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Development rights to former Civic Arena site selling point for Pittsburgh Penguins, officials say |

Development rights to former Civic Arena site selling point for Pittsburgh Penguins, officials say

Stephanie Strasburg | Trib Total Media
Construction crews work at the site of the former Civic Arena in the Lower Hill District on Thursday, June 4, 2015.
Chaz Palla | Trib Total Media
Penguins owner Mario Lemieux is introduced during a pre-game ceremony at Mellon Arena during the final regular season game in the arena.

More than $400 million in planned development on the former Civic Arena site controlled by the Pittsburgh Penguins could make the franchise more attractive to would-be buyers, officials said Thursday.

“That’s where the value is for a potential investor,” said John Clark, a sports management professor at Robert Morris University.

Penguins co-owners Mario Lemieux and Ron Burkle said Wednesday they have retained New York investment firm Morgan Stanley to explore sales opportunities for a franchise that Forbes valued at $565 million in 2014, 10th highest in the National Hockey League.

A team source told Trib Total Media he believes that value is low, and Clark agreed.

“I think they’re in better shape than what’s listed on the latest Forbes list,” Clark said.

Allegheny County Executive Rich Fitzgerald doesn’t think there is any danger of the team leaving town or of development on the Civic Arena site losing steam, just as North Shore development continued despite ownership changes with the Pirates and Steelers.

“We’ve watched the Steelers and the Pirates go through this,” Fitzgerald said. “Oftentimes, sports teams see what they’re worth and try to bring in additional investors.”

The Penguins obtained exclusive development rights to the 28-acre former arena site in a 2007 agreement that Clark called “a sweetheart deal.”

Under the deal, the Penguins are required to develop at least 10 percent of the site each year until it is fully built up. Work is to begin this year with construction of a corporate headquarters for U.S. Steel.

“The Penguins organization remains committed as ever to developing the former Civic Arena site,” said Penguins Chief Operating Officer Travis Williams. “Nothing has changed based on Wednesday’s announcement. This will be a transformational project for the region, and we are off to a great start with the U.S. Steel world headquarters and the residential development.”

U.S. Steel will lease the building for at least 18 years from a partnership that includes the Penguins and developer Clayco Realty Group, with offices in St. Louis and Chicago. The team has retained St. Louis firm McCormack Baron Salazar to develop as many as 850 apartments on the site and is seeking a minority-owned firm to develop 250 other units.

Those deals will provide a revenue stream for the team for years to come.

“It’s one of the best stadium deals I’ve seen in the past 20 years,” Clark said. “With development rights alone, to that parcel of land in an area where the city has been trying to turn around … you knew someone was going to turn it around, and the Penguins are going to benefit.”

Marimba Milliones, CEO of the Hill District Community Development Corp., said she would expect a potential new owner to fulfill the obligations that are in place, but she isn’t going to get overly excited about the matter just yet.

“Until those conversations become a bit more real, I’m not going to spend considerable energy focusing on it,” she said.

A potential buyer would have to be approved by the NHL’s Board of Governors, and any detectable plan to relocate the franchise would not go over well, an NHL source said.

Penguins officials weighed proposals to sell or relocate the franchise before reaching an agreement to build Consol Energy Center that ensured they wouldn’t go anywhere.

That 2007 deal cleared the way for the Civic Arena to be demolished, Consol Energy Center to be built with contributions from the state and Rivers Casino, and for the Penguins to have exclusive development rights to the former arena property.

“There’s no provision in their lease for them to leave,” Mayor Bill Peduto said. “The building of the arena came with the provision that the Penguins remain in Pittsburgh.”

Peduto said he realizes some taxpayers could be unhappy because the team’s value has soared as a result of public money being invested in constructing Consol Energy Center, as well as a development deal for the Lower Hill District.

“The payoff that the city got was that the Penguins and the new arena and the development of the area around it would be here for the next 30 years,” Peduto said, adding that Lemieux and Burkle took a risk in buying the team. “But for a couple of conditions going the other way, they could be sitting on one of the lowest values of the team and locked into staying here for the next 30 years. They minimized their risk in the deal that they struck … but there was definitely risk involved.”

The mayor, who describes himself as the Penguins’ biggest fan, said he expects Lemieux to continue in an ownership role. He said he doesn’t anticipate changes in player or front-office personnel.

A sale, he said, could help Lower Hill development.

“Where you see the difference is there will be more equity on the table,” Peduto said. “There will be opportunity, hopefully, to see development occur at a hastened pace.”

Staff writer Bob Bauder contributed. Jason Mackey and Tom Fontaine are staff writers for Trib Total Media. Reach them at [email protected] or [email protected].

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