A Grisly Scenario
Is it the worst of times for the local NBA outfit?
Pau Gasol has been traded. Attendance at Grizzlies home games is down. The Griz are not going to make the NBA playoffs. The majority owner doesn't live here. In a worst-case scenario, could the team leave Memphis and FedExForum?
The short answer is "yes," but probably not for several more years.
One thing is clear. When the Grizzlies left Vancouver for Memphis in 2001, the possibility that they would also leave Memphis some day was not just contemplated, it was discussed at length, especially since one of the conditions of moving the team here was building the $230 million FedExForum.
The contracts signed in 2002 and in subsequent amendments talk about "shortfall season," "suite shortfall," "worst-case scenarios," "haircuts" (a real estate term for disappointing financial results), and "early termination payment." The reason such things are in the fine print is, obviously, that the history of professional sports is littered with franchises that abandoned their homes and fans for greener pastures.
The Grizzlies came to Memphis in 2001, played in The Pyramid for three years, and moved into FedExForum in 2004. They made the playoffs for three straight seasons but faded badly in the 2006-2007 season. This season the Grizzlies have one of the worst records in the league and are 28th out of 30 teams in average home attendance (12,935 per game, at this writing). The trading of Gasol, the team's star player, was seen as a sign of giving up or "strip-mining" the franchise by some local sportswriters.
The bad news is that attendance is well below the projected 14,900 that was the basis for the arena financing plans. And with further declines likely as college basketball begins March Madness, it is dangerously close to the five "worst case scenarios" used as benchmarks in the contract between Memphis and Shelby County and Hoops, L.P., the Grizzlies operating entity. The ugly five range from the 1997-98 Los Angeles Clippers (9,968 per game) to the 1999-2000 Golden State Warriors (12,418 per game) to the 2001-02 Charlotte Hornets (11,476 per game). In each case, attendance rebounded to 14,000 or better in a new building. But none of those teams shared its arena, as the Grizzlies do, with the currently top-ranked college team in the country.
The good news is that the Grizzlies are locked into a non-relocation agreement. The original term was 10 years from the first year in the new arena, during which time "HOOPS shall not relocate from the City of Memphis (and) not apply to the NBA to transfer to another location outside of the City of Memphis." That was amended to "the first 17 NBA full seasons," or until 2018.
The "limits on termination" after that include average attendance falling below 14,900 after the eighth season, including 70 suites and 2,500 club seats. In that case, however, "the private sector and/or the community of Memphis and Shelby County shall have the right prior to such early termination becoming effective to purchase the required number of suites and season tickets to achieve the ticket sales standard."
What if majority owner Michael Heisley sells the team? "The city/county shall have a right of first refusal to match the economic terms of the offer" and "may assign its purchase rights to a buyer of the franchise who commits to keep the team in the arena." Presumably, that would be current minority owners Pitt Hyde, Staley and Andy Cates, and others. Under the contract, this must take place within 60 days.
Still nervous? So were the people who drew up the contract.
"HOOPS expressly agrees that the provisions governing the exercise of HOOPS early termination right are unique and absolutely necessary to protect the business and good will of city/county and that a material breach of such provisions will absolutely, irreparably, and continually harm city/county, for which money damages may not be adequate or determinable."
The contract says the termination payment would be $107 million in 2008, $74.6 million in 2018, and $8.4 million in 2027. The $107 million figure seems like a lot, but NBA superstars have contracts worth more than that. And in a relocation deal, the termination payment would probably be paid by the new owners and/or the new city.
Such is the contract. Sleep well, Grizzlies fans. M