Wrigley rooftop owners on shaky financial ground

By Oscar Avila and Ameet Sachdev, Tribune reporters

Story posted 2010.08.14 at 01:49 PM CDT

The Lakeview Baseball Club apartment building across from Wrigley Field is best known for the tote board under its rooftop seats that details the years elapsed since the Cubs’ last division, league and World Series titles.

But after Lakeview slipped into foreclosure this year, it is the numbers outlined in court filings that are particularly telling. They offer a rare glimpse into the shaky finances of a rooftop club operating in a bad economy.

In May, for example, Lakeview had an operating profit of $34,365. If the club was still making its $31,865 in monthly mortgage payments to the bank, that would have left just $2,500 after all expenses and fixed costs.

Other rooftops are scrambling to feed their own multimillion-dollar mortgages as the recession leaves their corporate customer base gun-shy from spending $30,000 on an outing that revolves around watching the Cubs play. Throw in the Cubs’ dismal record, which depresses ticket demand, and several rooftops are now selling entire blocks of games on half-price online coupon sites such as Groupon.

The price war may be a temporary solution to fill seats, but it has stressed rooftop owners, especially those who took out major loans in the boom years to finances upgrades.

“There’s a lot of money going out and only some coming in,” said Rich Zasiebida, managing partner of the Skybox on Sheffield, 3627 N. Sheffield Ave. “People have got hefty mortgages. We’re busting our (hump) over here.”

Selling discounted tickets to individuals also puts the rooftops in more direct competition with the Cubs. A rooftop ticket, which includes food and drink, has been advertised for as little as $69. Bleacher seats sell for as much as $54. Throw in a few $6.75 beers and the cost is about the same.

The Cubs have noticed. In June, the team threatened legal action against rooftop owners who were allegedly selling tickets on the day of games and using ticket brokers — both of which are banned by the city’s rooftop ordinance. Rooftop owners argued that the team should not care because what’s good for the clubs is good for the Cubs. The rooftops pay royalties to the Cubs, part of a 2004 agreement that did not seem so bad when times were good.

The suddenly treacherous financial footing for some rooftops has generated talk that the new owners of the Cubs, the Ricketts family, have designs on investing in the clubs or even buying them out. The family’s investment in the 3621 N. Sheffield Ave. rooftop in May only fed the speculation. The family also had discussions with the owners of the Lakeview Baseball Club who were seeking investors after last season, but no deal was struck, sources said.

Ald. Thomas Tunney, 44th, who has been at the center of development plans by the Cubs and the rooftops since he took office in 2003, sees room for more cooperation between the Cubs and the rooftops.

Tunney said the family has expressed a vision of expanding its footprint beyond Wrigley, especially as it looks for revenue streams to recoup an investment that topped $800 million. He said the rooftop owners, meanwhile, seem more motivated to cooperate.

“We know the family is in it for the long haul,” he said. “There are a few people in rooftops that have deep pockets. Most of them do not.”

The rooftops could serve as luxury suites for Wrigley Field, whose 96-year-old structure is unable to fit more skyboxes. The current skyboxes in Wrigley also are dated, preventing the team from generating more revenue from an amenity that is critical for most major-league teams.

A closer working relationship with the Cubs would give rooftop owners a full-fledged partner to fill seats and ease fears of a clash when their agreement expires after the 2023 season.

“It’s a natural,” said James Lourgos, who co-owns the rooftop club at 3639 N. Sheffield Ave. “The rooftops give the team something they don’t have in the stadium. And the rooftop owners have always wanted security on their investment. When you invest $5 million on a facility, you want business certainty.”

Max Waisvisz, a partner in three rooftops, added: “I think (Tom) Ricketts is a smart guy, and he wants to get more involved in these (rooftop) businesses. He’s going to be a very powerful figure in the neighborhood in the next few years.”

Cubs chairman Tom Ricketts said he is open to working more closely with the rooftops, but he is not focused on them now.

“Our top priority right now is turning the team around and building a winning ballclub,” he said.

