When Hall of Fame Resort and Entertainment announced it would go public in 2019, it disclosed to investors that it was creating the” Disneyland of football.” The more fitting title could have been” Ghost Town Village” following four years of madly missed economic forecasts, property problems, mounting piles of debt, and a new definition that promises to palm over most of its resources to Blue Owl.
Last week Hall of Fame Resort disclosed that it has defaulted on$ 2.6 million of lease payments for a half-built waterpark at its Canton, Ohio, campus. The company’s potential repercussions are devastating because it pledged nearly all of its physical goods as part of its contract to the football stadium, its 20 % ownership in a number of sports grounds, and right to another 14 commercial and residential items on the home as well.

According to Hall of Fame,” the practice of some remedies by Landlord may be expected to have a material negative impact on the liquidity, economic situation, and results of operations of the Company.” Shares plunged 27 % Friday, the second trading day after the disclosure. Hall of Fame Resort’s press representative did n’t respond to an email asking for comment.
The employer is Blue Owl, a Chicago-based company that is a subsidiary of the officially traded private equity firm Oak Street Capital. Two years ago, Oak Street paid Hall of Fame Resort$ 50 million to acquire and rent the venue from the business. Although it indicated to the business it was considering it, it’s not obvious if Oak Street intends to seize all of Hall of Fame Resort’s pledged home. Oak Street’s principal did n’t respond to a phone call and email seeking comment.
Regardless of what Oak Street intends, the definition is likely to cast a critical question on Industrial Realty Group’s plan to privatize the company in September, at$ 1.98 per share. After the default, Hall of Fame Resort stock is now trading around$ 1.30. It’s yet another blow to owners who invested in dreams of a sports entertainment and media empire.
In order to sell the property of the Pro Football Hall of Fame in Canton, Ohio, Hall of Fame Resort formed a relationship between Industrial Realty Group and the volunteer Hall of Fame ( which kept the Hall of Fame itself independent volunteer ). The goal was to create an anchor interest in the Midwest’s theme-park desert that may entice the millions of football fans. Canton’s control benefited greatly from the fact that 15 of the NFL’s companies are within an eight-hour travel. The original schedule, because announced therefore, was to create a 200-acre football-themed place for those millions of NFL fans, including a venue, a four-star comfort hotel, conference center, a symphony hall and a senior care facility for aging NFL alumni, among other features.
In the years since, the existing stadium has been rebuilt—the 23, 000 seat Benson—but efforts elsewhere have lagged. Instead of a four-star hotel, there’s a DoubleTree, plus some retail shops and restaurants, seven artificial turf fields and one grass field. Josh Harris and David Blitzer purchased 80 % of those fields for$ 10 million in December. An indoor waterpark, to feature a lazy river and swim-up bar, is half-built and years behind schedule.

Although the plans for a football-focused media company have come along, there have been bump bumps: a ballyhooed deal with Sports Illustrated cost little, while a more recent production, The Perfect Ten, was well-liked. Hopes that on-site sports betting would be a third business line now seem unlikely to have much of an impact:” While not giving up on retail sports betting, we really have realized that the opportunity for retail sports betting is much less than what it was originally thought to be,” CEO Michael Crawford told analysts during an earnings call in August.
In many ways, Hall of Fame Resort consistently raised concerns for investors. The business went public with Gordon Pointe, a special purpose acquisition company that had originally wanted to find a financial technology company to buy. As the company’s extended deadline for finding a merger or returning its cash to shareholders approached, it reached an agreement with the Hall of Fame. SPACs with targets outside of their designated areas of concentration are typically much less successful than SPACs overall, which themselves have a poor track record.
In its first presentation to investors, the business drew inspiration from a previous successful attempt to construct an amusement park in Sandusky, Ohio, in 1878 to inform its decision to construct a sports and entertainment facility in Ohio in stages. More damning, the business presented financial and revenue projections that have fared far short in reality. In its 2019 presentations to shareholders, whose approval the SPAC needed for the going-public merger, Hall of Fame projected 2023 revenue would be$ 131 million —about a quarter from the waterpark—up from a baseline of$ 40 million in 2020. Granted, the unforeseen pandemic can be to blame for the failure to hit targets in 2020 ( the business had sales of$ 7.1 million that year ), but it is n’t the only factor. Due to the loss of USFL games on its campus and the failure of the company to book enough new events to match 2023’s slate, revenue for this year will fall short of 2023’s$ 24.1 million in sales.
” There’s still some, what I would call, variability in our portfolio of events”, Crawford, CEO of the business since 2018, said in August. ” Not being an owned-and-operated Live Nation venue … some may look at that as a disadvantage. I look at it as an advantage”, he added. ” We still have event managers, we still have programmers, and we still have agents who will come here and be amazed at our destination in terms of our capabilities and how we can execute and the venues that we have to offer,” said one event manager.
Overpromising revenue targets and failing to book enough events are n’t Hall of Fame’s Resort’s main problem: Its biggest issue is crushing debt. The company has$ 229 million in long-term obligations, according to a September investor presentation. While much of that is n’t due for many years, it’s a level that dwarfs Hall of Fame Resort’s$ 8 million market capitalization. One possible exit strategy is a takeover of the company by Oak Tree through its seizing collateral and a different lifeline from Industrial Realty Group, its largest creditor, which could lead to the Hall of Fame being privatized or going through some sort of restructuring.
” Lending has been incredibly restrictive into early-stage companies like us, almost non-existent”, Crawford added on the August call. ” And so we’ve had to explore alternative models, public private financing models that we believe will benefit us, but it’s a close that takes time”, he told analysts, adding later,” We really believed that at one point in time, we’d have our waterpark up and running”.