Sources: Alex Meruelo is walking away from Coyotes ownership

Alex Meruelo is calling it quits. Multiple sources told PHNX Sports that ownership addressed Coyotes staff on Monday, telling them that they have no plans to pursue further arena options.  

The decision comes in the wake of the Arizona State Land Department’s decision to cancel an auction on Thursday. Meruelo had hoped to win that auction and purchase a 95-acre (110 gross acres) parcel of land and build an entertainment district and an arena that would house his hockey team. With that delayed indefinitely, and considerable political opposition in his path, he sees no viable options that would allow him to reactivate the franchise within the parameters set forth in the $1.2 billion sale of the team to Jazz owners Ryan and Ashley Smith.

Meruelo agreed to sell the team in late April (the sale closed on June 13) after securing an exclusive contractual right to reactivate the franchise within five years of the date of the agreement, and trigger an expansion draft if an arena was built. Reactivation would have required him to pay back the $1 billion that he received from the sale (the other $200 million was distributed to other owners as a relocation fee).

In a news release announcing the cancellation of the auction, the land department noted that it had “recently confirmed that the proposed arena use will require a Special Use Permit, and as a result we are requesting that the applicant file for and receive a Special Use Permit prior to the auction. This affords the applicant and ASLD certainty that the applicant can build what it intends to build for its anchor tenant. It is not uncommon for ASLD to require applicants to secure zoning/use permits prior to auction. We understand the delay in an auction is a disappointment for our applicant and members of the public, but the change in timing is the prudent decision for the Trust. ASLD remains open to working with our applicant to bring the land forward to auction in the future if a special use permit is received.”

When the Coyotes first began pursuing state trust in northeast Phoenix, they were under the impression that, given its C-2 designation, it was zoned for an arena. The Legacy Sports Project had the same zoning designation in place ahead of an ill-fated, multi-sheet youth hockey complex.

The Arizona Republic first noted in December that the land in question might not be zoned for an area of this scale and PHNX Sports confirmed that with City of Phoenix officials. 

“A sports arena is not specifically listed as a permitted use in the C-2 zoning district,” city spokesperson Teleia Galaviz said. “A property owner could request an interpretation of the zoning so that a specific argument and evaluation can be completed by staff. Only a property owner can request a site-specific interpretation and staff has told the Coyotes that we would process an interpretation request, but there is no guarantee that an interpretation would allow the sports arena.   

“Staff has verbally told the Coyotes that the most analogous use is a stadium type of facility for large public gatherings and that requires a special permit to be approved by the Mayor and City Council through a rezoning process. The other option would be to rezone the site to an appropriate zoning district that allows for the arena use like a special permit for the portion of the land that would comprise the sports arena. The Legacy Sports Project is a 3,000-seat facility for ice hockey and volleyball practice facilities, much like soccer sports complexes and is very different than a 17,000-seat sports and entertainment venue.”

Although the Coyotes had a different interpretation of the wording of C-2 designations, they have known for a while that they would need a special use permit. What likely drove the Meruelos to pursue the land in spite of the zoning issue was timing. Commissioner Gary Bettman gave the team until the end of the 2023-24 season to have a credible solution in place. An attorney familiar with the acquisition of a special use permit said it can take eight to 10 months, so Meruelo may have chosen to risk acquiring the land and then seek the permit so that he could meet Bettman’s deadline.

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But when the auction that was originally scheduled for the spring was moved until late June, Bettman approached Meruelo about selling the team. Between the failed vote for an entertainment district in Tempe and the plans for building elsewhere being delayed, Bettman had seen enough. He couldn’t justify the team playing at 4,600-seat Mullett Arena indefinitely.

“It’s not fair to the players of the Coyotes,” Bettman said in a news conference to announce the sale at Hyatt Regency Phoenix on April 19. “It’s not fair to the players on the other teams that come in. It’s not a major league facility and the prospect of playing playoff games there, or a Stanley Cup Final, it just didn’t work so I decided we needed to look for a solution.”

While Meruelo had a five-year exclusive rights window to bring NHL hockey back to Phoenix via the expansion process, the key benchmark came at the 3½-year mark, per deputy commissioner Bill Daly. 

“Reactivation notice must happen prior to Dec. 31, 2027, and the arena must be 50-percent complete by then,” Daly wrote in an email, adding that Meruelo would have “to make a significant deposit on the purchase price by then… so basically, it’s gonna be the next three years in which that has to happen.”

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Multiple sources confirmed that Meruelo had been exploring other options since learning of the zoning issue. The team had a letter of intent out on a site in northwest Mesa, and another undisclosed location, but neither of those sites were zoned for an arena and would have required a public process to change the zoning — one that may have included a referendum; the process that killed Meruelo’s hopes of building an arena in Tempe.

Sources said the Meruelos also explored a site on Salt River Pima-Maricopa Indian Community land, but the inability to build residences on tribal lands, and the lesser concerns of not being able to own the land or build a sportsbook, made the revenue model untenable.

It’s unclear when the NHL will officially announce the decision, but when asked previously what would happen to the market if Meruelo were to depart, Daly said that, “Arizona becomes like every other potential expansion city.” 

The NHL has said repeatedly that it is not in expansion mode, but an Atlanta group has already purchased land, designed an arena and has formally requested that the NHL begin the expansion process.

PHNX is aware of at least two groups with interest in bringing an expansion team back to Arizona, but it will be hard to gauge their level of interest and ability until they can formally enter the fray and the process begins.

Top photo of Coyotes owner Alex Meruelo via Getty Images

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