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November 27, 2023

Oak View Group confident $100M renovation will spur XL Center turnaround; venue will draw ‘well above 30 shows a year’

RENDERING | CONTRIBUTED A planned $100 million XL Center renovation would push back the arena’s main stage, increasing concert capacity to over 13,000 people.
What will  $100M XL Center renovation provide? 
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International sports and entertainment company Oak View Group is preparing to wager at least $20 million that Hartford’s XL Center arena can transform from an aging venue running a $2 million annual deficit to a bustling moneymaker.

The Capital Region Development Authority (CRDA) and OVG have a tentative deal that would require the Los Angeles-headquartered company to invest $20 million toward a $100 million overhaul of the roughly 15,500-seat arena.

Gov. Ned Lamont, in his current budget, lined up $80 million in public funding to cover the remaining costs.

Executives with OVG — which already manages the venue — say experience demonstrates they’ll be able to jump-start activity at the XL Center and turn it into a profit center, following much-needed renovations.

The half-century-old Hartford arena currently hosts six to eight concerts a year, with many performers and promoters turned off by substandard stage rigging, lack of premium seats and a loading-area chokepoint that adds much time and cost to setting up and breaking down shows, according to OVG and CRDA leadership.

At an October CRDA Board of Directors meeting, Oak View Group Facilities President Hank Abate predicted a draw of “well above 30 shows a year” in the second or third year following renovations.

Under a tentative 20-year contract negotiated with CRDA, OVG would keep the first $4 million of annual net profit from the arena each year, in return for its upfront renovation investment. After that, profits would be split evenly with the CRDA, which would use those funds for arena maintenance.

OVG would be responsible for covering any operating loss in the meantime. Abate said his company aims to top the $4 million net profit mark by the third year following renovations, which are targeted to take place in 2024 and 2025.

Similar arenas, big draws

Abate said OVG’s experience with similarly sized venues bolsters confidence in XL Center’s potential.

He drew parallels with the 9,500-seat Enmarket Arena completed in Savannah, Georgia in February 2022; the Acrisure Arena completed in Palm Desert, California in December 2022; and a renovation of the CFG Bank Arena in Baltimore, which reopened with a Bruce Springsteen concert on April 7.

Renovations allowed these venues to offer easy loading, advanced stage rigging, improved fan and performer amenities, and more premium seating — all features planned for Hartford’s downtown arena, executives said.

The planned XL Center renovation will add an event-level club section like the one shown above.

XL Center renovation plans call for a significant expansion of premium lower-bowl seating, including the addition of event-level suites; a new dressing room and lounge for performers; and relocation of the stage to increase concert capacity, among other improvements.

“Just as that worked in all three of these buildings that I’m pointing out to you, we feel that we’re going to accomplish the same great results for the XL Center,” Abate said.

At 50 years old, Baltimore’s arena is about the same age as the XL Center, and it suffered from similar repair needs, Abate said. Baltimore did not want to directly invest in it, he said.

“OVG came in and invested quite a bit of money,” Abate said.

The cost of the OVG-financed, 11-month-long project in Baltimore ultimately topped out at $250 million. Before renovation, the venue hosted up to four concerts annually by premier performers. The venue is on track for 109 concerts, shows and other events this year, OVG said.

According to terms approved by the Baltimore Board of Estimates on Nov. 24, 2021, an OVG-affiliated limited liability company was to receive a 30-year contract — with two, 10-year renewal options — in return for spending at least $150 million renovating the arena.

OVG is responsible for funding the Baltimore arena’s operations and debts. It must also annually put aside at least $750,000 for upkeep and improvements during the first 10 years of the contract, and $1.5 million each subsequent year.

Under the agreement, Baltimore will hand over all taxes raised from the venue in excess of a $1.75 million threshold. The city would also receive a share of profits after the project reaches a 15% internal rate of return.

Abate told CRDA board members planned renovations will allow the XL Center to compete with the state’s two casinos, Foxwoods Resort Casino and Mohegan Sun, which have poached the concert business over the years.

Foxwoods, in southeastern Connecticut, has theaters with 4,400 and 1,400 seats, respectively, that will host, among others, Kenny G, Jefferson Starship, Jerry Seinfeld and Boyz II Men in December.

Mohegan Sun Arena has 10,000 seats and is home to the Connecticut Sun WNBA franchise. Its upcoming concerts include Frankie Valli & The Four Seasons, Bret Michaels and Michael Bolton.

OVG’s business has benefited from changes in the music industry, Abate noted. Musicians can no longer count on album sales due to a migration of music online, and so they make their money touring.

Once renovations make the XL Center more appealing, OVG will be in a stronger position to leverage its network of East Coast arenas to convince promotion companies that Hartford “has to be a must-play as well,” Abate said.

The XL Center has undergone tens of millions of dollars in publicly financed renovations over the past decade-plus, but nothing as extensive as the planned $100 million overhaul.

Most recently, a new $5 million, 5,000-square-foot sports bar and betting lounge debuted in a section of the property that faces Ann Uccello Street.

Mammoth presence

Founded in 2015 by music industry giants Irving Azoff and Tim Leiweke, OVG either owns or is in the process of building 11 new arenas in the U.S., Brazil, Canada, Wales and Austria.

The company’s management arm — OVG360 — services more than 400 arenas worldwide, including the XL Center. It has also worked out arrangements to participate in the refurbishment of existing arenas.

“We have over $5 billion invested in projects of all sizes,” OVG360 co-chair Peter Luukko told the Hartford Business Journal. “Really, we’re looking to invest in marketplaces, thinking long term.”

OVG acquired venue management and hospitality company Spectra in November 2021. At the time, Spectra held a contract to manage the XL Center, with CRDA providing oversight.

Luukko, who has strong ties to the NHL as past president of the Philadelphia Flyers and executive chairman of the Florida Panthers, said he voiced a willingness to “put equity” into a long-sought XL Center renovation during his first meeting with CRDA Executive Director Michael Freimuth.

It was a demonstration of good faith, as well as a belief in the marketplace’s long-term potential, Luukko said.

OVG is participating in a string of high-profile, arena-building and restoration projects around the world, from a pending $280 million renovation of the 18,000-seat FirstOntario Centre in Canada, to plans for a “state-of-the-art” sports and entertainment arena in Vienna, Austria.

A convincing offer

Freimuth, who has spent years pushing for a large-scale XL Center renovation, said he has not yet had a chance to visit the revived Baltimore arena.

But he said he’s confident in the OVG deal, which will end taxpayer subsidies of the Hartford arena and leverage state funds to make long-needed repairs, while providing modern amenities.

“If you’re going to put $20 million down and sign a piece of paper saying, ‘We’ll take the operating loss,’ that’s two indicators to me they have comfort and they can perform it,” Freimuth said.

Freimuth said he expects bids for the XL renovation by the close of December. If these fall within, or at least very near, the projected $100 million budget, CRDA can finalize an agreement with OVG.

The next big milestone would be a release by the state Bond Commission of the $80 million allocated in the state budget.

Renovation work would be planned around XL Center’s events schedule over the next two years, with the building closed and entirely dedicated to construction during summer months.

Freimuth said Hartford needs an arena to help generate vitality. Some have advocated for closure, but more voices are in favor of preserving the venue, he said.

One thing many can agree on is the state has little appetite to spend the hundreds of millions of dollars it would cost to build an entirely new arena, he said.

“The building isn’t going away,” Freimuth said. “There is no market to simply replace it. So, we have to invest in it to buy a little more life out of it.”

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