One of the hurdles that the Arizona Coyotes face in their quest to build a $1.7 billion arena and entertainment complex is dispelling the narrative that owner Alex Meruelo doesn’t have the financial heft to privately fund the project.
During a presentation at a Tempe, Ariz., city council meeting earlier this month, club president Xavier Gutierrez cited letters from bankers Meruelo and the Coyotes have all done business with.
“It speaks to our ability to execute this proposal,” Gutierrez said in an interview.
Gutierrez added that Meruelo himself has a banking license, a license to run radio and television stations, owns two casinos in Nevada, and the Coyotes.
“These are highly-regulated industries,” Gutierrez said.
“Alex Meruelo has been in business for almost 40 years. Through multiple economic cycles or recessions, he’s never been in bankruptcy, ever had a company in bankruptcy. He’s bought companies out of bankruptcy.”
The Coyotes were certainly a distressed asset when Meruelo purchased them for $300 million in 2019.
The meeting, which went deep into the evening, ended with the council voting 5-2 in favor of accepting the Coyotes’ request for proposals (RFP) to move forward and negotiate the deal all parties hope will be consummated no later than the end of the year. If that happens, the city council will vote again on the parameters of the final agreement, and the Coyotes will target 2025-26 as the first year in the new arena.
Gutierrez and company are simultaneously negotiating the deal with Tempe officials and seeking money from financial institutions to establish a still-to-be-determined debt-equity structure for how Meruelo will pay for the project. Gutierrez mentioned Citibank, Bank of America, PNC, and Comerica as possible partners.
The arena and practice facility are budgeted at $700 million in the first phase of the two-part development.
“No club funds. Let’s be clear, this is all Alex Meruelo,” Gutierrez said. “He’s responsible for the private development. Fully responsible for it. If we proceed, we will allow [Tempe] to have direct communication with all of our banks, all of our financial institutions. We have nothing to hide. We are fully transparent. We’re very confident in the financial resources Alex Meruelo is bringing to the table.”
There’s a public perception that the Coyotes are underfunded and have had difficulty at times paying their bills, particularly in the wake of losing what Gutierrez called “Tens of millions of dollars” after two seasons plagued by COVID-19.
Gutierrez blames that perception on the City of Glendale and a relationship that soured. But there were other reasons.
Like every club in professional sports, the Coyotes have found themselves refunding money to ticket members, sponsors and local media outlets as games were canceled or rescheduled because of COVID-19. The 56-game 2020-21 season was played at a fraction of capacity in now-vacated Gila River Arena.
For those who decided not to attend games during the pandemic or seek refunds, the Coyotes had to make good on those tickets this past season, which was played under a cloud of controversy with Glendale officials and a team downsized on the ice to maximize future draft picks.
Arizona has 10 picks in the upcoming draft July 7-8 in Montreal, including the No. 3 overall pick and three in the first round. General manager Bill Armstrong can’t afford to miss on any of them.
“Mistakes were made, and we own up to them,” Gutierrez said. “It wasn’t as if there was a massive balance we were sitting on.”
The most well-publicized “mistake” happened this past December when The Athletic first reported that the Coyotes were in arrears on 17 months of sales taxes to the City of Glendale and State of Arizona totaling about $1.3 million .
The notification—a late afternoon letter to the Coyotes, which appeared in the media—came replete with a threat to bar the club and all personnel from the arena if the debt wasn’t satisfied.
The bill was paid in full early the next day, Gutierrez said.
What happened behind the scenes to cause the snafu has been a matter of conjecture. Until now.
As debt and refunds started to pile up after the NHL paused the 2019-20 season on March 12, the Coyotes stopped making direct payments from their account to satisfy the monthly tax bills.
It was an oversight the payments were not reactivated, Gutierrez said.
“Our mistake,” Gutierrez said. “But what city, in good faith, doesn’t pick up the phone, and say, ‘Hey, it’s been 17 months and you haven’t paid your sales tax?’ Who does that?”
By that point, Glendale had already opted out of its arena lease with the NHL club after the Coyotes declined to sign a 20-year lease extension, Gutierrez said. The team is set to play in an arena that seats 5,000 spectators on the campus of Arizona State for the next three seasons.
“We’ve reached the point of no return,” Kevin Phelps, Glendale’s city manager, told The Athletic in August. “There’s no wavering.”
Commissioner Gary Bettman corroborated Gutierrez’s version of the situation during a media conference at the All-Star Game in Las Vegas. The Coyotes were told to sign a 20-year lease or “get out,” Bettman said.
In reality, the Coyotes had no future in Glendale. They had played in the publicly owned arena since it opened at the cost of $220 million during the 2003-04 season, and never made any money. A series of ownerships, including the NHL and Meruelo, couldn’t make ends meet.
“The problem with that arena situation in Glendale was that we didn’t own anything,” Gutierrez said. “We didn’t own the parking, the billboards. Nothing.”
They were a tenant just paying rent.
“Where was the Class A office space around us?” he asked.
“That creates the basis for your corporate sponsors. Not only the branding guys, but the ones who buy the suites, the premium seats. The West Valley is a thriving community primarily made up of residential and the industrial and logistic industries. It’s fantastic, but that’s very difficult for an entity like ours.”
In their projected new locale, the Coyotes will have and plan to create that office space around them. The team and their financial partners will own everything in the entertainment district if the new arena deal is completed.
Gutierrez has told the Tempe City Council that Meruelo has the wherewithal to fund the project.
During the next few months, it will all play out.