A reclusive billionaire tries to resuscitate the Timberwolves' struggling arena
In early May, the Twin Cities played host to two of the top-selling arena acts to hit the road in 2007. Mother's Day brought a sweat-drenched Kenny Chesney show. And just four days earlier, Billy Joel played a concert that doubled as his own birthday party. For an encore, the Piano Man doffed a Minnesota Twins cap.
Both concerts were hosted by the Xcel Energy Center in downtown St. Paul. Ever since it opened in 2000, "the X" has routinely drawn the biggest names in arena tours. More and more, the Target Center in downtown Minneapolis remains dark when marquee acts come to town.
A host of factors have contributed to the Target Center's demise as a premier entertainment venue. For starters, the center's main tenant, the Minnesota Timberwolves, have hit a three-year skid. And the arena opened in 1990, making it one of the older facilities in the country. The venue has been owned by the city of Minneapolis since 1995, and has seen no less than five management companies run its day-to-day operations. With $85 million sunk into the Target Center, the city hasn't seen much return on its investment.
"It's sick," says Pat Born, the city's chief financial officer. "We need to do something to stabilize the building, because we own it. It's ours."
On February 1, Midwest Entertainment Group, a Minnesota company owned in part by Timberwolves owner Glen Taylor, notified the city that it would no longer operate the arena, as it had been doing for three years. The city took bids from three groups, but ultimately went with AEG Worldwide, which owns the Staples Center in Los Angeles and has booked tours for musicians such as Prince and Justin Timberlake.
"They are a major player in arenas," says Born, who adds that AEG is also the second-largest "content provider" in the entertainment industry, behind Live Nation. "Their proposal was the most entrepreneurial of the three."
The 18-year deal calls for AEG to invest $2 million in improvements, upgrading concessions stands and acoustics. More attractive to the city was a chance to stop the bleeding. In recent times, the city has lost some $2 million a year in revenues, and hasn't been able to chip away at the $68 million it still owes on the building. AEG's proposal called for the entertainment group to cover any losses after $1.75 million in 2008, and will provide similar cash in subsequent years.
"AEG recognized the sort of urgency with our financial situation," says Minneapolis City Council President Barb Johnson. "Hopefully it brings some stability. And AEG also has a marketing edge. They offered money up front, and they own the rights to some touring acts. Hopefully it will lead to more, as they say, butts in the seats."
AEG is part of the Denver-based Anschutz Company, owned by a reclusive billionaire named Philip Anschutz. He's the son of a Kansas oil speculator who struck it rich in 1980 when Amoco discovered huge oil and gas reserves near a family ranch in Wyoming. In 1982, Anschutz sold off some $500 million in holdings he had in Mobil Oil, and soon began buying up old railroad lines out West. Anschutz's company laid fiber-optic cable along the rail lines, foreseeing the technology boom that came in the late 1990s. He started a telecom company that morphed into Qwest, which eventually became the local telephone provider in 14 states, including Minnesota. At one point, Forbes named Anschutz the 16th richest man on earth.
In recent years, the 67-year-old has moved into the sports and entertainment business. He owns part of the NBA's Los Angeles Lakers and the NHL's L.A. Kings, and he was responsible for bringing international soccer star David Beckham to the L.A. Galaxy, one of three soccer teams he owns. Most recently, AEG began developing what the company's website describes as a $2.5 billion, 4-million-square-foot "sports and entertainment district" in downtown Los Angeles.
If Anschutz has a Midas touch, he'll certainly need it to revive the Target Center. The 19,000-seat arena was originally built for $104 million by the Timberwolves' inaugural owners, Harvey Ratner and Marv Wolfenson. Eventually, the duo known as Harv and Marv hit hard times, selling the team to Taylor and the arena to the city.
Since the city took over ownership in 1995, Target Center has been operated by a series of companies, none of which has managed to make the arena profitable. But the arena really began losing business in 2000, when the Xcel Center opened thanks to some $65 million in loans from the state. Immediately, the new 18,600-seat arena drew attention, if for no other reason than that it was new. Further, it gained a reputation as a place with great concessions, good sight lines, and stellar acoustics.
The Target Center was soon viewed as antiquated and inadequate. More to the point, artists want to play the St. Paul venue because the city's more favorable sales tax structure ensures a bigger share of the gate.
"Target Center has been sick since the state subsidized the money for the Xcel to be built," council president Johnson says.
The Xcel is managed by a subsidiary of Minnesota Sports and Entertainment, which owns the Wild hockey team. Bill Robertson, communications VP for the company, shows little concern that AEG is coming to town. He notes that a 2005 issue of Pollstar magazine cited the Twin Cites as one of the top-10 markets for arena ticket sales.
"Competition exists for all live entertainment options in the Twin Cities market, which we believe is healthy and keeps us all striving to be our best," he says.
But the arena-concert market is extremely volatile. Gary Marx, who has promoted shows in town for 33 years and has booked acts at both venues, says that the business has changed "rapidly and radically" in the last five years.
"We all recognize that big companies are the way of the world now," Marx says. "It's so early in the relationship to see how it will play out. We'll see how AEG treats local promoters and audiences. The future of Target Center hinges on that."
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