Post-Covid, Elvis Presley’s Graceland Bond Default | Business Insurance

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Paul Simon released that anthem over Elvis Presley’s historic Memphis home in 1986, roughly a decade after the famed singer’s death. Much has changed.

Covid-19 hurt Graceland so badly that bonds issued by the state of Tennessee tied to tourist revenue have gone into default. The city of Memphis, the state and Elvis Presley Enterprises are arguing over how this happened and how to fix a crash that caused some $20 million of Graceland Project bonds to fall into “junk” status.

Now, in the King’s house, there are many signs.

“We are not going into default,” he insists Joel Weinshanker, who has been a managing partner of Elvis Presley Enterprises for a decade. “The state agency defaulted,” he said, referring to the economic development agency, EDGE, for Memphis and Shelby counties.

Not so fast, Stefanie Barrett, the agency’s director of marketing and communications, responded in an email. “EDGE serves as a conduit…Graceland bonds must be repaid [taxes] that are generated at Graceland.” His email says, “Neither EDGE, the city, the county, the state, nor any taxpayer is responsible… for the refund.”

Graceland is one of the biggest tourist attractions in the South and for years was the second most visited house in the country after the White House. Then came covid.

“Covid-19 was the largest crisis to hit the leisure and hospitality industry in history,” said a spokesperson for the Tennessee Department of Tourism Development. The state of Tennessee saw just 75 million visitors in 2020, down from 128 million the year before, according to the department.

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Graceland’s default may have implications for other tourist attractions and cultural sites across the country that have pledged revenue to raise funds.

But this bond offering is “unusually complicated,” which is often an indication that trouble may lie ahead, said Matt Fabian, a partner at Municipal Analysis Management.

EDGE originally issued $104.3 million in Graceland Project bonds in 2017, some of which were unrated or identified as high risk. Graceland’s different revenue streams, tied to a host of new taxes (sales, tourism, and property), were each pledged with different series of bonds. Approximately $20 million of those are now in default.

As for the bond attorney who approved the complicated bond issue, “we’re out of the loop,” an email from Bass, Berry & Sims said.

The bond proceeds went to fund a massive expansion — perhaps overly ambitious, critics say — that began in 2015, eventually adding new buildings and a 450-room hotel.

An Elvis car museum, a collection of more than 100 of his sequined jumpsuits and other outfits, memorabilia and more from music history, including black artists who influenced or worked with Elvis. The singer’s ex-wife, Priscilla Presley, noted at the 2017 opening that “that’s what Elvis wanted.”

It worked. The hotel received a coveted Four-Diamond Mobil Award and has twice hosted General Hospital’s annual fan convention. The cheapest adult ticket to the property, including a tour of the mansion, is $77. An Ultimate VIP pass, which covers the new attractions, private tour, lunch and access to the singer’s private planes, cost $190.

“Years ago a visit was a drive, now we invite you to stay for a few days,” Weinshanker said.

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But as Graceland grew, the expansion pitted Elvis Presley Enterprises against the city of Memphis. In 2018, Graceland sued the mayor’s office over a delay in plans to build a concert venue that may have broken the city’s non-compete law with the FedEx Forum and the Memphis Grizzlies. (The mayor’s office did not respond to several emails.)

With that project on hold, Weinshanker began speaking in interviews about a possible solution that amounted to heresy: get Graceland out of Memphis.

Elvis Presley Enterprises owns the rights to the singer’s likeness and much of his music and is still owned in part by his daughter, Lisa Marie Presley. (Weinshanker declined to give the percentage, but it was reported in court documents as 15%.) Emails to his representatives were not returned.

During the height of Covid, the property was either closed or operating at reduced capacity, and revenue dropped dramatically.

But those financial challenges may prove temporary. Attendance has been boosted in recent weeks by director Baz Luhrmann’s film “Elvis.” Crossed the $100 million mark a US box office on July 15, “becoming one of the rare movies without superheroes or dinosaurs to hit that mark,” reported Variety.

Attendance at Graceland in the second quarter of this year reached 200,000, Weinshanker said, more than in all of 2020 and just 10,000 fewer than the same quarter in 2019. “And people are spending more,” he said.

The increase in tourism in August also helps, as the city celebrates Elvis week (the singer died on August 16, 1977, at age 42).

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There are a week-long series of events, concerts, and a huge candlelight vigil that shuts down the streets surrounding Graceland. Thousands of fans flock there each year, in what some visitors refer to as a “pilgrimage.”

In the meantime, what about investors in defaulted bonds? they just have to be patient. “Bondholders should wait for Graceland to generate enough tax revenue,” EDGE said.