By Don Muret, Sports Business Journal | November 16, 2015, Page 24
It’s a Tuesday night and the Columbus Blue Jackets are playing host to the New York Islanders in an early season matchup. Like many other NHL teams, midweek games can be a tough draw, especially in central Ohio where the focus these days is on who’s playing quarterback for the Ohio State Buckeyes. To make matters worse, the Blue Jackets, winless in their first six games of the season, would fire head coach Todd Richards the next morning after suffering their seventh straight loss, tying the NHL record for the worst start in modern league history.
But on this fall day, the weather is gorgeous and there’s lots of activity in the Arena District, the 100-acre mixed-use development surrounding the hockey barn. Across the street, the custom margaritas are flowing outdoors at Nada, a contemporary Mexican restaurant. On the opposite corner, Boston’s, a gourmet pizza and sports bar, is packed with fans wearing Jackets jerseys. The same is true at R Bar, a no-frills watering hole where Labatt Blue is the drink of choice. More fans dine al fresco at the Three-Legged Mare, Gordon Biersch and Dick’s Last Resort, the district’s newest addition.
It’s a vibrant scene and one that took a while to assemble. Fifteen years after Nationwide Arena opened in September 2000, the Arena District has transformed a dead zone in downtown Columbus, a brownfield site where the old Ohio Penitentiary once stood, into a thriving, 24/7 community. The 20 bars and restaurants, three hotels (and five more hotels surrounding the district), 2 million square feet of office space and 875 housing units, among other properties, represent more than $1 billion in total development.
Development has been steady through the years. Huntington Park, the city’s 10,000-seat minor league ballpark, opened in 2009 on the district’s western edge. Franklin County owns the Columbus Clippers, the primary tenant and the Cleveland Indians’ Class AAA affiliate, plus the $70 million ballpark it funded. Since Huntington Park opened, the Clippers have topped 600,000 in total attendance for seven consecutive seasons and the team has won multiple awards for ballpark of the year. The stadium keeps the district humming during the summer months by bridging the gap between hockey seasons.
“We were kind of like the exclamation point coming down here,” said Ken Schnacke, the Columbus Clippers’ longtime president and general manager.
Over the past five years, two apartment buildings have popped up across the street from the ballpark as the Arena District expands westward. It’s become the hip place to live with many of those apartments occupied by recent Ohio State graduates.
“My daughter is 18, a freshman in college, and her plan is to come back to Columbus [after graduation] and get one of those apartments on Flats on Vine,” said John O’Grady, a Franklin County commissioner.
Outside of the sports venues, the Studio Movie Grill, an 11-screen theater complex, and LC Pavilion, an indoor-outdoor concert venue with the flexibility to fit crowds of 2,200 to 5,000 for shows, help maintain a consistent level of activity in the district on dark days at the arena and the ballpark.
All told, it’s one of the few successful mixed-use projects in sports tied to downtown redevelopment. As a result, the Arena District has become a must-see for the Detroit Red Wings, Edmonton Oilers, Milwaukee Bucks and Sacramento Kings as they all put together the puzzle of mixed-use for their respective arena projects. It’s piqued the interest of outside media outlets as well. For the Islanders-Blue Jackets game, a television crew from Milwaukee was in town to run a feature on the district back home in Wisconsin.
“It’s been an amazing transformation and now it’s one of the most active spaces in the entire city,” said Xen Riggs, Ohio State University’s associate vice president for student life and executive associate athletic director. Riggs oversees operations of both Schottenstein Center (Ohio State’s arena) and Nationwide Arena under a joint management agreement. “It’s been fun to watch.”
Brian Ellis has watched the Arena District grow from the ground up. Ellis is president of Nationwide Realty Investors, a division of Nationwide’s corporate operation headquartered in Columbus. His company had a vision for revitalizing downtown through a mixed-use project anchored by a new arena for an NHL expansion team. In the 1990s, Ohio’s capital had the distinction of being the country’s largest market without a team among the big four major league sports. There was a hunger to fill the void in a city where Ohio State typically dominates the sports pages.
