A Palace, Indeed

Davidson’s bold gamble on funding his own arena changed the NBA’s economics
Editor’s note: Editor’s note: This is a revised version of the third of a four-part series that originally appeared on Pistons.com in March 2007 when Pistons owner William Davidson was first announced as a finalist for induction into the Basketball Hall of Fame. Davidson, who was elected to the Hall’s 2008 class, died at 86 on Friday. Part III looks at his daring decision to privately finance The Palace of Auburn Hills, the arena his Detroit Pistons call home and one that forever changed the revenue-producing potential of the buildings in which NBA teams play.

AUBURN HILLS, Mich. – The Palace of Auburn Hills opened during a perfect storm of a basketball season for the Detroit Pistons – a team poised to win its first NBA championship playing in an arena crammed with amenities that revolutionized the industry. A blue-collar team playing games in a blue-chip arena produced a red-hot ticket.

It took a storm of another kind to help it all come together.

On March 4, 1985, wet, heavy snow began amassing atop the Teflon-coated Fiberglas roof that enclosed the Pontiac Silverdome, a football arena built to accommodate the Detroit Lions and the place the Pistons had called home since 1978. The weight caused the surface to tear, and then high winds carried parts of it away in pieces. The Pistons were displaced – and the seeds for The Palace, which opened in time for the 1988-89 season, were sown.

It took big-picture thinking and fanatical attention to detail to turn The Palace into an arena that spawned a wave of copycat buildings and immediately rendered obsolete many either just completed or under construction. But mostly it took the steely nerves of Pistons owner William Davidson to fund the project.

“Newspaper articles said it was folly,” Davidson recalled 18 years after The Palace opened from his office at the world headquarters of his business empire’s flagship, Guardian Industries, a worldwide leader in the production of glass products. “They said this wasn’t the right location. Of course, it proved to be.”

With the Silverdome unavailable, the Pistons scrambled for an alternative. The logical choice was Joe Louis Arena in downtown Detroit, home of the NHL’s Detroit Red Wings. Joe Louis had been built since the Pistons left Detroit following the 1977-78 season at their longtime home, Cobo Arena. Davidson had become concerned over Detroit’s population flight and general deterioration since the 1960s riots, but the clincher for him came when a Cobo security guard with whom he was familiar didn’t show up one night.

“The next time I came to a game, he wasn’t there. He’d gotten beat up,” Davidson said. “I had young kids – real young kids – and I couldn’t take them to the games anymore. That did it.”

The Pistons weren’t a very good team when they moved a half-hour north to Pontiac, but by the time the Silverdome’s roof collapsed, they were getting there. Davidson hired Jack McCloskey as general manager in 1979 and, two years later, McCloskey drafted the dynamic sophomore point guard from national champion Indiana, Isiah Thomas. The first building block of a championship team was in place.

An ‘Electric’ Idea >

The first building block of The Palace was still several years away. But when the Silverdome couldn’t accommodate the Pistons during the 1984 playoffs because of a building conflict, it gave everyone a reminder of the charged atmosphere possible in an arena built for basketball.

“It was the last game – Game 5 – against the Knicks after the Silverdome had booked a tractor pull,” Pistons and Palace CEO Tom Wilson recalled. “It turned out to be the best game I’d ever seen. It was electric. Twenty-thousand-plus people, 95 degrees in there, no air conditioning, but it was electric. It was spectacular.”

Thomas wound up scoring 16 points in the dizzying final 94 seconds of regulation to force overtime, but Bernard King led the Knicks to a 127-123 win to end the Pistons’ season.

Wilson walked away “realizing that basketball should be played in an arena and not in an airplane hangar.”

Fast forward one year, when the storm displaced the Pistons, as Wilson walked the concourse at Joe Louis that separated the upper and lower bowls with one of his top assistants, executive vice president John Ciszewski.

“Why,” Wilson asked, “don’t people ever put suites right here?”

“Because,” Ciszewski shrugged, “no one ever has.”

Two of the three critical elements necessary to build The Palace were in place, both of them inspired by visits to Joe Louis Arena a year apart – the motivation to play in their own arena and the idea of how to produce enough revenue to make it possible, by placing suites along the most coveted site lines and not atop the arena as had been customary.

It was the third element where the project would have hit a dead end in probably every other NBA city – the willingness by ownership to privately finance the arena.

“Not one other owner in the league would have taken on that risk,” Wilson said. “It was unheard of.”

Tipping Point

Jack Kent Cooke had built The Forum in suburban Los Angeles for about $16 million, but all of it was covered by two business partners in return for concession and advertising considerations. Old-guard owner Abe Pollin built an arena for his Bullets-Wizards in Landover, Md., for about the same price.

And the NBA was intrigued by Sacramento Kings owner Gregg Lukenbill’s decision to move the Kings from Kansas City and build the original $6 million, 10,000-seat Arco Arena while planning all along to build a 17,000-seat version of roughly the same design for $25 million – the Arco Arena of today that current ownership wants replaced.

“The first one was a warehouse with seats,” Wilson said, “and the second was a bigger warehouse with seats. The fact was that this guy had shown a way and even a warehouse was better than an airplane hangar.”

Wilson and his staff began pushing a pencil on the numbers at the same time the executive council that oversaw the Silverdome’s business affairs was bumbling its way into losing the Pistons. The cavernous football stadium meant supply of tickets always outstripped demand, so Wilson and his staff made bold deals to try to lure new fans. One was with Marathon Oil Co. – fans would get four free tickets for buying a full tank of gas.

