NEW (SUB) LEASE ON LIFE – Islanders Amend Lease At Nassau Coliseum

Howdy, I’m pinch-hitting for the Florida bound bastard blogger, B.D. – hope everyone had a Happy Festivus.

Late last night, news broke (from behind a paywall) about a new lease agreement that could give the Islanders control over parking, concession, and other revenues from Nassau Coliseum.

B.D. and I got wind of this earlier in the night, and he pinged me, cryptically saying “Source says Suozzi is working on a new lease with SMG.”  We initially barked up the wrong tree, concerned the outgoing County Executive had gone insane and was attempting to extend the horrific lease agreement that has crippled the New York Islanders and the facility at which they play for decades.  The news has thrown many people off-guard, and Islanders Country is scrambling to figure out what this means for the Lighthouse Project in general, and the team specifically.

I have spoken to some people in the know, and this is what I have so far:

• This in no way shape or form means Charles Wang is abandoning the Lighthouse Project.  It is dangerously misguided to go down that road and assume “just an arena” is now suddenly acceptable.
• It shows, as I have said numerous times, that Mr. Wang is very serious about getting a deal done on Long Island.
• This is the big news: this is not a new lease agreement.  Tom Suozzi compelled a sub-lease between SMG and the New York Islanders/Lighthouse Development Group.

Last things first:

What Exactly Happened

There are 3 main parties involved with Nassau Coliseum: Nassau County, which owns the building, Spectator Management Group (SMG), which manages the facility, and the New York Islanders, who play their home games at the facility.  The lease agreement was originally signed in 1979, and it only covers the County and SMG.  The Islanders play their home games at the facility, and they are entitled to what amounts to financial crumbs.  It is by far the worst lease deal in sports, and it has resulted time and again in the Islanders losing money as a franchise.  It was widely known that SMG would either be bought out or not invited back once the agreement expired, something the Lighthouse confirmed to me in February, given their abysmal handling of the arena.

This move is a bit of political genius because it addresses the money issue without touching the initial contract.  This is a good plan because contracts in the United States are largely considered sacrosanct, and it is very difficult to break them.  In this case, the Islanders/Lighthouse Development Group entered into an agreement with SMG that complements the original document signed with Nassau County.  This allows SMG to relinquish its right to some of the revenue streams, an action that benefits the Islanders financially.  At the same time, it does not subject the agreement to County approval, because the County is not a party to the agreement.  The only issue is for the County Executive to sign off on the deal, which Mr. Suozzi has now done (while he still holds the office).

To make matters even more interesting, this move almost certainly prevents Ed Mangano from canceling the agreement once he takes office.  He would have to compel the Islanders to relinquish their financial right, a move I simply do not see happening.

After reviewing all the information, I think I’ve figured out why SMG signed the agreement: they were likely forced.  Mr. Suozzi probably confronted them with 3 options: condemnation of the lease, a lawsuit for breach of contract, or signing this new sub-lease.  If that happened, it would make sense that SMG would sign the agreement.

Lighthouse Implications

Some believe this bit of news means the Lighthouse Project is abandoned, and that is a misguided line of thinking.  This shows, as I have said all along, that Charles Wang’s first choice – by far – is to get something done on Long Island at the site of the proposed Lighthouse Project.  This agreement frees up revenue streams the New York Islanders never enjoyed, and it will at worst stop the constant bleeding of money the franchise has experienced since Mr. Wang bought the team almost a decade ago.

At the same time, it will likely eliminate a major obstacle to the Lighthouse Project being completed.  SMG, according to the lease agreement, retains the right to manage any new/renovated arena built on the property, and, given the state of the relationship, they were likely to be excluded from the new arena (and the money to be made) once the deal either expired or was bought out.  That could have created a legal headache, but this seems like a win-win.  The Islanders get an expanded revenue stream, and SMG likely retains the ability to participate in a bidding process for the renovated building.

On the other hand, this may – MAY – be clearing the way for a renegotiated project.  I have shown through calculations why there is a Lighthouse Project, and anything built on the site would have to make more money than that which is spent on the arena renovation.  Opening up new revenue streams could be a potential way of accomplishing this.  Since the deadline passed on October 3, this is by far the most substantive action the Lighthouse Development Group has taken to show its commitment to the area, and, given the issues surrounding the project, it could not have come at a better time.

Political Fallout

You can never accuse Tom Suozzi of being a passive politician.  In many instances – such as his election kick-off rally, which was held in front of Republican headquarters – the outgoing County Executive has enjoyed sticking it to his rivals, and this is no exception.  Much like Tom Gulotta rammed through an 11th-hour extension of the SMG lease through 2015 (aiding a company with close ties to Al D’Amato) before ceding his office to Suozzi, our outgoing County Executive had one last trick up his sleeve.  However, I do wonder if this could have been done earlier and was held back in the name of political expediency…

Naturally, Republicans in the Town of Hempstead and Mangano camps are livid, claiming this is an end-around by Suozzi and prevents the incoming administration from having a say in the issue.  While they may not like it, they do not seem to have any legal recourse.  This has occurred in American politics since John Adams‘ infamous appointment of the “Midnight Judges,” an action which led to the landmark Supreme Court Case Marbury v. Madison and the establishment of Judicial Review.  Ed Mangano won the election, and he will take the oath of office January 1, but until that happens Tom Suozzi is the County Executive, and he is entitled to all the duties and benefits of that office.

That isn’t to say that the issue could be completely out of the woods.  This move, and the Lighthouse Project’s past close alignment with Democrats, could harden the incoming and entrenched Republican policy-makers against the proposal.  We’ve also established that other developers have been heavily donating money to Ed Mangano in an apparent attempt to curry favor in case the Lighthouse Project fails.  This move makes it more likely the project will happen, and some operatives may be disappointed.

At the same time, reader Jimmy makes an excellent point: these actions could be part of a campaign to make sure the Lighthouse Project is a top priority for Ed Mangano, who endorsed the project in his interview with me, once he takes office on January 1, 2010.

A Town of Hempstead source had immediate reaction last night, telling B.D. that the move needles Ed Mangano and could possibly signal the death knell for the Lighthouse Project.  If the Lighthouse resumes payments to F.P. Clark, fulfills its legal requirements, and properly finishes the environmental review, we could see a very good end to this process.  At the end of the day, it will require something that has been too often missing from the process: communication.

Bottom Line

This is a bit of good news, but it remains to be seen how it will play out once the Mangano administration takes office.  We now see clearly that Charles Wang wants to make it work (despite those saying for certain that Brooklyn is all but done) right here, on Long Island.  The Lighthouse Project is now more likely to pass than it was as recently as last week.  If nothing else, from an Islanders perspective, this is a nice Christmas present.  Let’s enjoy it for now.

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