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Long IslandPolitics

Deal removes one barrier to Islanders leaving LI

The New York Islanders after defeating the Toronto

The New York Islanders after defeating the Toronto Maple Leafs 3-1 at Nassau Coliseum. (December 23, 2009) Credit: Christopher Pasatieri

The New York Islanders may have removed one more barrier to renovating their Nassau Coliseum home - but they've also come one step closer to being able to leave Long Island altogether.

A $17 million sublease deal, reached this week after years of negotiations between Philadelphia-based SMG, the Coliseum's manager, and the Islanders, removes the main lease's legal roadblock that forced the Islanders to play all home games at Nassau Coliseum until 2015.

The sublease states that it does not prevent the Islanders from either selling the team or "permanently relocating."

But the Islanders still would need county approval to move, Chief Deputy County Executive Marilyn Gottlieb said. "It clears one hurdle for them," she said. "This does not give the consent of the county."

If the Islanders were to leave, and relinquish control of the Coliseum, they would immediately have to pay SMG the remainder of the rent due for the entire term of the lease, which still expires in July 2015.

The sublease requires the Islanders to pay SMG $3.4 million annually, plus additional payments structured as a percentage of the Islanders' net operating income.

The deal gives the Islanders operational control of the Coliseum, while SMG will continue to handle day-to-day activities there, Gottlieb said. The Islanders will receive all revenue that SMG used to get, including parking, concessions and some ticket sales and the team will handle all Coliseum bookings.

"Clearly this is a move that is team friendly," said Scott Rosner, the associate director of the Wharton Sports Business Initiative at the University of Pennsylvania. "This will not turn them into a profitable operation in the short-term. What it will do in the short-term is stifle the losses a little bit."


Original lease 'looked good'

The main SMG lease had come under fire for giving SMG too much and the county and the Islanders too little.

Fred Parola, a state assemblyman when the SMG contract was signed in 1979 and county comptroller from 1994 to 2001 when his office audited the lease, said it "looked good on its face at the time" as well.

"They said they were going to shepherd sports in," he said. "This group [SMG] would put us on the map."

But in a 2006 audit, county Comptroller Howard Weitzman said SMG had underpaid the county by $900,000. SMG said at the time that it believed the county was "misreading longstanding agreements" regarding the financial arrangements between the county and SMG.

SMG officials did not return calls for comment this week.

Islanders owner Charles Wang, who is now trying to develop the Lighthouse project, a $3.7 billion effort to renovate the Coliseum and redevelop the surrounding area, has said he loses $20 million to $30 million a year on the Islanders, in part due to the SMG contract.

The new sublease notes that the Islanders' control of the arena is necessary "to improve the marketing of the Islanders and as a condition to proceeding with such renovation and redevelopment plans."

The deal gives nothing more to the county, but Gottlieb said she hopes the Islanders will improve the Coliseum so the county will ultimately benefit.

"We have said for years that we didn't think SMG did enough to market the Coliseum and bring in outside events," she said. "We think there will be greater motivation for the Islanders to do that."


Positive for Lighthouse?

What's more, Gottlieb said she believes the sublease is a sign that Wang and partner Scott Rechler want to move forward with the Lighthouse, noting that the need for control over bookings at the Coliseum was especially important for developing a construction timetable.

But Rosner noted that the clause allowing the Islanders to move turns the team into a "portable franchise," making them more valuable. "This gives him [Wang] more leverage over the powers that be," Rosner added.

Lighthouse officials did not return calls for comment.

Gottlieb said SMG and Lighthouse officials reached a deal in the past two weeks. The sublease was then approved by outgoing County Executive Thomas Suozzi and doesn't need further approvals, Gottlieb said, because it does not change the underlying terms of the original lease.

Nonetheless, incoming County Executive Edward Mangano said he should have had been able to review the deal.

The Lighthouse project still requires Town of Hempstead environmental and zoning approvals and a lease between the county and the developers that the legislature must approve.

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