Nationwide Realty Investors took the lead for privately developing and financing the arena after local voters defeated a tax levy to pay for construction. The same goal remained — for the arena to serve as a catalyst for further development. Up to that point, most of the economic growth occurred in the suburbs, but Nationwide remained committed to redeveloping the city’s inner core. Twenty years after the company built One Nationwide Plaza in 1977, its 40-story headquarters, officials were ready to expand upon that base.
As the sole developer through most of the process, Nationwide Realty Investors formed a master plan for the Arena District and funded the initial $450 million in projects with partner Capital Square Ltd., which owns 20 percent of the development (the Blue Jackets have no investment in the Arena District). Over time, a few other private developers have built projects on the district’s outer edges in addition to the county stepping up to construct Huntington Park. For Nationwide, though, it wasn’t a case of falling into the trap of “build it and they will come” to attract development, Ellis said.
“That’s a fallacy,” he said. “There are advantages that sports facilities bring, but you have to incorporate those into a very well-planned neighborhood that takes advantage of the pluses, overcomes the negatives and is very market-specific. There is really no formula. It’s not sexy to say it this way, but the Arena District is first of all, a Class A office development masquerading as a sports and entertainment district. It’s all of our office tenants that really drive this from a development standing. We have kept many jobs and businesses downtown.”
It helped that a few pieces of the Arena District were in place at the time Nationwide Arena was under construction. Buca di Beppo, a national chain of family-style Italian restaurants, opened in 1999, one year before the arena opened. The country’s first Ted’s Montana Grill opened shortly after the arena did. Ellis remembers co-founder Ted Turner, for whom the restaurant is named, serving him a bison burger to celebrate the new business. Gordon Biersch, the microbrewery, was another restaurant timed to the arena’s opening. Fifteen years later, all three eateries remain in operation.
“They developed the arena side by side with development around it,” said Riggs, who arrived in Columbus 18 years ago to oversee construction of Schottenstein Center. “It’s not like ‘We have the arena, now what?’ [The plan was] ‘Let’s do it all at once.’”
At the same time, Nationwide began leasing office space. The city agreed to pay between $50 million and $100 million for infrastructure upgrades to frame the Arena District with red brick sidewalks and side streets and granite curbwork. Nationwide built several parking garages, a $100 million investment.
Arena Crossing, a 252-apartment complex, opened in 2004 in the shadow of the arena as the first residential component. It was followed by two condominium projects, a combined 207 units, plus the Flats on Vine and Flats II, the two apartment buildings by the ballpark.
“You could see what was coming and visualize it,” Ellis said. “I think that helped us a lot getting started. We came out of the gate very aggressively in terms of trying to establish the Arena District as a great neighborhood. We wanted to leave as little to the imagination as possible.”
There were some hiccups along the way for developing the Arena District, including the effects of two NHL lockouts over a span of seven years. The work stoppages could have delivered a potentially crushing blow to the bars and restaurants that depend on the steady flow of customers attending 40-plus hockey games a year. On both occasions, though, Nationwide Realty Investors implemented deep cuts in rent for those establishments to avoid having them default on their respective leases.
“The first time it happened [in 2004-05], we gave 50 percent off their rent,” Ellis said. “We did that unilaterally; it wasn’t a negotiated thing. I don’t know that it fixed the issue but it helped. They still struggled some but we didn’t lose anybody.”
The second major obstacle facing the district revolved around the city’s unique position of having two 18,000-seat arenas sitting three miles apart. Under their lease agreement, the Blue Jackets, playing in one of the few privately funded and managed, single-tenant venues, were responsible for booking and marketing the building. They also had to cover operating expenses, which extended to the team’s practice facility attached to Nationwide Arena. The team paid millions of dollars in annual rent to Nationwide Realty Investors, their landlord.
