Potential Sears Centre operator took a pass, says it can't make money
Hoffman Estates officials didn't have much of a choice Monday when considering who they'll hire to run the Sears Centre.
One of the two companies in the running dropped out of the process last week.
Officials from SMG World said Tuesday they'd withdrawn from consideration on Oct. 27 in a phone call with Mayor William McLeod.
"We just don't believe we can make money," said SMG financial analyst David Burns.
SMG says the Sears Centre stands to lose $3.5 million over a two-year period from 2011 to the end of 2012. SMG runs more than 200 facilities worldwide, including Chicago's Soldier Field.
McLeod acknowledged he spoke with SMG Senior Regional Vice President Harry Cann Oct. 27 but denied SMG withdrew during that call.
It wasn't until Friday, during a call with SMG President Wes Westley, that McLeod said he learned SMG was no longer interested in operating the arena near I-90 and Rt. 59.
Monday, the village board voted to start contract talks with Global Spectrum, an SMG rival, to run the arena starting Jan. 1. No village board member mentioned during Monday's public meeting that SMG had dropped out of the running. The village had solicited proposals from five management firms earlier this year but only SMG and Global submitted them.
"I don't think when the process started that (the village) envisioned having only one company in the process at this point," Cann said.
When asked Monday what differentiated Global's from SMG's proposal, Trustees Gary Pilafas and Raymond Kincaid said Global was more detailed. Village officials were impressed that Global offered to forgo its $135,000 annual operating fee if financial projections weren't met.
If Global gets the contract, it could also receive a cut of concessions and parking revenues, as well as a share of overall profits.
SMG officials said the arena might make a long-term profit but would struggle in the short term. They cited the competition with Allstate Arena and a poor economy as reasons, adding the Sears Centre might also have to offer reduced rental rates to attract performers. SMG officials also claimed Global's projections of 132 shows in 2011 were too optimistic. SMG projected around 100 shows per year.
SMG's Cann also said he didn't feel the process was fair and favored Global from the start.
"We withdrew over concerns with the direction and the fairness of the process and future loss projections, which would impact our company's reputation," Cann said.
McLeod disagreed that the process was unfair, saying he "heard from Global Spectrum people that they felt (it) was tilted toward SMG."
SMG's decision to drop out was news to Trustee Cary Collins, who said he'd been unaware of it until a Tuesday call from the Daily Herald. Monday, Collins had criticized the selection process, saying it wasn't open enough.
"I did not know anything about what SMG was doing," Collins said.
The Sears Centre has struggled since it opened in 2006, posting a $512,000 operating loss last year. The current ownership, a division of the Ryan Companies, plans to leave by the end of the year. The village would then take over the facility and needs a firm to operated it. The village would assume responsibility for paying off a $55 million arena construction loan, which with interest could cost to $88.4 million over 20 years.