News Column

Sale of Vadnais Sports Center to Ramsey County clears legal hurdle

May 1, 2014

By Sarah Horner, Pioneer Press, St. Paul, Minn.



May 01--Ramsey County is moving to assume ownership of the Vadnais Sports Center for a price officials say will keep the previously debt-ridden facility in the black and taxpayers off the hook.

The deal cleared its last major hurdle Tuesday, when a Ramsey County probate judge approved a request by the facility's trustee to sell the complex to the county for $10.5 million.

The decision pushes the county into a 45-day due diligence period, where staff will review final details before closing on the purchase in late June, when Ramsey County would presumably pick up the keys to the 200,000-square-foot arena. The arena includes two sheets of ice and a dome-covered turf field.

It looks to be a great deal for a complex that originally cost $26.5 million to finance, according to Ramsey County Commissioner Blake Huffman, who said the county's substantially lower purchase price ensures a successful venture for an arena plagued by financial problems since it opened in 2010.

"They had plenty of users under the old structure but the debt service was $26 million. Now it's less than half that," Huffman said. "That's the biggest difference between this paying for itself now and it not paying for itself before."

According to the county's analysis of the arena's financials, the complex is expected to bring in about $1.6 to $1.7 million annually, said Greg Mack, the county's outgoing parks and recreation director.

Offset by annual expenses estimated at a little less than $1 million and debt payments of about $500,000, and the county is left with just enough to start a rainy day fund to cover future repairs at the arena, Mack said.

"We really feel it's critical that we're planning for the capital replacement side of this because stuff wears out," he said. "This arrangement allows us to prepare for that."

If the estimates prove accurate, taxpayers would get the benefit of a relatively new ice arena without having to pay for it, Huffman said. He added that the county would initially cover the $10.5 million cost by borrowing from an internal reserve fund and paying it back over the next 20 years with the arena's profits.

The arena, which sits on about 15 acres on the corner of U.S. 61 and County Road E in Vadnais Heights, would stand out among the county's fleet of 11 aging ice rinks, which on average are about 40 years old.

The acquisition comes at a time when ice time has become increasingly competitive around the metro-area, Huffman said. Options got scarcer when Minnesota State Fair officials recently announced it was closing the rink at the Lee & Rose Warner Coliseum.

"There's less ice then there was just six months ago, so that makes us feel even more comfortable with our numbers," Huffman said.

Though operational details are still a ways out, county officials anticipate keeping the same core users of the Vadnais Sports Center while adding others.

"I would say that there will likely be a little different mix in the utilization so that you'll see teams not only from White Bear Lake but other parts of the county as well," Mack said. "Places like Mounds View High School and other groups that have been looking for a place to call home."

The new arena would likely be offset by at least one arena closure somewhere in the county down the road, Mack said. It is too soon to say which one would be targeted, he added.

While slightly worried about having to share ice with additional users, the president of the White Bear Lake Hockey Association said he's pleased the facility appears to be going to Ramsey County.

"There has been a lot of turmoil at the (Vadnais Sports Center) with recent management so this brings in a lot of stability," Kevin McFarlane said. "Ramsey County knows how to manage rinks and they're easy to work with so we're happy as an association that they're getting it."

A newfound sense of stability will hopefully ease concerns of others in the market as well, Mack said.

"There's not going to be anything looming over customers shoulders about whether the place will be closed next year... It's going to be open," Mack said.

While good news for some, there are some bondholders who financed the arena who are upset about the pending sale. The deal ensures they lose over half of their investment, said Dan Nelson, attorney for Community Facility Partners, the current owner of the sports center.

Some of those bondholders showed up at a hearing Monday to ask the judge to give the center more time to turn a profit. The judge ended up siding with the trustee, US Bank, which basically made the case that no amount of additional time would be enough to cover the outstanding debt and interest payments owed on the facility, Nelson said.

Financial problems started piling up at the Vadnais Sports Center almost immediately after it opened.

Initially financially backed by the city of Vadnais Heights, the city pulled out of the deal in 2012 after the arena failed to live up to revenue projections, defaulting and leaving bondholders without a payback plan. The maneuver came after the city found itself routinely transferring city funds to cover shortfalls.

Ongoing civil lawsuits still tied to the sports center wouldn't fall to the county in the transfer of ownership, Mack said.

The Ramsey County deal comes after a bid to buy the facility by charter sports academy Northern Educate, which has since been sold, fell through.

The Ramsey County Board is expected to vote on approval of the sale in late May, pushing the closing out to late June.

The county could opt to back out of the purchase before then if final details can't be worked out between the involved parties.

"We are excited to get to this point," Huffman said. "All the formalities are done and we're finally at that due diligence phase we've wanted to be at for several months now."

Sarah Horner can be reached at 651-228-5539. Follow her at twitter.com/hornsarah.

___

(c)2014 the Pioneer Press (St. Paul, Minn.)

Visit the Pioneer Press (St. Paul, Minn.) at www.twincities.com

Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Saint Paul Pioneer Press (MN)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters