Verizon Arena Battles Tough Entertainment Market

Long-term suite leases and reserve seating agreements that helped fund the debt-free construction of Verizon Arena are now line items in the facility's annual income statement.

(To view a seating chart of the arena's luxury suites and who leases them, click here.)

Renewing those contracts at the North Little Rock entertainment venue has produced mixed results. The arena recorded total revenue of $6.6 million during 2009, its second-biggest year since opening in 1999.

But that sales performance didn't generate a handsome profit as management invested in capital improvements to keep the project updated and competitive while laboring in a challenging business climate.

"Current economic conditions make it difficult for many sponsors to continue to renew their advertising contracts and suite leases with the arena," the 2009 annual report notes. "A significant decline in advertising/lease revenue or ticket sales could have an adverse impact on the arena's future operating results."

Michael Marion, general manager of Verizon Arena, expects 2010 results will be comparable to 2008, which produced a $27,854 loss.

"I would be shocked if we didn't show a loss this year, but we have money socked away," Marion said of the arena's enviable financial position. "The fall is promising, but I don't think we will end up finishing the year in the black."

The most current numbers compiled for arena operations this year show a            $19,661 loss on revenue of nearly $2.1 million through April 30.

Along with the decline in long-term suite leases is the "Save Your Seat" program, launched with an original count of 980 that has fallen to 411.

That 58 percent drop represents more than $142,000 in lost annual revenue for the arena. The SYS program is priced at $1,250 for a five-year term and reserves a participant first crack to buy an event ticket with a guaranteed seat location.

The precipitous decline accompanied the University of Arkansas at Little Rock Trojans moving its home court from the arena in 2005 to its new on-campus facility, the Jack Stephens Center.

Adding to the lost allure of SYS was the demise of the RiverBlades (2003) hockey franchises followed by the exodus of the RimRockers basketball team.

Marion said the biggest impact was felt when the Trojans left, taking many UALR season ticket-holders in the move.

"It didn't surprise me," Marion said of the SYS slide. "Plus the economy turning south."

Even with the whammy of financial cutbacks by SYS patrons that hit renewals, the priority seating arrangement continues to boost the arena bottom line.

Renewed seat licenses through the SYS program will add $102,750 yearly for the next four years. Seat licensing guarantees now booked drop to $77,063 in 2014, according to the arena's 2009 annual report.

Suite Leases
Renewed suite leases will contribute $192,500 annually during 2010-14. But that line item once carried more heft as well.

A decade ago, 27 of the 32 arena suites were leased. Budget cutbacks and financial casualties among the initial tenant roster pared today's count to 21 out of 32 leased.

Little Rock's One Bank & Trust remains the biggest player among the arena suite holders, renewing eight-year agreements for three slots in addition to its 20-year, premium spot.

When One Bank isn't using its suites to entertain clients or reward staffers and their families, the space is marketed.

"There is a big demand to sublease the suites for events," said Layton "Scooter" Stuart, CEO of One Bank. "The arena staff coordinates that and takes us out of the middle of it.

"All in all, it's been a great experience for us. From a marketing standpoint, it's the footing of our marketing program in Arkansas."

One Bank's deal includes handling the arena's bank business and ATM operations, banner advertising at the facility and name branding on the back of all arena tickets.

"Our experience with the arena has been nothing but positive and pleasurable," Stuart said. "It's in the long-term marketing program of this bank."

'Watching Our Expenses'
Gone from the business scene through bankruptcy and the Verizon Arena rent roll are two Little Rock ventures, Forza Marketing Group and J.M. Products.

Suite agreements weren't renewed by U.S. Bank of Minneapolis, which inherited the lease originated by its predecessor, Mercantile Bank of Arkansas; VCC of Little Rock, the local partner in the construction management team that built the arena; and Beach Enterprises of Little Rock, parent company for a family of Arkansas real estate title companies.

Gus Vratsinas, chairman of VCC, said fiscal stewardship during uncertain economic times prompted the tough decision to forgo renewing the firm's suite agreement.

"We thought it was great," Vratsinas said of the firm's involvement with the suites program. "I supported the idea of an arena for years, and we were proud to be part of the project.

"When the renewal time came up, we were like a lot of companies. We're watching our expenses. We did continue doing the Save Your Seats program" with eight seats.

Gone from the suites picture are teams that once called the arena home: Trojans basketball, RiverBlades hockey and Twisters arena football. The arena staff retains hope of someday landing a professional franchise as a drawing card once again.

Even the suites without long-term leases provide revenue for operations on a one-time event basis. The cost ranges from $250 for a high school or college graduation ceremony to $750 for a concert that bears the added cost of tickets and any food ordered.

"We make money by leasing the vacant suites to the public for events as well," said Jared Lillard, director of sales and finance. "For the Eagles [concert on July 1], we had every suite in the building full except for the six suites behind the stage."

Awaiting an Upturn
The arena staff considered mounting a marketing push to replace exiting suite tenants. However, Marion said the decision was made to wait for more favorable conditions.

"We thought about a more significant marketing campaign," Marion said. "It just seemed like it was a bad time to do that.

"We didn't go into any heavy marketing during the last 18 months because of the economy. Hopefully, the economy will turn around, and we can beat the bushes a little harder."