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Controversy in Louisville’s lease with the Yum! Center?

Aug 2, 2012, 9:36 PM EST

Arena1

A budding controversy surrounding the leasing terms between the Louisville Arena Authority and the University of Louisville over the KFC Yum! Center seems to have reached a boiling point.

There have been rumblings that the university has been getting the best of a bad deal for some time, but this week InsiderLouisville.com got to the root of the problem.

Essentially, it goes like this: the lease says that the U of L has the right to buy the arena in the event of a default, which creates quite a conflict of interest when you consider that a) the university is the tenant and b) the “University of Louisville Athletic Association both controls booking dates, limiting the potential for outside income, while taking the majority of revenue under the lease in an arrangement that’s looking more and more financially untenable.”

From Terry Boyd’s story:

In essence, the clause sets up scenarios – most of which are highly unlikely – in which U of L officials could refuse to alter the agreement to ensure money is available to service the $348 million in municipal debt issued to build the arena, then buy the arena for a much lower price.

How can this be?

Because Section 47, the “Right of Tenant” clause in the lease, states that U of L essentially has the right to buy the KFC Yum! Center it leases in the event the owner – Arena Authority – defaults.

This doesn’t right.

The tenant of a publicly-funded building can not only control incoming revenue streams — in part by blocking an NBA team from coming to Louisville through their scheduling agreements — but can then buy the arena on the cheap if the current owners default on it?

That’s like saying I’m able to prevent my landlord from leasing out another apartment in my building and then calling ‘dibs’ on buying the building from them when they can’t pay their mortgage.

Anyway, I’d strongly urge you to go read Boyd’s work. Thorough investigative stuff heavy on the financials I don’t quite understand.

Photo credit: Louisville.com

Rob Dauster is the editor of the college basketball website Ballin’ is a Habit. You can find him on twitter @robdauster.

  1. phillyphan83 - Aug 3, 2012 at 10:00 AM

    ” This doesn’t right.”

    Nice complete sentence, editor.

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