By Sean Pendergast
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Richard Connelly
By Jeff Balke
By Casey Michel
By Craig Hlavaty
If Rockets owner Les Alexander's dispute with Aeros owner Chuck Watson were as simple as coming across with a few million bucks to break a lease, a new downtown basketball arena would be just a mayoral edict and another referendum away from reality. But the lease is only one piece of a larger puzzle Alexander must solve if he's to get what he's after -- which, in addition to freedom from his contractual obligation to Watson, appears to be total control of a new arena and the money that would flow into it.
Alexander's latest round of whining over his Summit lease was about as well-timed and tasteful as shacking up with a new mistress a few days after your wife dies, coming as it did the day following voters' approval of a new downtown ballpark and renovated Astrodome.
Yes, we know that Alexander, like poor Drayton McLane in the outmoded Dome, just can't make a go of it in his team's current venue without new luxury boxes and other revenue enhancers (even though he reportedly has bragged about town that he's reaping a $20 million annual profit on the team).
And yes, we've heard Alexander say that the only thing holding back our beloved Rockets from their cherished dream of a new home is a recalcitrant Watson, holder of the Summit lease (even though it was Alexander who broke off negotiations with Watson last July).
But the timing of this last plea for relief from bondage, so soon on the heels of the referendum, raised more than one eyebrow. What's more, the reclusive Rockets owner didn't even raise the stink himself. Instead, in a PR miscalculation that had even the city's normally sycophantic sports scribes jeering, chief booster Jim McIngvale celebrated the opening of his new Rockets training facility by calling on Watson to "let our Rockets go."
Alexander's quest is not as fraught with peril as a Red Sea crossing. Still, it may just take a miracle on that scale for the Florida bond dealer to get what he wants. At this point, Watson not only has a binding contract that Alexander can't legally break -- the Aeros owner is holding almost all the cards.
As long as the Summit remains the only arena in town, Watson's the man, at least until his lease expires in 2003. And if a new arena is built and the Summit shuttered (the city wouldn't bear the expense of operating two arenas), Watson is in as strong a position as Alexander to stake a claim for a healthy piece of the revenue pie, what with his hockey team and long-standing relationships with the other tenants that would use the building.
Alexander must be kicking himself for not buying the Summit lease when he had the chance a couple of years ago, because not only could he have turned a profit from it, but he could already be enjoying the view of construction crews building his new palace (as yet unfunded, though Mayor Bob Lanier is said to have an arena plan at the ready and will move if and when Alexander and Watson resolve their differences). Instead, he must resort to emotional pleas from furniture salesmen to have a shot at the big money.
How big is big? Given the sweet deal McLane squeezed out of the city and county, which will funnel every penny of revenue from the new ballpark into his pockets, why should Alexander expect anything less? (Naming rights? Sure, why not?) On the other hand, if he is forced to split the revenues with Watson, Alexander would likely be absorbing a bigger hit than just the dollars Watson will pocket. Without a single owner strong-arming every penny of the revenue, the city would be better able to bargain for a share of the income -- those naming rights, for instance, which should belong to whoever foots the construction bill.
In addition, Alexander would be competing for sponsorships and fans, and competition always holds prices in check better than a monopoly. Denver's sold-out hockey team, for example, just announced that fans on the waiting list for season tickets could get them only if they also bought season tickets to the lowly basketball Nuggets (both franchises are owned by Ascent Entertainment Group). The loss for Alexander is tough to calculate at this point, but it's easy to imagine that it would be in eight figures.
As big a sticking point as Alexander's contract with Watson is the Summit lease itself. When he bought Arena Operating Company, which owns the lease, Watson quickly moved to strengthen his asset. He signed many of the bigger tenants, including the circus and other family shows, to long-term contracts that run through 2003, the length of AOC's agreement. In addition, AOC has a variety of obligations -- to bondholders, to the city and to vendors. If AOC tried to break those agreements, according to Aeros general manager Steve Patterson, they could be sued for the value of those deals, which Patterson says was roughly $60 million as of last January.
So to let the Rockets out of their lease, Watson wants Alexander to indemnify him against any lawsuits arising from breached contracts. Even prorated to 1999, the earliest a new arena could open, the figure could top $30 million, assuming Patterson's figure is correct. As an alternative, Watson has proposed a reasonable split of the new arena's revenues, the percentages depending on whether the city gets an NHL franchise or keeps the current minor league team.
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