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New player expected in arena wars
A deal is in the works for a new manager for the financially troubled Target Center.  The firm, AEG, runs other such venues.
By Jay Weiner
Mpls Star Tribune
Monday, April 9, 2007

What:  Target Center is expected to get a new manager

Who:  AEG Facilities, which manages, among other buildings, Staples Center in Los Angeles and theaters in Las Vegas and New York

When:  Minneapolis City Council is expected to approve the deal this week, with AEG taking over May 2

Why:  Arena is losing money on non-basketball events.  Timberwolves pulled out of their management arrangement.  City needed new operator and sought to limit its subsidy.

At stake:  Competition for family shows and concerts islikely to intensfy between Target Center and Xcel Energy Center.

New Target Center manager, more city subsidies

In a move certain to intensify the already heated arena war in the Twin Cities, a Los Angeles sports and entertainment conglomerate is expected to be named today to be the new manager of the financially troubled Target Center.  With Minneapolis' Target Center and St. Paul's Xcel Energy Center battling to book family shows and concerts on increasingly thin margins, AEG Facilities is already upping the ante.

It has committed to invest about $2 million in concession stands and skyways in an attempt to "rebrand" and freshen the look of the arena, said City Council Member Lisa Goodman, whose ward includes the 17-year-old Target Center.

And AEG, which promotes such popular acts as Disney's "High School Musical" tour and pop star Justin Timberlake, is expected to steer shows it produces to Target Center.

With Xcel's management group declining to bid to manage Target Center as Goodman hoped they would, she said that Minneapolis will look after its own:  "We have the best location.  Our number one job is take care of what we have now.  We need to invest in [Target Center] and compete, not cower in the corner."

Spokeswomen for the Xcel arena's management group were not available for comment Sunday.

The deal between the city of Minneapolis, which owns Target Center, and AEG, which operates arenas and promotes touring shows worldwide, has broad implications, said City Finance Officer Patrick Born.  The terms of the deal -- including a maximum $1.75 million annual operating subsidy from the city -- should raise red flags to managers of local facilities and to public officials, present and future, in an increasingly cluttered sports and entertainment market, he said.

"We are the canary in the mine shaft," said Born, noting that a new Twins ballpark, a new University of Minnesota football stadium and, perhaps, a new Vikings stadium, will open soon.  "Target Center is sick.  All the other facilities in town should look at us and see what's going to happen to everyone else."

As part of the deal, the city, which bought the arena in 1995 for $85 million, will increase its underwriting of the arena's continuing operating losses.  Recently, the building has run a $2 million annual deficit;  that shortfall was shared by the city and a management company owned by the NBA's Timberwolves.

Over the past 12 months, Minneapolis taxpayers covered $1.2 million in arena losses.  In the new arrangement, AEG will cover any annual losses after the city covers the first $1.75 million.

An AEG spokesman declined to comment;  formal approval of the deal is expected by the City Council on Friday.

Goodman and Born said that before deciding on AEG, they were both eager to have Xcel Energy Center's managers operate Target Center.  Some joint-booking arrangement was discussed, they said.

Earlier this year, Pam Wheelock, chief financial officer of Minnesota Sports & Entertainment, or MSE, which owns the Minnesota Wild hockey team and manages Xcel arena, said her company might be interested in managing Target Center.  But the Xcel group never bid.

"Left with that rejection, we have no choice but to compete," Goodman said.

Wheelock was unavailable for comment Sunday, as was Xcel arena spokesperson Kathy Ross.

If approved, AEG would become the sixth arena manager since Target Center opened in 1990.  For the past year, a management company owned by the Wolves tried to compete with Xcel for the non-sports events in the market.  Using an escape clause in its management contract, the Wolves pulled out of that role this year.

Since Xcel Energy Center opened in 2000, many shows have opted for St. Paul.  Promoters have played the two arenas off each other, gaining sweetheart deals for their artists while eating into the margins of both facilities.

"It's like having a ringer in an auction," Goodman said.  "Prices keep getting higher and higher, and the only people who benefit are the acts and the people who manage the acts."

Timberwolves CEO Rob Moor, who oversaw arena management last year, said:  "When they built Xcel, the number of concerts didn't double.  They created this competition that killed the market."

Already, Minneapolis taxpayers are on the hook for a $6 million annual mortgage payment on Target Center, which was built privately by former Wolves owners Marv Wolfenson and Harvey Ratner, but they were bailed out by the city in 1995.  About $67 million of debt remains on the arena.

The city has been seeking debt forgiveness from the Legislature this session, but that bill has languished in committee.

The city of St. Paul has a bill to lighten its load on annual debt service on RiverCentre, the convention center that is adjacent to Xcel arena, and on a nearby parking ramp;  RiverCentre also is managed by MSE.  That proposal rests in a Senate appropriations bill.

Jay Weiner 612-673-4378