays about $13 million annually to pay off the $183 million it borrowed to open the arena in 2003, and $500,000annually in maintenance costs.
Gila River has good year
Phelps said AEG has “brought a new level of sophistication” to managing the arena.
In the last year, the arena hosted more concerts, sold more tickets and accumulated the highest gross ticket sales since 2009, according to the company’s news release. Adams said he could not provide the actual numbers of tickets, sales or concerts.
The company, which runs 150 venues worldwide, has secured many big-name acts in the last two years, such as Coldplay, Pink, Elton John, Drake, Sam Smith, Tim McGraw and Faith Hill, Roger Waters, Queen, WWE, Chainsmokers, Panic! at the Disco, and the Red Hot Chili Peppers. It also brought the Professional Bull Riders and UFC back to the market, according to the company.
Arena to get new lighting
As the city and AEG talked about the extended contract, Phelps said, they thought about how to reduce operational costs and improve fan experience.
The old lighting fixtures in the arena offer cloudy light quality, he said.
AEG agreed to cover the costs to update the lighting, he said, estimating it would spend about $650,000 but save about $100,000 annually from the new LED lighting.
The lighting will be able to change colors and do other tricks to improve fan experience, Phelps said.
Under the original contract, AEG takes in the first $500,000 in profit, the city takes in the next $500,000, and then AEG and city split the revenue until it totals more than $3 million. After $3 million, AEG takes 75 percent and the city takes 25 percent.
You may not believe the grand total to build stadiums for Arizona’s four professional sports teams (hint: it’s seven figures).
Coyotes tenure not considered
While the city is losing less money under the management agreement with AEG, it came with a trade off. The city nixed its deal with the Arizona Coyotes for the team to manage the arena in 2015.
The team now is on a year-to-year lease with the city and has said it would leave if the right venue came along.
The team announced in December it would stay for at least another season.
There is a provision in the management contract that says AEG can back out of its contract with Glendale if the Coyotes leave.
Adams said the Coyotes’ future did not play into the company’s decision to stay involved with the arena.
“We don’t even think of that,” he said. “What happens, happens.”
What did matter, he said, was how much potential there is in the area. With GoDaddy founder Bob Parsons’ company, YAM Properties, recently purchasing Westgate, he said that things look even more positive.
“You can’t underestimate someone who understands entertainment and the value of it,” Adams said.
Coyotes President and CEO Ahron Cohen said in a statement that AEG has been a good partner of the Coyotes.
“As the fellow owner of an NHL franchise,” he said, “AEG understands and appreciates our goal of providing the best fan experience possible at every one of our games.”
An affiliated company, AEG Sports, owns and operates the Los Angeles Kings hockey team.
The Coyotes did not answer other specific questions about their future in the arena and how much good management will factor into the team’s decision to stay.
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