Nick remarked on the sale of the Pontiac Silverdome for the rock bottom price of $583,000 last week. An article in the Globe and Mail provides some additional interesting information about this transaction:
- The new owner, Toronto real estate developer Andreas Apostolopoulos didn’t expect to win the auction, and only mailed in a bid after seeing an ad for the auction in the back of a newspaper. There were only 4 bids. He has never visited the Silverdome, but plans to next week. Apostolopoulos manages a “small portfolio of retail and industrial properties.” He has zero experience managing large venues or sports facilities.
- Apostolopoulos has vague plans for attracting an anchor tenant – an MLS team – but has not contacted MLS and the league appears to want nothing to do with Mr. Apostolopoulos and the facility. He is also considering concerts and other large events.
- Maintenance costs are $1.5 million per year. Given the low cost of the facility, Mr. Apostolopoulos does not need external financing for this project. “I can carry the costs for a few years.”
Since the site includes 127 acres of land, and the city has pledged to remove development restrictions, Mr. Apostolopoulos will probably be able to realize a profit on the transaction eventually, when the real estate market picks up. That much commercial land should be worth much more in a better economy, but the cost of tearing down the Silverdome could be significant, which would limit the redevelopment potential. Note that Apostolopoulos is also exposed to some exchange rate risk. As a Canadian real estate manager, the funds he must use to pay the maintenance costs are in Canadian dollars; any depreciation in the Loonie, which is currently trading at about 93 cents, will drive up those costs.
Given Mr. Apostolopoulos’ unexpected win, and his lack of experience managing sports venues, you have to wonder about this quote from Pontiac’s Emergence Financial Manager following the sale: “The Silverdome will now be in the hands of professionals who can devote their time to transform this high-profile property into a vital asset instead of enabling it to continue to languish as an empty facility.” Good luck with that.