It wasn’t much of a deal for the Pistons – Marathon would pay them $1 a ticket. But it was a great deal for the Silverdome, which kept all money generated from concessions and parking.

“The tipping point came when they were furious because they had to bring in five more parking attendants and three more security guards,” Wilson said. “They would make 15 grand on parking and probably 30 grand on concessions – a forty- or fifty-thousand-dollar night – and they complained about the thousand-dollar expense it might have cost them to make it happen.”

Wilson would report back to Davidson on the absurdity of the Silverdome’s position – and, being a shrewd businessman, Davidson was disbelieving.

“I’m telling him this story and I’m thinking that he’s thinking I’ve got to be crazy,” Wilson said. “So I took him over and we sat down with the powers that be and we had the exact same meeting. I thought maybe they’d roll over with him in the room, but they stuck to their guns. As we walked out of the meeting, down a narrow little hallway that led to the conference room, he said, ‘That’s it. We’re going. I heard it. I didn’t believe it. Now I believe it. And I can’t believe it. So let’s go.’ ”

Suite Dreams

Davidson was led to developer Robert Sosnick through a longtime mutual friend, David Hermelin. The three became business partners in The Palace. Sosnick’s development company had used Rossetti, a Detroit architectural firm, for its many projects and sold Davidson on letting them design The Palace despite the fact Rossetti had no experience in arena architecture.

That turned out to be a plus.

“We had to design this building to cover costs,” Wilson said. “Remember, in those days interest was 16 or17 percent. The debt service was just enormous. That’s why we had the suites where they were. The advantage we had was an architect that had never built an arena – they would listen to you.

“We didn’t know anything about buildings, either, so when we came down to the suites, we figured that was the one area that could drive enough revenue to help pay for this thing. That was the difference-maker.”

Even Rossetti didn’t think it could be done without thoroughly disrupting the site lines of the rest of the arena, but Wilson, perhaps in his naivete, doodled on a napkin in Sosnick’s office one day and was struck by the thought – submerging the actual suite beneath the seats above it, so that suite-holders would walk up and out to their seats. It was doable, the architects agreed.

The only hesitance Davidson ever showed was during a meeting at Guardian’s former headquarters site in Northville, when he asked Wilson “what the marketing plan was to sell the suites” and Wilson said, “Well, I don’t know, but we’ll get it done.”

“He wasn’t very happy with that answer,” Wilson said, “and he let me know he wasn’t very happy with that answer.”

What Wilson had was a list of 50 people or companies to approach, figuring 40 of them would bite. Only 10 did. But not long after construction began in March 1986, armed with nothing more than the blueprint to convince buyers, the suites began to move. They planned two rings of 50 of them, the first just 16 rows off the playing surface, the second at the top of the lower bowl.

Among the companies that declined, much to Wilson’s dismay, were General Motors and Ford. But Chrysler bought in – and the fact that Lee Iacocca, then an American marketing icon, was on board helped move countless other suites.

“We used that story many times,” Wilson said. “I think Iacocca sold more suites than we did.”

A Gamble That Worked

The best suites were priced at $120,000 – triple what suites at the Silverdome and Joe Louis Arena were priced – and there were more of them than anyone had ever tried to lease. It was audacious.

“It was a weird, foolish gamble,” Wilson said, “that worked out incredibly well.”

So well that as construction reached critical mass, another bold decision was made – to add another level of suites atop the arena.

“We got a call from the architect saying we’ve got to know now,” Wilson said, “because if we’re ever going to put those in upstairs, we have to raise the whole building.”

At a cost of another “five or 10 million,” Wilson said, “we swallowed hard and said let’s build them.” At first it was going to be 20 suites on each side, baseline to baseline, but they kept selling as the Pistons kept winning.

“We sold the last suite on the last day of the Lakers (1988 NBA Finals) series,” Wilson said, “so when we opened, we were 180 suites, all sold out. It was pretty amazing.”

As suite leases were signed and more and flashier advertising in the concourses than other arenas had ever sold was committed, Wilson kept going back to Davidson with ideas for more and better amenities.

“The building got bigger, the building got nicer, the suites got better, the scoreboard got more outrageous,” Wilson said. “Once we sort of figured out we could cobble this thing together, Mr. Davidson wanted something he could be proud of and the team could be proud of.”

The Pistons not only found a way to pay the debt service, they opened up a gushing river of revenue that helped the NBA grow beyond anyone’s dreams. Davidson initially gave Wilson a budget of $50 million, but the project wound up running closer to $90 million. Only NBA arenas where the Nets and Knicks play are now older than The Palace, but it remains among the world’s premier sports and entertainment venues.

“His friends begged him not to do it,” Wilson said. “(Theater mogul) Joey Nederlander called me and begged me to persuade him to back out, he’s going to go broke. His friends would say, ‘Hey, we know he knows what he’s doing, but with this, he doesn’t know what he’s doing.’ I think one reason he takes a lot of pride in this place is because of all the naysayers.

“It will be his legacy. A lot of the incredibly critical issues he took on with the NBA – all his work on the collective bargaining agreements and his support of David Stern in the early days – might have a more lasting impact on the game. But that was where he was one among a group of owners, a leader among them, but still among a group. This was all individual. And nobody else would have done it.”