Against that backdrop, the Blue Jackets struggled to fill Nationwide Arena with concerts and other special events, the result of competing against Schottenstein Center for dates. “The Schott” opened in 1998 on the Ohio State campus, two years before Nationwide Arena. Over time, the situation hurt both arenas as they ultimately drove the price up to get a show, which in turn, forced promoters to dig deeper in their pockets to cover the costs to bring events to Columbus. Everybody’s intentions were in the right place, but it wasn’t good business for all parties involved, Riggs said.
“The belief at the time was the best way to put this type of deal together was for the NHL team to lease the arena 365 days a year and have the benefit of the revenue that came from other events,” Ellis said. “But it didn’t work out.
It comes down to the size of the city and multiple tenants. Two [sports] anchors makes a huge difference on the economics of the arena. We were further hampered by the fact that our city had two professional-caliber arenas. It’s not like we didn’t know [about the potential consequences], but the impact of it was greater than we perceived.”
The Blue Jackets had to find a different business model for running an arena that was losing millions of dollars a year. After lengthy discussions between Nationwide Realty Investors, the team and city and county officials, the county bought Nationwide Arena in 2012 for $43 million, saving the Blue Jackets about $10 million a year through a rent-free lease. The transaction included using tax revenue from four Ohio casinos to pay for arena operations and capital expenditures. The arena, designed by HOK, which has an office in the Arena District, originally cost $150 million to build.
Separately, a new entity, Columbus Arena Sports and Entertainment, was formed to jointly operate and book events at both arenas. Within that entity, a firm called Columbus Arena Management, headed by Riggs and his Ohio State facilities staff, runs Nationwide Arena on behalf of the county.
Now, the focus is on selling more tickets and improving the guest experience at both buildings, which in turn, drives higher concession per caps from patrons having a better time at events, Riggs said. The joint agreement has solidified the district’s future. Over the past three years, the bottom line for both arenas has improved by $100,000 to $200,000 annually by jointly running the two facilities, with another $600,000 to $700,000 saved in operational costs by combining staffs, said Don Brown, executive director of the Franklin County Convention Facilities Authority.
“Through the partnership with Ohio State, we created a model and a matrix where our community competes against other cities for events, and they decide which venue that act will play,” said Mike Priest, president and alternate governor of the Blue Jackets. “Not only are we able to market to both season-ticket holders for the Blue Jackets and Ohio State, but we have raised the bar for the shows coming to town over what we were doing before we aligned.
Now there is more money for everybody on top of not having to give up as much as we used to, to get a show in the market.”
Meanwhile, the Arena District continues to grow west, beyond Huntington Park. Earlier this month, Nationwide Realty Investors filed plans with the city to construct a 12-story building with 69 condominiums and a four-story parking garage. The $34 million project, to open mid-2017, will complete the Arena District’s original master plan formed almost 20 years ago. Next door to the condo tower, construction is already underway on Nationwide’s commercial office project on a site that once held the old Buggyworks, where horse carriages were made more than 100 years ago. The new development opens next summer.
More hotel space is also in the works. In late October, city officials approved plans to build a Canopy by Hilton, a 168-room downtown hotel. It’s part of the community’s effort to boost the number of higher-end hotels to attract major events such as the 2015 NHL All-Star Game and the 2018 NCAA Women’s Final Four, which was awarded to Nationwide Arena. It’s the one key element the Arena District lacks to draw those events on a consistent basis, according to Bruce Wimbish, director of marketing and communications for the Greater Columbus Sports Commission.
Long term, Arena District principles see development expanding to a point where it forms a stronger connection between Short North, the arts district to the east leading to Ohio State’s campus, and Grandview Yard to the west, which is Nationwide’s newest mixed-use development.
“When all that happens, geographically, the Arena District is kind of in the middle,” Riggs said. “The convention center continues to grow [with a $125 million expansion] and more hotels will drive nightlife. It seems like Brian can’t build housing fast enough. People want to live here, which is counter to what is happening in a lot of America’s downtowns.”