His Latest Flame
Elvis Presley’s empire now in hands of New York equity firm
By Bill Dries
Updated 9:50AMThere is Elvis Presley Boulevard and there is Graceland.
The boulevard takes in much more than the considerable financial and cultural presence left by the entertainer who lived and died in rock ‘n’ roll’s house on the hill in Whitehaven.
As Graceland reaches its summer peak on Aug. 16, the anniversary of Elvis Presley’s death, the state of Elvis Presley Enterprises as well as Whitehaven are largely dependent on the national economic recession that has come back to life.
The city of Memphis is about to spend $1.8 million for land acquisition and street design along a three-mile stretch of Elvis Presley Boulevard, between Brooks Road and Shelby Drive.
http://www.memphisdailynews.com/news/2011/aug/15/his-latest-flame/
The plans that emerge would be the first concrete, visible signs in a seven-year bid to broaden the footprint of Graceland in Whitehaven and act on Whitehaven’s commercial and retail potential. They are two separate and distinct though not opposing goals.
“We have always maintained that the street has nothing to do with Elvis Presley Enterprises,” said Memphis City Council member Harold Collins, whose district includes Whitehaven. “We know that the street needed to be done anyway. We know based on conversations with the (Greater Memphis) Chamber that if we expend $44 million to $45 million on redoing the street, we believe that twice that much could be invested in private dollars where people want to come in and serve the community.”
Collins and Memphis Mayor A C Wharton Jr.’s administration hope the state of Tennessee will make good on a commitment of $44.5 million in state funding to alter the streetscape over two to three fiscal years starting in fiscal year 2013, which begins July 1, 2012.
The commitment was made when Phil Bredesen was governor and when Elvis Presley Enterprises was under different ownership that had ambitious plans for multiple hotels, a shifted Graceland Plaza on the same side of the street as the mansion, restaurants, an expanded tourism center and a convention-performing arts center.
Whitehaven has a split retail identity in which the two parts of the identity are not always as easily separated when the subject is economic potential and money to realize that potential.
There is the Graceland bubble that Elvis Presley Enterprises wants to expand and move around.
“We know based on conversations with the chamber that if we expend $44 million to $45 million on redoing the street (Elvis Presley Boulevard), we believe that twice that much could be invested in private dollars where people want to come in and serve the community.”
– Harold Collins
Memphis City Council Member
Memphis City Council Member
Memphians work in the bubble. But not a lot of Memphis dollars are spent there.
The area outside the bubble is Memphis money and retail potential too often being spent elsewhere, according to Collins and others. There are hints of that potential in Southland Mall’s 90 percent occupancy rate. The mall’s trade is overwhelmingly from Memphians.
“The Whitehaven community is per capita the highest earned income community (among nine economic development zones in the city), per capita the highest home ownership, per capita the highest educated, per capita the highest disposable income,” Collins said, referring to a University of Memphis study.
“What we have to do is provide a pathway for these businesses to come in and put their shops and their restaurants down, knowing that they already have a community that can sustain it.”
Graceland is looking for a similar path with a different public that doesn’t live in Whitehaven and probably doesn’t live in the Memphis area.
“As the life, times and artistic works of Elvis Presley grow more distant in our past, their popularity may decline,” reads the 2010 annual report ofCKx Inc., issued in March. The quote comes from a section of the report with the heading “risks related to our business.”
“If the public were to lose interest in Elvis Presley or form a negative impression of him, our business operation results and financial condition would be materially and adversely affected.”
The company went on to say that it believed Elvis fans will visit Graceland for quite some time to come and buy the related Elvis merchandise.
But since CKx Inc. bought 85 percent of Elvis Presley Enterprises in 2005, Graceland has been operating under a philosophy that the mansion should remain frozen in time, but the area around it should be more of a destination with more events and even other performers.
Tour and exhibit revenue for Graceland in the 2010 calendar year was $14.5 million, down $200,000 from 2009. Attendance dropped 4.4 percent from 542,728 in 2009 to 518,940. CKx attributed the drops to lower tourist traffic in Memphis, partly because of the BP oil spill in the Gulf of Mexico.
Elvis retail revenue was $14.3 million for the year, up $900,000 over 2009 because of higher sales of merchandise at Graceland and at the “Elvis the Concert” series in Europe – Elvis in his 1970s prime on a large screen synced with a live touring band on a continent that Elvis never played during his lifetime.
