Wednesday, June 27, 2012

Global Entertainment's Decade Of Bad Business: Part 2 In A Series Visits Allen, Texas

Here's Part One of the Series on Global Entertainment...

Over the next editions here, OSG will recap Global’s business activities, expose the lessons each of their failed business elements, and try and determine where the future is with all involved.

Global Entertainment is a multi-layered business that seemingly focuses on consulting, building and then running arenas, mostly for smaller-to-medium size towns.

Their most recent foray into that business is consulting the folks in Glendale, Arizona.  The track record so far, is not very good.

They've left a virtual wasteland of failed management and cities with nearly empty and debt filled arenas.

Through interviews with city officials and scouring through documents, we learned how and where they've failed.

The first location is Allen, Texas- one of the places where the phrase “discovery phase” is currently in play...

They come to you with the idea of a shining star of a centerpiece- a mid-sized arena to help with a city's development- and Global would provide all the pieces to help with operation: connections to architecture, event planning once the arena is built, ticketing, food services, advertising, suite sales, and even anchor tenants since one of the vertical properties is the Central Hockey League.

But since 2003, Global has had their hands in the building of ten arenas- all of them have experienced some kind of failure with the company at the wheel.

The Allen Events Center (pictured right, thanks opened in November 2009 as the ninth of the ten arenas Global put on the landscape. The 7,500 seat building came on line at a cost somewhere between US$52-56-million.

The Central Hockey League agreed to put a franchise, the Allen Americans, in as an anchor tenant for a ten-year guarantee. Allen city officials visited three other Global arenas including the 1st Bank Center in Broomfield, Colorado and Tim's Toyota Center in Prescott, Arizona since the appointed architect would do the proposed Allen building as they had done the others.

The Events Center would be operated at no cost to the city and Global would make up any deficits according to Allen City Manager Peter Vargas in a conversation with OSG Sports. The construction and raising of the building "went great" according to Vargas:

"In their original model,"
Vargas explained, "they (Global) said that since they operated five or six other arenas they could book an act into each venue. It looked like a really positive model. But not long after, it was clear that they didn't have the financial wherewithal to run the arena. While the hockey team was a great tenant and puts on a great product, the rest of the balance wasn't doing very well."

While Global was supposed to also receive a $175,000-a-year fee (WFAA-TV reported in August 2010 that the figure was just north of $200,000) to manage the arena, the city of Allen knew there was a problem when Global couldn't meet payroll expenses and asked the city to help out in that regard.

Allen seems to be the exception rather than the rule in Global's case. Global was removed by June of 2010 as operator in favor of the city running the building, and the city had signed eight separate contracts for all of their bill paying for the arena cost. The building is still having issues being profitable.

The city of Allen has filed a lawsuit against Global within the last eight months and the suit is in the discovery phase. Vargas anticipates it will take a couple of years before the case is heard in court, and that mediation might even be considered first before any of the Allen complaint is heard...

The lesson from Vargas: "Have a substantial reserve before you establish the facility and understand that it will take, at least, three years before a totally new building will be accepted within the artist's community. In the day-to-day management of the arena, they (Global) tried very hard, but it became pretty clear that they didn't know how to run an arena."

Next: More evidence that Global has anything but "The Midas Touch". 

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