SHADOW OF A DOUBT

THE DEFECTION OF PHILIP ANSCHUTZ IS JUST THE LATEST RED FLAG IN THE PEPSI CENTER DEAL.

The Maryland firm stumbled into ownership of the Nuggets in 1989, buying into the team with two partners who were on the verge of embarrassing the NBA with their financial difficulties. NBA boss Stern, an old friend of one of Comsat's top executives, asked his buddy to bail the team out. That transaction was heralded as the deal that kept the Nuggets in Denver. But after suffering through a series of dismal seasons, Comsat came close to moving the team to Toronto in 1992.

Leiweke, known as a master marketer, was widely credited with turning around the Nuggets' fortunes. He came to Denver in 1991 and, like his new bosses, didn't hesitate to use whatever leverage he had available. He soon challenged fans to show their support for professional basketball by averaging 14,000 a game during a four-game home stand. If they didn't, Leiweke implied, the Nuggets might leave Denver. Ticket sales climbed past 15,000 for each game, marking a turnaround in the Nuggets' fortunes.

The Nuggets' 1992 season opener against the San Antonio Spurs was the team's first sellout in years. Enthusiastic crowds and much-improved players like Dikembe Mutombo led to several strong seasons. Comsat's 1994 financial reports glowingly noted the success of the company's fast-growing entertainment division, which had revenues of $157 million last year. The company attributed most of the division's $11 million in profits--a 62 percent jump over 1993--to the Nuggets.

In professional sports, though, all profits are relative, and Comsat has never been satisfied with its earnings at McNichols. While games regularly sell out, McNichols has a mere eighteen luxury suites and no club seating. The big money today is in the exclusive suites and club concourses that cater to corporate fat cats, and the Nuggets have turned a jealous eye to Coors Field, which has 58 taxpayer-financed luxury suites where Denver's high and mighty rest in mahogany chairs, sipping champagne and spearing veal cutlets out of silver chafing dishes.

Special services available to suite holders at Coors Field include a valet, fax and copy machines, a boardroom for between-inning business meetings, fully catered meals and a private entrance away from the mob. From Boston Market to KUSA-TV, dozens of Denver's best-known companies shell out a minimum of $70,000 a season to lease suites at the ballpark. Those private suites earn the Rockies millions every year and have helped make the team enormously profitable.

Comsat sees a similar gold mine in the Pepsi Center, which it envisions as the hub of a new regional entertainment zone. But with public tolerance for team bailouts apparently on the wane--Denver fans were outraged when the Broncos made noises about extending the Coors Field sales tax to build a new football stadium--the company was hesitant to ask for a direct taxpayer subsidy. Instead, Comsat and Leiweke turned to the Target Center model of a "public-private partnership" fueled--on the front end, at least--by their own funds. And true to the old maxim that it takes money to make money, the company has been sodding the entire Central Platte Valley with greenbacks. In addition to shelling out millions for the hockey Avalanche, which it expects to play in its new arena, it has invested $7 million in Elitch Gardens, given $250,000 to Colorado's Ocean Journey and even chipped in $50,000 to the struggling Children's Museum.

One of the key players in Comsat's original scenario was Anschutz, the oil-and-railroad tycoon who owns 43 acres of former railyards in the valley and has been waiting for years to cash in. Anschutz knew that construction of the arena would make the rest of his property more valuable when he entered into a partnership with Comsat last year. He also salivated at the prospect of getting a 50 percent interest in the expansion hockey franchise Comsat was then in the process of wooing. And both he and Comsat were encouraged by the inclusion in the deal of cable giant TCI, which agreed to fund a $20 million TV production studio on the Pepsi Center site.

"There's a great synergy in the Central Platte Valley, with the aquarium, Children's Museum, Coors Field and Elitch's," says Gary Hunter, the Comsat executive charged with negotiating a Pepsi Center deal. "We're excited about it. I think we're looking at the entertainment industry as a whole. We want to provide an entire menu of entertainment assets. That's the wave of the future."

In fact, Comsat is so convinced that it stands to make a killing on the deal that it apparently had second thoughts about letting Anschutz--a shrewd investor who a few years ago got his hands on the Southern Pacific Railroad in a deal where he put up hardly any of his own money--walk away with half of its hockey franchise. Contrary to expectations, Comsat bought an existing franchise, the Quebec Nordiques, rather than waiting to purchase an expansion team. And the company--which at one point reportedly began refusing to take Anschutz's phone calls--apparently used that fine print to squeeze the rail tycoon out of a share in the newly christened Colorado Avalanche.

Ironically, the millions Comsat shelled out for the Avalanche has hurt the company's earnings. Citing a $16 million loss in the third quarter of 1995, the company recently laid off 106 employees, though it predicts revenues will rebound once the Avalanche hits the ice. And after the falling out with Anschutz--who claimed to be "devastated" by the deal's collapse even as he floated the idea of a multimillion-dollar sports arena of his own in Los Angeles--the Pepsi Center is relegated to looking for a new home.

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