The overhead of Graceland operations was up by $1.2 million, most of it from the professional and legal fees of the new master plan that the CKx report describes as “postponed.”
CKx founder Robert Sillerman was behind not only the $250 million overhaul of Graceland and its acquisition of new property west of the plaza and north of the mansion. He launched an expansion of the Elvis brand that included remixes of Elvis tunes, a Cirque du Soleil show in Las Vegas and a licensing agreement for Elvis-themed restaurants and clubs possible around the world.
Sillerman also wanted to break Graceland out of a five-year cycle of peaks and valleys connected to anniversaries of Presley’s death that ended in zeros or fives.
He wanted new reasons for tourists who may not have been born when Elvis died to form a bond with an Elvis brand able to be more widely interpreted.
The audio tour, available in half a dozen languages other than English, explains the times the entertainer lived in as well as his music. It also acknowledges that he had an addiction to prescription drugs.
Collins and other Whitehaven boosters had some concerns about what an expansion of Graceland would mean in an area where residential areas are less than a block off the boulevard on both sides of the street.
But ultimately, they saw it as a means to the goal of reviving what amounts to Whitehaven’s Main Street for those who live in the neighborhoods.
Then the recession hit, Sillerman encountered problems getting financing for Graceland as well as other parts of his vision for EPE, Sillerman attempted to buy CKx, Sillerman left and CKx was bought this past July by New York-based Apollo Global Management LLC.
That makes four owners Elvis Presley Enterprises has had in seven years – a lot of instability for a business that since the late 1970s has limited itself to a very carefully drawn identity and paid dearly for its efforts beyond that including a Beale Street restaurant and guided tours of the Hunt-Phelan House on another part of Beale Street.
Elvis fans from around the world visit Graceland during Elvis Week. (Photo: Lance Murphey)
Sillerman broadened the identity, but the broader plans for what to do with that changed identity have stalled.
Everyone involved in direct control of the Elvis empire declined comment when contacted by The Memphis News.
The CKx annual report, released two months before Apollo announced the acquisition, speaks in guarded terms about the expansion.
“The company has determined that there is a strong likelihood that the original preliminary design plans may require significant modifications or abandonment for a redesign due to current economic conditions and a lack of certainty as to exact scope, cost, financing plan and timing of this project,” the report reads.
The CKx annual report also emphasizes the uncertainty by pointing to the termination of the licensing agreement in 2008 involving FXRE – the real estate arm of CKx – for the development of one or more hotels on the Graceland footprint and broader plans for Elvis-themed hotels.
When FXRE didn’t make a $10 million guaranteed minimum royalty payment in 2008 to CKx, Elvis Presley Enterprises terminated the agreement.
“The company remains committed to the Graceland redevelopment and will continue to pursue opportunities on its own or with third parties,” the 2010 annual report concludes before saying at another point several pages later, “We expect that the redevelopment of Graceland, if and when pursued, would take several years and could require a substantial financial investment by the company.”
Apollo is an “alternative asset manager” that specifically looks for assets it feels are undervalued and which have the potential to make a lot of money for investors – their investors – especially in a recessionary environment.
“We’re a value-oriented contrarian investor,” Apollo president Marc Spilker told a Barclays conference in London in May, two months after Apollo became a publicly traded company.
“We put a lot of money to work during recessionary periods. Half the money we’ve invested in our (20-year history) has been invested in recessions.”
Spilker touted the firm’s research of and “deep industry” knowledge, which extends to the entertainment industry – including buying Harrah’s and Caesar’s – two of the biggest casino names.
“We have an integrated platform, which means the Chinese wall is around the organization, not within the organization,” he said. “It’s the way the firm was organized in the beginning. It’s the way people behave.”
Executives with several local equity management companies who spoke on background told The Memphis News that Apollo obviously feels CKx is undervalued and has potential.
But they question what Apollo sees as the value. CKx is a company best known for the Idols international television franchise including the “American Idol” television show and the companion “So You Think You Can Dance” television program and franchise.
Important to those in the equity firm industry is the backing of Sillerman and The Promenade Trust – the Elvis Presley estate – of the sale of CKx to Apollo. It suggests Graceland and the Elvis brand will remain a key part of any future plans.
But one local adviser questions whether they are supporting Apollo because Apollo intends to carry out the 2005 expansion or because Apollo has a new plan.
http://www.memphisdailynews.com/news/2011/aug/15/his-latest-flame/
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