Real's plan short of cash?
By Leigh Dethman
Deseret Morning News
Real Salt Lake might not be able to pay its debts on an ongoing basis, including generating funds for a proposed new stadium in Sandy, a consulting firm reported after reviewing the team's financial plans.
But the Major League Soccer franchise says the report failed to look at the big picture, including the stadium's potential as a major concert venue.
An independent financial review released Friday predicts that even in the best of circumstances, Real Salt Lake will fall more than $1 million short of paying its debt for the stadium.
In a worst-case scenario, Real would have only $201,000 in the bank to pay off at least $3.3 million in debt a year, according to the report by Economics Research Associates. The report looked only at the stadium's cash flow, not the team's overall operations, including a radio station.
Real Salt Lake leaders believe they can make more than enough money through ticket sales and concerts at the stadium to pay off the debt.
If that doesn't work, the team has a backup plan: additional profits made through Real's profit-sharing agreement with MLS and radio and team operations. In 2009, that amount is projected at $3.7 million.
Salt Lake County Mayor Peter Corroon said finding out if Real can pay off its debts is key to a stadium funding deal.
"That really is what's going to make it or break it," Corroon said. His staff is plugging in both Real's financial projections and ERA's numbers to come up with the county's own model. "We'll see how it turns out."
ERA's report considers Real's business plan a little too ambitious. That was an assumption that team officials knew was coming.
"With all due respect to ERA, their assumptions are, in our view, unrealistically conservative," said Gary Reimer, Real's chief financial officer.
Team owner Dave Checketts believes he can book 11 concerts a year, but the ERA report said at best, the stadium could bring in six concerts.
Joel Peresman, president and chief executive officer of the Rock and Roll Hall of Fame Foundation, said Checketts' plan for 11 concerts a year "is easily attainable." Peresman has worked for Checketts in the past, when they both were employed at New York's Madison Square Garden.
Peresman said Checketts and his management team "are uniquely qualified, experienced and have the entertainment-business connections that position them to be able to maximize concert traffic for this new facility."
At minimum, the ERA report said, Checketts could expect two concerts a year at the Sandy stadium.
That baffles Real officials.
"To suggest we would only put on two concerts a year, we just can't fathom that," Reimer said. "Why would we even be in this business? I just don't understand how they conclude that."
Jeff Cohen, ERA's director of sports facilities consulting, said the fact that other outdoor venues nationwide have trouble booking concerts and Utah's climate — which only allows outdoor events five months out of the year — led the firm to predict a low number of concerts at the Sandy stadium.
After the Deseret Morning News asked what would happen if Real could book 10 concerts, Cohen re-ran the numbers. If that happens, the stadium would have $3.2 million in the bank after operating expenses to pay off stadium construction bonds — still $100,000 short of Real's potential debt payments.
"We have not found any outdoor venue that does double digit concerts on an annual basis," Cohen said. "There are only so many acts going around. The concerts are a big driver in this venue."
Real officials believe there are more than enough tours to go around, as other outdoor venues are able to book more than triple the number of shows Real plans.
At Colorado's Red Rocks Amphitheater, organizers host up to 40 concerts a year, with a capacity of 10,000 seats. And at Jones Beach Amphitheater in New York, with approximately 15,000 seats, 40-plus concerts fill the stage yearly.
ERA also softened Real's predictions for ticket prices.
The team forecasts a 29 percent jump in average ticket prices from the year the stadium opens in 2008 until 2012 — with prices jumping from $22.78 to $29.42.
ERA believes the Salt Lake market can't follow that trend. The ERA report shows just 10 percent growth in ticket prices during that same time frame, with prices starting out at $22.50 on the stadium's opening day, capping out at $24.85 per ticket in 2012.
Salt Lake County leaders hired the financial-consulting firm to evaluate the stadium's operations and the team's business plan.
The Debt Review Committee is trying to determine if Real Salt Lake is a worthy business in which to invest public dollars. A decision from the committee could come as soon as Monday.
Both Corroon and the County Council have said a stadium-funding deal hinges on the committee's approval. Real Salt Lake is asking for $30 million in hotel-tax revenue from the county and $15 million in redevelopment agency dollars from Sandy.
The committee will meet again Monday and is scheduled to either make a recommendation or give a status report to the council on Tuesday.
Deseret Morning News graphic