Outside Wrigley Field, he said his top priority is to develop a parking lot adjacent to the ballpark along Clark Street. The previous owners, Tribune Co., parent of the Chicago Tribune, had proposed a multipurpose building on the triangular-shaped lot in tandem with the bleacher expansion. The new bleachers were built, but the so-called Triangle building remains a blueprint.

“We look forward to working with the community and the city once we have a concept to share,” Ricketts said.

For now, the rooftops have been more of an annoyance to him. Two rooftops, including the Lakeview club, did not pay last season’s royalties on time. The new Toyota advertisement in the left-field bleachers caused some rooftop owners to launch a public relations campaign that attacked the further commercialization of the ballpark.

The back-and-forth with the team has raged since the rooftops stopped being just a quaint backdrop on nationwide WGN telecasts in the early 1980s. The Cubs erected windscreens in 2002 that blocked some rooftop views, and the team filed a lawsuit accusing the clubs of “stealing” access to the product on the field.

A truce was reached, and starting in 2004 the rooftop owners agreed to pay the Cubs 17 percent of their revenues. As the Cubs thrived in 2007 and 2008 and made the playoffs, the rooftops’ fortunes surged. In 2007, they raked in an estimated $18 million, up from about $10 million in 2002.

But selling a high-end party atmosphere is harder in a recession, Rooftop owners say the limping economy has discouraged companies from organizing as many lavish summer outings for their employees and clients.

Add to that the team’s losing record since May 4. Lourgos said underperforming Cubs teams can cause rooftop ticket sales to suffer by as much as 15 to 20 percent, particularly in September.

Even before the team took a nosedive in July, several clubs started discounting for the first time. In June, the rooftop supported by the Ricketts family advertised $150 tickets for half price. It offered the same discount for games the first week in August.

Waisvisz has sold tickets on Groupon for as little as $69 for September games.

“I want to fill the rooftops even if I have to discount them,” Waisvisz said. “Once you put people up there, you hope they come back again.”

An initial financial report filed in June by the court-appointed receiver operating the Lakeview Baseball Club while it is in foreclosure supports the anecdotal evidence that the rooftops have been hard hit.

The club sold 3,985 tickets through the first 27 games, including two games it was not open because of a lack of reservations. That works out to 147 per game, or 73 percent of its 200-person capacity.

In the first two months, the club generated $275,667 in revenue, or $69.18 per ticket. Food, beverage and other expenses worked out to $54.86 per ticket, leaving a gross operating profit of $14.31 per ticket. Add in fixed costs such as insurance and taxes, and the club reported net income of $10,311, or $2.59 per ticket, through April and May. Comparable information for the same two-month period in 2009 was not filed by the receiver.

The Lakeview club had several one-time expenses in April to upgrade the facility that have depressed profits, costs that other rooftop owners likely did not face. But even with 95 percent attendance in May, the $34,365 profit was paltry.

In a down year like 2010, some rooftop owners privately wonder if there is too much capacity. After the 2004 settlement, several boosted capacity to 200 people by adding outdoor seating and turning interior space into lounges. Combined, the 16 rooftops can hold about 3,000 people.

To boost business, some rooftop owners would like to open ground-level shops, currently prohibited under a special zoning that governs the rooftops. Other rooftop owners want to host parties and other events on nongame days.

To get there, the rooftops will need Tunney’s support.

Campaign disclosure forms show the rooftop clubs and their owners have donated more than $160,000 in funds and in-kind services since 2003 to Tunney and the 44th Ward Regular Democratic Organization that he heads. Four times, rooftop owners have donated their space so Tunney could host prospective donors.

Tunney has endorsed letting the rooftops build upward, a move that some residents and preservationists opposed, and open during special events, such as an NHL game and rock concerts.

Tunney insisted the contributions have not skewed his sympathies toward the rooftops. In fact, he insisted that any major changes in the rooftop ordinances would be a tough sell.

“We know it has been very expensive for the operators,” he said. “But if we are going to open up things, it’s going to be a hell of a fight.”

Chicago Tribune

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