Eastland project backers predict more tourists than NASCAR Hall

efrazier@charlotteobserver.comSeptember 6, 2013 

Developers of a proposed Eastland Mall movie-production complex expect to attract at least 350,000 visitors in the first year, with tourists being shuttled around the site to see where movies and TV shows are filmed.

That would be more visitors than the NASCAR Hall of Fame attracted in its first year, and more than initially forecast for the U.S. National Whitewater Center.

Both those attractions faced budget issues soon after they opened, and ended up needing more public financial support than backers originally forecast.

Developers of the proposed project on the city-owned Eastland site say they are confident about their attendance and budget projections – though they won’t publicly explain how they arrived at the numbers.

Their spokeswoman said they don’t expect to ask for tax dollars for the complex, known as Studio Charlotte.

“It will be self-supportive,” said Barbara McKay. “All of the components of the complex are a private enterprise.”

Studio Charlotte’s projections will be scrutinized during what city staff expects will be dozens of meetings with the developers as part of a six-month due-diligence process City Council agreed to last month.

“Clearly, we’re not going to take anything at face value,” said Peter Zeiler, the lead city staff member analyzing the proposal.

Charlotte entrepreneur Bert Hesse and his co-developer, Santa Monica, Calif.-based Pacifica Ventures, want the city’s blessing to build their $250 million-plus complex on the site of the abandoned Eastland Mall.

It would include a 30-acre movie studio with eight sound stages and production offices. They want to develop the rest of the 80-acre site with retail and office space, a hotel, a film school, and a movie studio tour/events center.

The studio tour center is listed in the group’s formal proposal to the city as a bigger money-maker than the sound stages.

They project the studio tours, charging about $30 per ticket for adults for a two-hour experience, will draw at least 350,000 visitors in its first year, producing $5.4 million in profits. The income would gradually increase to $8.4 million by the fifth year of operation.

The sound stages, by contrast, are projected to make $4.3 million the first year. The profits would remain relatively flat, and would dip slightly to $4.2 million by the fifth year, the proposal says.

The NASCAR hall attracted 270,000 people in its first year. Estimates prior to its opening projected about three times as many visitors.

The Whitewater Center was expected to draw 310,000 in its first year. It beat the attendance expectation, but still struggled financially when too few visitors paid to raft, kayak or climb.

Zeiler said that he has no opinion yet on whether the projections for the movie complex seem sound. He said figuring that out will take months, and negotiations on the overall feasibility of the project could easily continue even after the six-month period is up.

“We do think there’s enough meat on the bone that we should spend some time digging into it and fully understanding.”

Issues with earlier projects

The city’s history with the Whitewater Center and the NASCAR hall highlight the pitfalls that come with projecting attendance and revenue for tourist attractions.

Before the Whitewater Center opened in 2006, the park’s backers said they wouldn’t need any public money up front, just commitments from Charlotte and other communities that lenders would eventually be repaid.

The recreational park managed small operating profits in its early years, but struggled to deal with its construction debt. Local governments paid nearly $2 million a year to keep it afloat, as required by the original agreement that built the center in northwest Mecklenburg County.

Lenders agreed to forgive most of the $38 million debt in 2010. Park officials say the center has been enjoying more comfortable margins since, with $3.7 million in net profits from operations in its 2012 budget year.

The center reported 723,000 visitors last year.

Hesse, who was part of the group that pushed to get the center built, didn’t return messages seeking comment Thursday or Friday.

The NASCAR hall has also been a challenge for local governments.

Before the hall opened in 2010, the Charlotte Regional Visitors Authority predicted it would have first-year attendance of 800,000, but only 270,000 people showed up.

Last October, the CRVA said the hall had lost about $1 million in the previous budget year. The hall reported 176,838 visitors for the budget year ending June 30.

The inaccurate projections for the NASCAR hall prompted then-Mayor Anthony Foxx and the City Council to push for the ouster of CRVA leader Tim Newman. He was removed in 2010.

Last year, the CRVA moved to overhaul how it tracks visitor spending for conventions and other events after an Observer investigation found overly optimistic visitor spending estimates led to inflated claims of economic impact.

‘A proven model’

Hesse, who led healthcare and technology start-up companies, has said he’s relying on the studio-building expertise of Pacifica Ventures, which has developed studios in New Mexico and Pennsylvania.

Pacifica Ventures CEO Dana Arnold said in a phone interview this week that he is aware of the sensitivities locally in the wake of faulty forecasts for previous projects.

He said his firm used consultants to come up with the attendance projections for the studio complex, but he declined to identify the consultants or explain how they arrived at their numbers.

The consultants’ methodology is confidential, he said, adding that it is based on a process used by attractions such as Universal Studios and Disney.

“This is a proven model,” he said. “Our estimates are actually pretty low.”

As for the $30 tickets, he said those prices are “really toned down” compared to tours at major studios such as Universal.

(A one-day general admission tour ticket at Universal Studios Hollywood goes for $84 on the studio’s website. Paramount Studios in Hollywood offered studio tours Friday for $48).

Scrutinizing the proposal

The city council agreed last month to enter a memorandum of understanding that would give city staff six months to scrutinize the Eastland proposal.

If the numbers don’t add up, the city can walk away.

City leaders haven’t said if they are willing to spend taxpayer money on the project, or donate the Eastland land.

“We’re still in a time period where the market is a little bit suspect,” Mayor Pro Tem Patrick Cannon said. “It’s my hope that city staff will drill down on (the developers’) assumptions during the due diligence process to really see if those numbers are conservative or liberal.”

Zeiler said he is leading a group of about six city staff members in scrutinizing the proposal.

He said he understands the developers’ reluctance to divulge their methodology in public, but added that the city will insist on “100 percent transparency” in private meetings.

City Council member John Autry, who represents east Charlotte, expressed confidence in the staff’s ability to vet the proposal thoroughly.

“Until we have had the time with staff and Studio Charlotte to lay all their cards on the table,” he said, “it’s still a waiting game.”

Frazier: 704-358-5145; @ericfraz on Twitter.

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