Post-Covid, the Default of Elvis Presley’s Graceland Bonds
Paul Simon released this anthem about Elvis Presley’s historic Memphis home in 1986, about a decade after the famous singer’s death. Many things have changed.
Covid-19 hurt Graceland so badly that bonds issued by the state of Tennessee tied to tourism revenue fell into default. The city of Memphis, the state and Elvis Presley Enterprises are bickering over how it happened and how to fix a slide that reduced some $20 million in Graceland Project bonds to “trash” status.
Now in the king’s house there are many accusations.
“We have not defaulted”, insists Joel Weinshanker, who was a managing partner of Elvis Presley Enterprises for a decade. “The state agency has failed,” 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, replied in an email. “EDGE serves as a conduit…Graceland Bonds must be redeemed from [taxes] all of which are generated at Graceland.” Her email states, “Neither EDGE, the city, county, state, or any ratepayer is responsible … for the refund.”
“Covid-19 has been the greatest crisis to hit the recreation and hospitality industry in history,” said a spokesperson for the Tennessee Department of Tourism Development. The state of Tennessee welcomed just 75 million visitors in 2020, down from 128 million the previous year, according to the department.
Graceland’s default may have implications for other tourist attractions and cultural sites nationwide that have promised revenue to raise funds.
But this bond offering is “unusually complicated,” which often indicates there could be problems down the road, said Matt Fabian, a partner at Municipal Analysis Management.
EDGE originally issued $104.3 million in Project Graceland bonds in 2017, some of which were not rated or identified as high risk. Different sources of Graceland revenue, tied to a host of new taxes – sales, tourism and property – have each been committed to different sets of obligations. About $20 million of those are now in default.
As for the firm that handled the legal language and drafting of the bond issue, “we’re not really aware,” read an email from Bass, Berry & Sims. A company representative added that “the company has no legal representation from any entity regarding the failure to issue bonds.”
Proceeds from the bond were used to fund a massive expansion, perhaps too ambitious, critics say, starting in 2015 and eventually adding new buildings and a 450-room hotel.
Also added were an Elvis automobile museum, a collection of over 100 of his sequined jumpsuits and other outfits, memorabilia and more about music history, including black artists who influenced or worked with Elvis. The singer’s ex-wife, Priscilla Presley, noted at the 2017 opener that “that’s what Elvis wanted.”
It worked. The hotel has received a coveted Mobil four diamond and twice hosted General Hospital’s annual fan convention. The cheapest adult ticket for the property, including a tour of the mansion, is $77. An ultimate VIP pass, encompassing new attractions, a private tour, lunch, and access to the singer’s private planes, cost $190.
“Years ago a visit was a drive-in, now required them to stay a few days,” Weinshanker said.
But as Graceland grew, the expansion pitted Elvis Presley Enterprises against the city of Memphis. In 2018, Graceland sued the mayor’s office for a delay in plans to build a concert hall that may have undermined the city’s non-competition with the FedEx Forum and the Memphis Grizzlies. (The mayor’s office did not respond to multiple emails.)
With that project stalled, Weinshanker began talking in interviews about a possible solution that amounted to heresy: moving Graceland out of Memphis.
Elvis Presley Enterprises owns the rights to the singer’s image and much of his music and is still partly owned 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.
At the height of Covid, the property was closed, or operating at reduced capacity, and revenues fell sharply.
But these financial challenges may prove to be temporary. Attendance has been boosted in recent weeks by the film “Elvis” by director Baz Luhrmann. It crossed the $100 million mark at the U.S. box office on July 15, “becoming one of the few films without superheroes or dinosaurs to reach that level,” Variety reported.
Attendance at Graceland in the second quarter of this year hit 200,000, Weinshanker said, more than all of 2020 and just 10,000 below the same quarter in 2019. “And people are spending more,” he said. he declares.
It also helps that tourism spikes in August, as the city celebrates Elvis Week (the singer died Aug. 16, 1977, at age 42).
There’s 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 call a “pilgrimage”.
Meanwhile, what happens to investors in defaulted bonds? They will only have to be patient. “Bondholders must wait until sufficient tax revenue is generated by Graceland,” EDGE said.
Clarification: This story has been updated to include additional comments from Bass, Berry & Sims.