Portland Finally Gets Its Promised Rose Garden -- Public-Private Cooperation Provided The Financing

PORTLAND - This city's new Rose Garden arena, which officially opened yesterday, was financed without owner threats, ballot measures, special legislative sessions or predominantly public funding.

What the 21,300-seat sports and entertainment complex has had going for it is a clear need, a rabid fan base and the deep pockets of Seattle software billionaire Paul Allen, owner of the Portland Trail Blazers NBA team.

Of the arena's $262 million pricetag, just $34.5 million came from a public jurisdiction - in this case, the city. Officials hope to recoup the money within six years through a 6 percent ticket tax and parking and rent revenue.

The remaining was all private: $46 million from Paul Allen, a $16 million Bank of America-Seafirst Bank loan, $10 million in interest and the biggest chunk, $155 million, from long-term mortgage notes handled by Prudential Securities.

Faced with escalating player salaries and operating costs, Allen and the Trail Blazers began looking seven years ago at building a new arena. The Portland Coliseum, while sold out for Trail Blazer games every year since 1978, held only 12,666 fans.

"We were looking at the possibility of having to move the franchise," said Marshall Glickman, president of Oregon Arena Corp. "But we never once issued a threat. From the first word of discussions with the city, we made it clear we wanted to stay in Portland and were intent on finding some way to make it happen."

The Trail Blazers also wanted to minimize public money in the arena. "When you take public money, they (the jurisdiction) expect a certain amount of oversight, which we were not willing to relinquish," Glickman said.

Because the city owned the property, however, "a certain package of public infrastructure was required," Glickman added. City backing was needed for road access, sewer, landscaping and parking, among other amenities.

City leaders settled on the $34.5 million figure. Allen put up $46 million with the understanding he would assume construction risks such as cost overruns and delays, but drew the line at that figure. The bank loan was the result of strong business support.

But the remainder was "no easy trick," Glickman said. The Trail Blazers, having committed to stay in Portland for 30 years, sought long-term funding from an investment community seldom willing to back high-risk ventures - especially in the fickle domain of professional sports.

Glickman and his associates took several steps to overcome doubts. They secured a Triple-B rating from Fitch Investor Service, and its near-equivalent, a 2-minus rating indicating "high quality," from Standard & Poor's - the first time both had endorsed to that extent a private arena package.

Oregon Arena Corp. also sold out all 70 luxury suites (at an average cost of $113,000 each), three-fourths of them for 9-year terms. Half of 2,400 preferred seats went. More than one-fourth of advertising capacity was sold.

The result: Prudential Securities picked up the package and received more than $215 million in orders for the $155 million loan. The 27-year, 8.99 percent notes were purchased by a handful of traditional insurance investors, none of whom had backed a sports arena previously.

The project also won community support by offering to-the-doors mass transportation via Portland's MAX light-rail network, by recycling 93 percent of waste material generated by construction, and in awarding more than $27 million in construction work and services to minority, woman-owned or emerging small businesses.

How much of a factor was a potential bailout by Allen? His Microsoft stock alone is worth more than $6 billion, making him the nation's fourth-richest individual.

"Psychologically, it helped a lot - but it was psychological only," Glickman said. "Paul never put his signature on anything that said if our attendance or revenue projections fell short he would make up the difference."

Glickman did credit Allen for avoiding "micromanaging the project or designing it from an ego standpoint. Paul wanted this built for the fans, and the truth is you're going to make more money if you design it for the people spending their money there."

At a $125-a-head charity event Friday night and public previews Saturday and Sunday, the arena won raves from attendees and exhaustive local media coverage. Wide aisles, a 3-to-1 female-to-male bathroom ratio, roomy seating and cuisine featuring everything from phad thai to hot dogs were big hits.

The variety in dining was made possible partly by the arena's decision to operate food concessions itself rather than contract to a traditional service.

The Rose Garden also offers high-tech advances, including an "acoustic cloud" that changes sound baffling for the type of event, and a $2 million outdoor fire-and-water fountain display. Both are computer-controlled.

The arena includes its own TV studio, a special-effects on-the-fly system for customizing replays, 23-foot-high media kiosks and some 750 TV monitors, including 10-inch displays in the bathrooms of luxury suites. Play-by-play audio is piped into all bathrooms.

There are also state-of-the-art sound systems, four Astrovision screens and the biggest scoreboard of any indoor arena in the U.S. Besides basketball, the arena can be used for hockey, indoor soccer, rock and other music concerts, trade shows and other events.

Glickman doubts the Rose Garden multipurpose model would work in exactly the same way for a baseball stadium, which has less flexibility in programming.

He says that to keep costs low a Seattle stadium should be open-air rather than covered. And he doubts a public jurisdiction has "the entrepreneurial skills" to operate a major sports facility.

As for Allen, who has put up $20 million for the Commons project and $50 million for the Experience Music Project rock museum at the Seattle Center, he has said he is not interested in backing a new stadium.

"I'm not a baseball fan," Allen said.