Alex Meruelo has decided to call it quits. Multiple sources tell PHNX Sports that the owners addressed Coyotes staff on Monday, telling them 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 the auction and purchase the 95-acre (110 gross acres) piece 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 way, he sees no viable option that would allow him to reactivate the franchise within the parameters laid out in the team's $1.2 billion sale 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 from the date of the agreement and begin the expansion draft if the arena was built. Reactivation would require him to pay the $1 billion he received from the sale (the other $200 million was distributed to the other owners as a transfer fee).
In a news release announcing the auction cancellation, the Lands 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 apply for and receive a Special Use Permit prior to the auction. This provides the applicant and ASLD with certainty that the applicant can build what it intends to build for its main tenant. It is not unusual for ASLD to require applicants to secure zoning/use permits prior to the auction. We understand that the delay in the auction is a disappointment for our applicant and members of the public, but the change in timing is a prudent decision for the Trust. ASLD stands ready to work with our applicant to bring the land to auction in the future when a Special Use Permit is obtained.”
When the Coyotes first began pursuing the state trust in northeast Phoenix, they figured that, given its C-2 designation, it was zoned for an arena. The ill-fated, multi-sheet youth hockey complex at the Legacy Sports project had the same zoning designation before it.
The Arizona Republic first reported in December that the land in question likely isn't zoned for an arena of this scale, and PHNX Sports confirmed this with Phoenix city officials.
“A playground is not specifically listed as a permitted use in the C-2 zoning district,” said city spokesperson Ofelia Galaviz. “A property owner can request an interpretation of the zoning so that a specific rationale 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 will act on an interpretation request, but there is no guarantee that the interpretation will allow a playground.”
“Staff has verbally told the Coyotes that the most similar use is a stadium-like facility for large public gatherings and that requires a special permit approved by the Mayor and City Council through the rezoning process. The other option would be to rezone the site into an appropriate zoning district that allows arena-like uses with a special permit for the portion of the land that includes the sports arena. The Legacy Sports Project is a 3,000-seat facility for ice hockey and volleyball practice facilities, much like a soccer sports complex and is very different from a 17,000-seat sports and entertainment venue.”
Although the Coyotes had a different interpretation of the wording of the C-2 designations, they had known for some time that they would need a special use permit. What prompted the Meruelos to pursue the land despite the zoning issue was timing. Commissioner Gary Bettman told the team to come up with a credible solution by the end of the 2023-24 season. An attorney familiar with the acquisition of a special use permit said it could take eight to 10 months, so Meruelo may have opted to acquire the land and then take the risk of getting the permit so he could meet Bettman’s deadline.
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But when the auction that was originally scheduled for the spring slipped to the end of June, Bettman approached Meruelo about selling the team. Between the failed vote for an entertainment district in Tempe and delayed construction plans elsewhere, Bettman had seen a lot. He couldn't justify having the team play in the 4,600-seat Mullett Arena indefinitely.
“It's not fair to the Coyotes players,” Bettman said at a news conference held to announce the sale at the Hyatt Regency Phoenix on April 19. “It's not fair to the players on the other teams that are going to be in it. It's not a major league facility and there's no possibility of playing playoff games or a Stanley Cup Final there, it just wasn't working so I decided we needed to look for a solution.”
According to deputy commissioner Bill Daly, although Meruelo had a five-year exclusive right to bring NHL hockey back to Phoenix through the expansion process, the main criteria came down to a 3½-year period.
“The reactivation notice must be in place no later than Dec. 31, 2027, and the arena must be 50 percent complete by then,” Daly wrote in an email, adding that Meruelo “must have put down a significant deposit on the purchase price by then … so basically, it’s the next three years in which this has to happen.”
Multiple sources confirmed that Meruelo had been looking for other options since learning of the zoning issue. The team had a letter of intent for a site in northwest Mesa and another undisclosed location, but neither of those sites were zoned for an arena and changing the zoning would have required a public process – which could have included a referendum; it was this process that ended Meruelo's hopes of building an arena in Tempe.
The Meruelos also explored a site on Salt River Pima-Maricopa Indian Community land, but the inability to own the land, the inability to build housing on tribal land, and the inability to build a sportsbook made the revenue model untenable, sources said.
It's unclear when the NHL will officially announce the decision, but when previously asked what would happen to the market if Meruelo left, Daly said that, “Arizona would become like every other potential expansion city.”
The NHL has repeatedly stated that it is not in the process of expanding, but the Atlanta group has already purchased the land, designed an arena and formally requested that the NHL begin the expansion process.
PHNX is aware of at least two groups interested in bringing an expansion team to Arizona, but it’s hard to gauge their level of interest and ability until they formally enter the field and the process begins.
Top photo of Coyotes owner Alex Meruelo via Getty Images
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