University of Kentucky signs deal to keep Wildcats at Rupp for 15 years

University of Kentucky men’s basketball will continue to play at Rupp Arena for 15 more years.

A new contract between Kentucky’s flagship university and Lexington Center Corp. — which oversees Rupp Arena — was announced Thursday morning at the Lexington Center board meeting. The agreement, outlined in a letter of intent signed by Lexington Center and UK officials, will ensure that the Kentucky Wildcats play at Rupp through 2033.

The university’s current lease with Rupp Arena terminates at the end of the 2017-18 basketball season. UK has played at Rupp Arena since the downtown Lexington arena opened in 1976.

As part of the agreement:

▪ UK has agreed to an annual base lease payment of $1.9 million to Lexington Center. That payment will increase by 2.4 percent each year.

▪ UK will pay Lexington Center $4.75 million each year for media rights.

▪ Lexington Center will receive 15 percent of merchandise sales and will be paid a not-yet-decided amount for parking.

▪ Lexington Center has agreed to add four club suites to Rupp Arena and to change roughly 10,584 upper-level seats from benches to chair-back seats. The cost of those changes will not exceed $15 million.

UK Coach John Calipari said later Thursday that he was “ecstatic” that a deal in principle had been inked.

“It appears that I’ll end my stuff coaching in Rupp,” Calipari said. “The good thing, from what I’m being told, it’s a win-win. Our season ticket holders are not going to be paying more for tickets because they had to do upgrades. There’s not going to be more taxpayer money. Everybody gave something so this thing works and I think it’s great.”

UK also agreed to pay a one-time sum of roughly $1 million, about half of the more than $2 million that was given to Lexington Center for design work from a state coal severance fund. Lexington Center repaid the state coal severance fund last year.

Currently, UK’s annual lease payment to Lexington Center is a little less than $1 million. Under the new agreement, UK’s guaranteed payment to the center is more than $6.65 million in the first year.

UK will get the media rights and have additional club seats to sell, generating more revenue for UK Athletics, said Mitch Barnhart, UK Athletics director. Currently, Lexington Center has the media rights. It then pays UK a percentage of those media rights.

The media rights for Rupp have become more lucrative thanks to a technology upgrade that added more video screens. If UK sells more than $7.25 million in media rights, Lexington Center will receive 25 percent of the additional revenue.

Despite the long history between UK and Rupp, a new long-term lease between the two groups was not a given. In the past, the university has toyed with building its own arena. Tensions between UK and the city boiled over in 2014, when UK failed to support a $351 million combined expansion of Rupp Arena and the convention center backed by Mayor Jim Gray. Without UK’s support, the project failed to get funding in the legislature. That ambitious plan was scuttled in favor of a more modest plan that includes a technology overhaul of Rupp and a separate renovation of the convention center.

Lexington Center receives no direct allocation from the city for its operating expenses. The city has agreed to bond $10 million for the convention center renovation. It receives some hotel and motel tax revenue.

Rupp Arena recently underwent a $15 million technology overhaul that includes a new center-hung scoreboard, ribbon boards, fresh paint and other upgrades. Those improvements, including a change from static signs to television screens, will allow Rupp Arena and UK to generate additional advertising revenue. A renovation of the attached convention center, estimated at more than $250 million, should start in late 2017.

The 15-year lease agreement — the details of which are still being worked out — will help Lexington Center secure bonds and other financing for its $250 million renovation of the attached convention center.

Bill Owen, president and CEO of Lexington Center Corp., said the $15 million for the new club suites and chair-back seating are likely to be added to the total cost of the renovation of the convention center. The additional money UK will pay Lexington Center will be more than enough to pay off the debt payments on the $15 million.

Barnhart said after Thursday’s meeting that UK would like to have those club suites and the chair-back seats in place before the start of the 2018 season. Those details are being worked out, he said.

Owen said Lexington Center officials need to figure out where those suites will go and how they will be designed.

The benches that will be replaced with chair-back seats are in sections 228 through 234, and sections 211 through 217.

Barnhart said the changes Rupp has already made helped.

“Their commitment to get this done, it was strong and we didn’t want to go anywhere else,” Barnhart said. “We wanted to be here. I don’t think there’s anybody in the world today that sits there and says, ‘We want to take on a $300 million arena (project) when we have a wonderful, tradition-rich facility that we’ve played in for 40 years. The city needs us to be downtown. We wanted to be downtown.”

The letter of intent between Rupp and its marquee tenant will help guarantee the complex’s future, Lexington Center and Lexington officials said Thursday.

“This agreement extends the viability of Rupp Arena and ensures its vitality for almost 60 years,” Lexington Center board chairman Brent Rice said. “As we celebrate Lexington Center’s and Rupp Arena’s 40th anniversary, this commitment from UK stretches that vital contribution to the city and the state well into the future.”

It also will help downtown. The attached convention center and Rupp Arena bring thousands of people into Lexington’s downtown, Gray said.

“Great news for Lexington and the Big Blue Nation. And congratulations to the Lexington Center Board,” Gray said. “It’s a win for the city because of the jobs it will bring downtown; and for UK because the arena will set a new standard by enhancing the fan experience.”

UK officials said the letter of intent shows it’s commitment to the city.

“This letter of intent underscores our shared commitment to the health and vibrancy of downtown Lexington and the broader community we call home,” UK President Eli Capilouto said. “It also demonstrates the strong partnership that exists between the university and the city of Lexington as we have worked collaboratively — and in a spirit of partnership — over the last several months toward an agreement that represents our shared interests and principles.”

This story was originally published December 15, 2016 at 10:47 AM with the headline "University of Kentucky signs deal to keep Wildcats at Rupp for 15 years."