Red Wings arena cost at $627M, could go higher

The cost of the new Red Wings arena being built has jumped to $627 million, $177 million more than the original estimate, as the Wings’ owner continues to add major upgrades to the state-of-the-art venue.

Some of the upgrades to the 20,000-seat arena include a large LED screen in the outdoor public space, a practice rink that can also be used for amateur games, and additional video and sound capabilities, according to Olympia Entertainment, a unit of Wings owner’ Ilitch Holdings Inc.

Money for the new upgrades is not coming from public taxpayer money but through private funding, Olympia officials said. The original $450 million estimate to build the venue is being partially paid by $250 million in bonds backed by taxpayer money. Any additional costs beyond the $450 million will come through private financing.

The new $627 million price tag may be not the ultimate construction cost because the Ilitch family continues to explore more potential changes, said Tom Wilson, president and CEO of Olympia Entertainment.

“The pursuit of excellence continues,” Wilson said.

The arena isn’t the most expensive venue used by a NHL team, but it is close: The Barclays Center in Brooklyn, home to the Islanders and the NBA’s Brooklyn Nets, cost $1 billion to build when it was completed in 2012. And renovations to Manhattan’s Madison Square Garden, home to the Rangers and NBA’s New York Knicks, cost $1.1 billion when it was finished two years ago.

“We keep looking at everything at other arenas and wonder if that will enhance the experience here,” Wilson said. The big LED screen was picked for the outdoor plaza because the area is expected to host 150 events a year, ranging from tailgate parties to community events. Underneath that public plaza is where the indoor rink will be built, Wilson said.

“We’re completely focused on delivering an arena that hosts exceptional experiences for our community, players, fans and neighbors while driving additional investment and development in Detroit,” he said.

Other new features include “gondola seating,” which appears to be suite-like areas in the upper portion of arena that will “hover” over the lower sections. Other new upgrades include more food options and a “skin” on the outside of the arena that can display video and graphics. Additional elevators, more locker room space and expanded security systems go beyond the original plans, Wilson said.

The project broke ground in September and the arena is scheduled to open in 2017. It sits in the middle of nearly 13 acres, located west of Woodward and east of Clifford with Henry Street to the south and Sproat to the north. It is expected to be the economic spark that will overhaul the surrounding 45 blocks into an area filled with new residents, offices and retail.

The arena is designed to provide a futuristic seating bowl as the centerpiece and allow fans to be close to the action, developers say. The ice will be well below street level in order to lessen the profile of the massive structure.

The venue is the culmination of more than 15 years of planning by Wings’ owner Mike Ilitch to build a state-of-the-art arena in the city.

The leading driver of the development plans is the billionaire Ilitch family, led by Little Caesars Pizza founders Mike and Marian Ilitch. Mike Ilitch owns the Red Wings and Tigers. Marian Ilitch owns the MotorCity Casino Hotel, which is several blocks east of the new arena. The Ilitches’ Olympia Development of Michigan controls a good chunk of the property in the 45 blocks targeted for the other developments.

Last week, Wayne State University announced that the Mike Ilitch School of Business will be built next to the new arena.

The arena will be surrounded by an atrium and street-like walkway, with storefronts facing fans along the concourse. The design also means other key elements of arena operations, such as a ticket office or team store, are developed outside of the traditional venue structure.

The venue also will have a “deconstructed” design with a glass-roofed concourse, offices, retail shops and restaurants in separate buildings outside the arena. The ancillary shops and restaurants will be open even when the arena isn’t being used for hockey or events.

The financing of the arena has sparked criticism because it is coming from the sale of two sets of bonds — one for $250 million backed by taxpayer money and another $200 million backed by the Red Wings owner. Most of the tax money used to back the bonds came from property taxes paid by downtown businesses. The biggest property taxpayer downtown is General Motors Co. Some of the tax money was earmarked for Detroit Public Schools, which critics have used to slam the deal. The school system will get reimbursed that money by the state.

Another point of contention is that the Wings owners keep all revenue, including concessions and parking, and any naming-rights deal. In an earlier interview with The Detroit News, Christopher Ilitch, president and CEO of Ilitch Holdings Inc., defended the way the arena was financed.

“A public-private partnership is the only way any of these type of projects work in an urban environment,” he said. He pointed out that while The Palace of Auburn Hills was paid for by private owners, the key difference is it’s an isolated venue in the suburbs.

“The Palace gets all the revenues from parking, concessions, retail,” Ilitch said, pointing out that those sources of revenue are key to the financial success of a major venue.