Forbes slams Levitt report
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11-12-2004, 09:11 AM
Join Date: Nov 2004
Originally Posted by
According to the article Forbes published last year that isn't true.
The only reason I can come up with for franchise values increasing this year after last year's decline is confidence that the new CBA will insure profitability.
Forbe's also stated at that time:
I'm sure NHL is over reporting losses. When entering negotiations try to make as strong as a case as possible. Likewise the NHLPA is going to look at the numbers and under report the losses counting everything tangentially related as revenues. The bottom line is there wouldn't be a lockout if everything was peachy.
Acording to the article you cited the average franchise value has increased by 31% over the last 6 years to $163 million. The average value of a team 6 years ago was $112.5 million. The average appreciation was $50.5 million. Forbes reports that the league lost $96 million last season and $123 the season before making the average loss $109.5. In a 30 team league that's an average $3.65 million loss per team per year. Over the course of 6 years it's $21.9 million per team. An owner who bought a team at the average price of $112.5 million six years ago and sold it for $163 million today realizes a $50.5 million gross profit. After deducting the $21.9 million loss incurred over those 6 years, there's a $28.6 million net profit. Investing $112.5 million in a 72 month CD with a 3.75% APY, yields approximately $28 million in interest. That's really conservative too. There's much better deals than that available for the high rollers. Even if we use Forbes numbers, the return on investment isn't acceptable.
First read again 2002/2003 increase was 5%, yes less tham the previous 4 years but who gets a 5% increase asset valuation? That is keeping pace with Vancouver real estate and we have one of the strongest real estate markets in North America.
Second, the impact of the lockout, which the owners have started, is going to heavily impact asset valuations. Why the NHL is a fan based business, will the NHL be able maintain it's fan base and income when this is all over??
Third, let's look at a real world example of return of investment. The Gund brothers sold the Sharks for 147 million they bought the team for 50 million, that is a a 97 million dollar profit, minus what you see as a loss, 28.5 million, the return would be 68.5 million, that is a solid return on investment in the corportate world. It aslo with the current 6 year trend is a safe investment.
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