After months of negotiations, the NHL's Carolina Hurricanes have agreed to a 20-year lease extension at Raleigh, North Carolina's PNC Arena, helped by a package of incentives officials hope will spur wider development in the area.
The Centennial Authority, which owns the arena on behalf of the state, put the final touches on a deal this week to refurbish the venue and redevelop the land around it.
In a statement Phillip Isley, Centennial Authority board chair, said the effort was "one of the biggest economic development projects in the history of the region."
Tom Dundon, the owner of the Hurricanes, said the work would "transform PNC Arena into a year-round destination for residents."
"It will enable the region to see a return on investment that will be incalculable," said Jeff Merritt, executive director for the Centennial Authority. "That is, it makes the largest and best use out of land that generates no property tax now and creates a job and quality of life center in one of the fastest-growing markets in the country. "
Renovating the arena would be more cost-effective than building a new one, officials contended, and final negotiations produced two separate terms sheets, one for the arena work and another for development of the surrounding area.
Under the terms of the contract for the arena project, Wake County and Raleigh will provide $300 million of support for the full-scale renovation of PNC, which opened in 1999, sourced from a county hospitality tax fund supported a countywide 6% room occupancy tax and a countywide 1% prepared food and beverage tax.
"We are working with our financial consultants on how we will structure draws, but the first allocation comes in July 2024," Merritt said.
According to the term sheet, the public and private partners would collaborate on choosing individual projects, which tentatively include utility upgrades, modernization of concessions, and retrofitting the arena to better serve as an indoor music venue,
As the owner of PNC Arena, the Centennial Authority will have ultimate oversight on projects carried out, with potential cost overruns to be addressed by a reduction of the project scope, the documents said.
Gale Force Sport and Entertainment, owned by Dundon and representing the team's interest in negotiations, has agreed to support work through several funding streams, including cash infusions of $10 million for new furniture and fixtures and $40 million to carry out work necessary to outfit the arena as a music venue.
Gale Force has also agreed to annual payments to the Centennial Authority derived from new revenues made in PNC; starting in 2029 the company is on the hook for payments starting at $4.5 million and increasing to $5.5 million by 2044, the end of the new lease. If revenue intake for any reason fails to meet those numbers, Gale Force is on the hook for payments.
The arena, also home to North Carolina State University men's basketball, is now surrounded by parking lots.
The term sheet for the development of the grounds surrounding PNC stipulates that Gale Force will cover 100% of the new entertainment district's on-site public improvements and, going forward, the parties will seek to iron out a tax increment financing structure or tax abatement structure "that allows for 100% reimbursement of eligible public costs including financing costs incurred by Gale Force for such Public Improvements," the term sheet said. "Following reimbursement of eligible Public Improvements, the parcels shall be subject to property tax."
Those public improvements include work on roads, sidewalks, plazas, greenways and parks, transit infrastructure and the construction of affordable housing in the area.
The land on which the development will occur will be leased to Gale Force on a phased basis based on the current construction plan; according to the term sheet, Gale Force will commit $200 million over the first five years to Phase 1 development, which will focus on new retail and dining spaces and $400 million over 10 years for Phase 2, which will develop 150,000 square feet of new office space. Support could top out at $800 million within 20 years, which will also include support for the construction of multi-family residential units, a 150-room hotel, and new indoor entertainment venues.
Contracts and official documents are still being ironed out, Merritt said.
"We are immediately starting the definitive documents phase," Merritt said. "My guess is that takes several months since there are two term sheets and one being a never-been-done-before development agreement here."
