When Stan Kroenke entered himself into a messy, drawn-out bidding war for ownership of the Nuggets and Avalanche, the vacant land next to Pepsi Center might’ve seemed like the least attractive portion of the potential winnings.
The arena itself was brand-new. The star-studded Avs had christened it on Oct. 13, 1999, with a 2-1 win over the Bruins. And as for the Nuggets, basketball was one of Kroenke’s first loves. His son, Josh, was on the team at the University of Missouri at the time.
But the 52-year-old businessman known then as a Walmart heir wasn’t venturing further into team ownership entirely for the sports. Kroenke was a shrewd real estate developer with ambition to build in Denver. Buying the Nuggets, the Avs and their arena in 2000 was a window into the edge of downtown, where he would eventually inherit an expanse of parking lots.
Twenty-four years later, Denver City Council approved rezoning for a massive development plan on top of those parking lots that will be carried out by Kroenke Sports & Entertainment, the teams’ parent company — jump-starting the execution of what one high-ranking KSE executive described to The Denver Post as the kind of long-term plan Kroenke envisioned when he bought the two sports franchises.
“The Kroenkes have an extraordinary vision,” said Mike Neary, KSE’s executive vice president of business operations, “as it relates to professional sports and real estate.”
At a time when uncertainty looms for the future of the Broncos’ home in Sun Valley, Denver’s only privately constructed professional sports venue — now named Ball Arena — is an example of how the business of team ownership has become intertwined with real estate development. Kroenke had to bide his time before launching his master plan in Denver. But eventually, finally, Ball Arena provided an impetus for development of a downtown corridor that will strengthen the bond between ownership and the city — while potentially making billions of dollars for the Kroenke family.
Land owner in waiting
When Kroenke bought the Nuggets and Avalanche from Ascent Entertainment, the $450 million sale closed in part because Kroenke, unlike previous bidder Donald Sturm, committed to keeping the teams in Denver for the next 25 years.
Yet there was a natural reason to agree to that commitment — and for Kroenke to want the teams located downtown much longer than a quarter-century.
In 1997, Ascent purchased the land where it planned to build Pepsi Center — and a chunk of surrounding land where parking lots would be situated — from a railroad company. Ascent then promptly deeded that land back to the city. The Nuggets and Avalanche were trying to get out of their lease at city-owned McNichols Arena, and “in order to break that lease, we had to negotiate the deal under which the teams were going to stay in Denver,” said Art Aaron, who was general counsel for Ascent.
As an incentive for the teams to stick around, the city assumed ownership of the land but agreed to give it back to the teams at the expiration of a ground lease in 2023, according to documents reviewed by The Post. That was the city’s idea, according to Aaron. “Their lawyers came up with this concept that gave them a little more comfort, that we essentially transferred to the city the land on which the arena sat,” he said.
When Kroenke came along three years later, he inherited the ground lease with his purchase of the teams. That meant he also inherited the future rights to those 55 acres — an oasis for real estate development.
He needed only wait.
Geoffrey Propheter, who teaches courses at the University of Colorado Denver and researches stadium economics, views the arrangement as an act of smart foresight by the teams and questionable decision-making by the city; that by prioritizing preventative measures against relocation while negotiating, Denver established an outcome in which the land sat undeveloped and under-taxed for multiple decades.
“I’m going to basically babysit this land for you,” Propheter said. “I’m gonna babysit it, and keep it warm, and marinate it. … (City lawmakers) were perfectly content to leave the arena as an island in a sea of asphalt.”
As those 20 years passed, Denver property values skyrocketed. On top of that, commercial and residential districts anchored by sports venues grew increasingly popular. In the NBA, Toronto and Milwaukee’s recent championship runs were frequently interspersed with national TV cuts to watch parties taking place right outside their respective arenas.
When Kroenke relocated the Rams from St. Louis to Los Angeles in 2016, he targeted the 300-acre site of the former Hollywood Park racetrack because it offered a more comprehensive development opportunity than merely the construction of a stadium. That space will eventually be filled with office space, residences, restaurants, retail stores and parks.
When it comes to maximizing a return on investment for owners — especially with privately financed venues like the $4.963 billion SoFi Stadium — controlling the land next to the building often matters just as much as the stadium itself.
“I think both Ascent and (Kroenke) certainly understood the potential value of that much land in downtown Denver,” Aaron said. “Essentially, when we initially just turned it all into parking lots, we were land-banking it at the time.”
Tax breaks and privately financed stadiums
Unlike Coors Field and Empower Field at Mile High, the Nuggets’ and Avalanche’s home didn’t use a public tax referendum to fund construction. But the private financing model used to build Ball Arena did come with tax breaks for ownership.
According to Propheter, that’s fairly ordinary. Teams often purchase the land that will serve as their new venue’s footprint, then they deed it to their local government. By renting or leasing from a city instead of owning the land themselves, owners can reduce or eliminate property tax bills. The Philadelphia 76ers’ proposed $1.3 billion arena is structured around one of these ground leases. As is the KSE-owned Colorado Rapids’ stadium in Commerce City.
“This notion that private construction of a facility is kind of like the Holy Grail of sports — that’s misleading,” Propheter said.
The Nuggets and Avalanche were operating on a ground lease until 2019. The teams owned the building, but not the land underneath it. According to the original 1997 lease reviewed by The Post, annual rent was $10. (The 76ers’ rent to cover the entire 30-year lease on their proposed arena would be $10, according to documents released by the city of Philadelphia in September.)
