By: Shia Kapos October 26, 2011 (Crain’s) —
Jerry Reinsdorf is about to make a lot more money from his operations at U.S. Cellular Field, while cutting out his landlord, an Illinois agency created to build the baseball stadium.
Mr. Reinsdorf’s franchise pays just $1.5 million in annual rent to the state, which owns the South Side ballpark, while keeping gross receipts for ticket sales, parking, concessions, signage and merchandise operations — including a soon-to-be-opened Chicago Sports Depot store and Bacardi at the Park, an adjacent restaurant that opened last spring.
The White Sox do not pay rent on the properties, even though the Illinois Sports Facility Authority is paying the debt service on the restaurant project. The Sox paid for the build-out on the souvenir shop. Mr. Reinsdorf has leased the Bacardi restaurant to Gibsons Restaurant Group, which runs it. The retail shop will be leased to Delaware North Companies Sportservice, which also runs the retail shops in the stadium.
Construction terms were permitted by the lease between the Sox and the state, according to a Nov. 18, 2010, agreement on a 35th Street revitalization project that includes the restaurant and store. In that deal, White Sox Executive Vice-president Howard Pizer notes a supplemental state fund would finance the restaurant’s construction and the Chicago White Sox would be responsible for building the retail shop.
The agreement was signed by former Gov. Jim Thompson, who was chairman of the sports authority at the time.
The supplemental fund was created when the state authority and the White Sox renegotiated their original contract so that, after 18 years of free rent, the ball club would begin paying a base rent to the authority. That revised agreement also set terms on annual rent based on ticket revenues. Since 2008, the team must pay $3 to $7 for every ticket sold above annual attendance of 1.9 million.
With paid attendance under 1.9 million in 2011, the Sox won’t pay ticket fees this year.
In 2010, however, paid attendance was 2,074,011, exceeding the trigger by 149,011. So Mr. Reinsdorf paid $455,974, or about $3 per ticket.
Including rent, that means he paid about $2 million to the sports facility authority last year for the 80-or-so games played at the Cell—far less than some other MLB teams in similar relationships with municipalities.
Philadelphia, for example, pays $18.5 million a year, which includes $2.5 million in base rent and $17.9 million in interest payments on the bonds issued to fund the stadium’s construction.
Minnesota pays $12.5 million: $600,000 in base rent plus $300,000 for inflation adjustments and $11.5 million for debt service.
On the lower end, Kansas City pays $450,000 in base rent. The team also must pay 5% of gross receipts above annual revenue of $7.5 million.
Within Chicago, the Chicago Bears pay $5.7 million (including a parking allotment fee) to the Chicago Park District for playing about 10 games each year at Soldier Field.
Under the terms of its original 1988 lease with Illinois, the White Sox, valued by Forbes at $526 million, do not report their revenues. The authority says it can only guess what Mr. Reinsdorf is raking in from ticket sales, parking, concessions and signage.
Mr. Reinsdorf has declined to comment.
In an interview earlier this month, Mr. Thompson praised the 35th Street deal as benefiting the community. “They (the White Sox) get the profits for the duration of the lease, and at the end of the lease (the state) owns both properties,” he said, adding that the development project could include future properties that would immediately benefit the state.
“Quid pro quo was that the White Sox would agree to the deal if they got (the profits of) the first two properties,” said Mr. Thompson.
The former governor acknowledged that there are no plans for any future development on 35th Street. And even if there were, Mr. Reinsdorf would have to give his thumbs-up before they could go forward.
“He can’t develop the property without our consent and we can’t develop without his consent. We own the property but he has the lease,” said Mr. Thompson, who recently was booted from his position as chairman by Gov. Pat Quinn.
That relationship carries through in all areas of the lease, which states Mr. Reinsdorf has “unfettered discretion” to determine how the stadium will be used.
That hasn’t stopped the authority from talking about possible revenue-generating events — though none have come to fruition.
Last year, the authority commissioned a study to analyze what the financial and economic impact from one hypothetical special event held in the summer, on a day when the Sox are playing out of town. The study by Hunden Strategic Partners concludes that it could generate $2.8 million in gross revenue from admission, concessions and parking — or $1.3 million in net revenue.
Mr. Reinsdorf, meanwhile, has used the ballpark for personal events. A few years ago, he hosted a 50th birthday party at the ballpark for his friend, Andrew Berlin, who is CEO of Arlington Heights-based Berlin Packaging.
Emil Jones, the newly named chairman of the Illinois Sports Facility Authority, told Crain’s Chicago Business earlier that he plans to examine the White Sox lease.
Acknowledging the team pays less than other Major League Baseball teams that play in stadiums owned by municipalities, Mr. Jones said, “It’s something we’ll be looking at.”
The ISFA has yet to meet on the issue. The agency is under the auspices of the state, though its seven members include three appointed by the Chicago mayor and four by the governor.
For years, the politically connected agency had been overseen by Mr. Thompson, who helped broker the original lease agreement with the Sox when he was governor and his friend, Mr. Reinsdorf, was threatening to take the White Sox to Tampa, Fla. (The men have known each other since attending law school together).
Mr. Quinn replaced Mr. Thompson last summer with Mr. Jones. He also appointed Chicago attorney Manny Sanchez; real estate entrepreneur Elzie Higginbottom Jr., and Dennis Gannon, formerly the head of the Chicago Federation of Labor.
Mayor Rahm Emanuel has yet to weigh in on his own appointments, leaving holdover board members Peter Thompson, a nephew of former Mayor Richard M. Daley; Alvin Boutte Jr., a financial-services adviser; and attorney William Power.