In Colorado, property owned by government entities is exempt from property tax, but businesses that occupy and make a profit on government-owned land can still be taxed a smaller amount for “possessory interest.” Aaron said that the reduced tax was an intended perk for Ascent in the original deal with Denver.
The teams also used a form of tax reimbursement known as Tax Increment Financing (TIF). The Denver Urban Renewal Authority (DURA) contributed $36.5 million for environmental remediation and infrastructural improvements to the land where Pepsi Center was built. Under the terms of the arena agreement, the city agreed to divert Ascent’s taxes (and later, Kroenke’s) toward paying off DURA. That meant the money went into a separate pool from the city’s general fund. The full debt was paid by 2016, according to DURA’s records, six years before it was due.
“It’s no different than just getting an exemption,” Propheter said. “The fact is, you’re paying yourself to do something.”
KSE sought to accelerate the process of acquiring control of the vacant lots in 2019. According to an amended arena agreement signed that year, the city terminated the ground lease and conveyed the land to Kroenke early, in exchange for an extended non-relocation commitment through at least 2040.
But Propheter questions how much of a giveback the city was truly getting from Kroenke.
“It’s not like anyone was saying, ‘We’re leaving.’ … So he didn’t give anything up,” Propheter said. “Parking lots are easy to demolish. It’s not like it’s buildings, where there are tenants inside, and you have to buy tenants out, and that’s all expensive. It’s empty land. Fast forward now to five years later: Now they’re getting to build on it, and they’re going to make a killing.”
The conveyance of the land ahead of schedule did result in property tax benefits for the city. It also represented an attempt to speed up the process that will eventually result in KSE’s mini-city — a project that is expected to take decades to complete.
Most sports franchises do not disclose financial performance numbers, but the publicly traded Atlanta Braves shared that they generated $59 million in revenue from their mixed-use development around Truist Field during the 2023 fiscal year.
“The existing condition of the property paired with the remarkable growth of the city of Denver allows for a lot of creativity while imagining the future of Ball Arena and the surrounding neighborhood,” said Neary, who oversees real estate for the company. “This is a rare opportunity for a downtown area and especially for a downtown as dynamic as Denver’s.”
“The overall goals of cities”
Andrew Goetz, a University of Denver professor who specializes in urban planning policy, has lived in Denver since the late 1980s and passed by those vacant lots more times than he can count.
He was always exasperated by what he considered a misuse of urban space. But even if development is long overdue to him, he was impressed by the plan KSE ultimately presented.
“You have an active, vibrant center of activity that isn’t reliant on cars and parking,” he said.
Nestled to the north of Auraria Parkway, the southwest of Speer Boulevard and the southeast of the train tracks that separate Ball Arena from Elitch Gardens, the 55-acre parcel’s future represents a potential synthesis of private profitability and public gain. Skyscrapers and green spaces will replace asphalt.
Hours after the City Council approved critical rezoning in October that allowed KSE to build taller buildings that will impede a previously protected view plane of the Rocky Mountains, the teams extended their non-relocation agreement again. This time, the commitment to Denver lasts through 2050.
With those buildings reaching 30 or 40 stories, the vertical growth of Denver will provide room for up to 6,000 new apartments and condos. A minimum of 18% of those units must be income-restricted affordable housing, a rate that academics such as Goetz and community groups such as the Lower Downtown Neighborhood Association were satisfied with.
“The Kroenke team was particularly negotiable. They were friendly. It wasn’t a difficult negotiation,” said Jerry Orten, who served as president of the Lower Downtown Neighborhood Association until recently and was involved in community benefits negotiations with KSE. “I think there’s a bigger engagement by Kroenke with the community, based on what’s going to happen here.”
Kroenke’s proposal also involves four pedestrian bridges connecting the new neighborhood to others, including his adjacent but separate River Mile development plan that is situated north of the train tracks. KSE senior vice president for development Matt Mahoney has stated the company is viewing the new projects as an interconnected, 130-acre neighborhood.
If mixed-used districts continue to be the trend and priority for team owners, is the arena on the other side of Interstate 25 a model that should be followed by other local franchises such as the Broncos?
Goetz thinks so — but the location is of particular importance.
“The downtown of a city is going to have the best transit access available,” he said. “What you don’t want to have is a situation where you have projects that are located in a far-away place, where the only way to get there is by driving.”
Ball Arena celebrated 25 years since its opening in October. There are no signs of a new venue on the way to replace it, but if the Kroenkes did decide to demolish it between now and 2050, they could build a new venue on the site.
Renovations to the arena are more likely as redevelopment plans move forward, KSE officials said. Major ones may be necessary in the next 10 to 15 years if Kroenke wants to keep up with other venues in Ball Arena’s age group. In the summer of 2023, the company put out a survey to fans exploring potential renovations to Club Lexus and other features of the arena, checking the pulse for willingness to spend on enhanced seating options.
The arena hasn’t undergone a major noticeable transformation since the installation of a center-hung jumbotron before the 2013-14 NBA and NHL seasons. Exterior facade lighting and locker rooms were renovated in 2015.
Inside the building, Kroenke’s teams have excelled. The Nuggets are valued at approximately $3.9 billion today, according to Forbes. The Avs are valued at $1.2 billion. Both teams have made the playoffs every year this decade, and both have been rewarded for their sustained success with a championship. Even Major League Lacrosse’s Colorado Mammoth, which calls Ball Arena home, won its league in 2022.
And with a new chunk of downtown Denver in the palm of their hands, the business-oriented Kroenkes are about to win big again.
“Sports owners always come out better than taxpayers. Nothing more to say,” Propheter said. “And if you think about the logic, you’re not going to go into business unless you can make money, right?”
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