The Business of HockeyDiscuss the financial and business aspects of the NHL. Franchise sales, valuations, TV contracts, ratings, expansion, relocation, the CBA and work stoppage discussion goes here.
As noted above, why would an owner want to sink money into buying an arena when the City is willing to let him generate and keep all the revenue he likes?
Because the lease terms will not be favorable. Any sort of change and you are looking at a challenge from GWI. Not so if they just buy the arena outright.
Because the lease terms will not be favorable. Any sort of change and you are looking at a challenge from GWI. Not so if they just buy the arena outright.
At the very least, the Coyotes' owners will be permitted to keep all of the revenues generated by the arena, I would think. That is better than owning it. What they might not get are additional subsidies, like an "arena management fee". That is why I don't see why an owner would want to buy the arena. He wouldn't get more revenue than is already on the table, would have to put money up front to buy the building, and forego any "arena management fee". Even with GWI in the picture, I expect that the city would put $10 million or so on the table as an "arena management fee", in addition to letting the team keep all revenues. Hard to beat that by purchasing the arena, I would think.
Because the lease terms will not be favorable. Any sort of change and you are looking at a challenge from GWI. Not so if they just buy the arena outright.
It takes a really unfavourable lease to make it less ideal than owning an arena outright. Even taking over the current lease agreement for nine more years (paying operating costs) and getting nothing from the city is better than having to not only finance the purchase of the arena but also pay property taxes on it in addition to the operating costs.
And then we'd have to ask whether or not the parking rights are included in this purchase, because those are apparently worth in the neighbourhood of $100M alone.
I realize it spoils the fun around these parts, but I still find it unbelievable that all of this time and energy is going into trying to solve this problem when there remains no realistic hope that enough people will ever actually show up to pay a reasonable going rate for these seats.
All of the backroom infighting; cupcake baking; oops reply-all emailing; finger wagging; lawyer hiring; grammatically-challenged and time-shifted faxing; Logan swaying; free beer and snuggie give-aways; bad math parking studies; Charlie Farquharson Councilor and Mayor Quimby groaning; and flat-out lying belies the rather obvious sense that this dog has been on life support for more than 3 years and should be given the dignity of finally being allowed to rest in peace. The dog was dead long before the circus came to town.
Toronto Police shot and killed another coyote last week. They seem to have the right idea.
At the very least, the Coyotes' owners will be permitted to keep all of the revenues generated by the arena, I would think. That is better than owning it. What they might not get are additional subsidies, like an "arena management fee". That is why I don't see why an owner would want to buy the arena. He wouldn't get more revenue than is already on the table, would have to put money up front to buy the building, and forego any "arena management fee". Even with GWI in the picture, I expect that the city would put $10 million or so on the table as an "arena management fee", in addition to letting the team keep all revenues. Hard to beat that by purchasing the arena, I would think.
Three words as to why it is favorable to own the team and the arena....
Tax Write Offs.
The arena and the team become two separate corporations. Team still pays rent to the arena(on paper anyway). Teams losses are tax write offs vs income generated by the arena.
This is a very basic synopsis, but it is the reason to own both. Sometimes it's the only way to make a franchise worth keeping.
So, Glendale needs at lest $152M for the arena (not sure if this is negotiable, or if any amount lower than that would be challenged by GWI under the Gift Clause), and the NHL says they will not sell the team for less than it paid, including its losses (guesstimate of $170M) - which would bring this transaction to $322M.
So, Glendale needs at lest $152M for the arena (not sure if this is negotiable, or if any amount lower than that would be challenged by GWI under the Gift Clause)
I don't think it would be seen as a gift if the arena were sold for less than $152M. Just because something cost a certain amount it doesn't mean it is WORTH that much. If it were sold for less than it is worth THAT could be a gift, cost shouldn't enter into the equation.
as noted above, why would an owner want to sink money into buying an arena when the City is willing to let him generate and keep all the revenue he likes?
Owning the arena also incurs annual fees such as 2.27% property tax bill, forfeits $500,000 per year from Glendale in renewal and repair payments, the owner will be required to pay for all police/security staff at prevailing wage, etc
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Originally Posted by XX
Because the lease terms will not be favorable. Any sort of change and you are looking at a challenge from GWI. Not so if they just buy the arena outright.
I don't follow you. Are you familiar with the current AMUL? Which terms do you think are unfavorable?
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Originally Posted by goalie41
Tax Write Offs. The arena and the team become two separate corporations. Team still pays rent to the arena(on paper anyway)
Can you explain what write off you would use and how it would exceed the income tax the lessor has to pay under non-residential tax code for payments received from the tenant (even if they're just on paper)? Unless you are thinking they can get the arena qualified as an exempt Health Care facility
Exactly. It's like the old idiom about marriage... "why buy the cow if you can get the milk for free?" A prospective owner wants the arena revenues, which Glendale has offered in each previous proposed lease agreement. In fact, they have offered to supplement the arena revenues with a subsidy in the form of an "arena management fee". So, I can't see why it is preferable to purchase the arena when a prospective owner can already negotiate to get all the revenue without any investment up front. Purchasing Westgate is a separate transaction, and has already been on the market for $40 million for any prospective buyer. It must be seen as a rather high risk investment, even at that price, since there were no bidders.
I'd have to disagree, the tide has shifted to owning where owning the arena is actually more profitable. I know winnipeg ownership had said they couldn't have made it work if they didn't own their arena. Here's a list of some other notables off the top of my head, apologies for any inaccuracies.
Philly
Toronto
Montreal
*Edm - I believe will own new stadium
Wpg
Van
Pitts (Not sure? - Its privately funded though)
Boston
Buff (? again not sure)
Ottawa
Chicago (50%)
These teams are probably tops in the league when it comes to profits
Feel free to add to the list or takeaway any that are in errror.
Anyways, it seems the new model is to hedge other income from Arena events against hockey ops.
Three words as to why it is favorable to own the team and the arena....
Tax Write Offs.
The arena and the team become two separate corporations. Team still pays rent to the arena(on paper anyway). Teams losses are tax write offs vs income generated by the arena.
This is a very basic synopsis, but it is the reason to own both. Sometimes it's the only way to make a franchise worth keeping.
I'd have to disagree, the tide has shifted to owning where owning the arena is actually more profitable. I know winnipeg ownership had said they couldn't have made it work if they didn't own their arena. Here's a list of some other notables off the top of my head, apologies for any inaccuracies.
Philly
Toronto
Montreal
*Edm - I believe will own new stadium
Wpg
Van
Pitts (Not sure? - Its privately funded though)
Boston
Buff (? again not sure)
Ottawa
Chicago (50%)
These teams are probably tops in the league when it comes to profits
Feel free to add to the list or takeaway any that are in errror.
Anyways, it seems the new model is to hedge other income from Arena events against hockey ops.
The plan is that Edmonton does not own the arena. The City would.
I'd have to disagree, the tide has shifted to owning where owning the arena is actually more profitable. I know winnipeg ownership had said they couldn't have made it work if they didn't own their arena. Here's a list of some other notables off the top of my head, apologies for any inaccuracies.
With all due respect, your list is full of inaccuracies and your entire thesis is erroneous.
That is how Glendale gets their revenge. Let every city, considering building an arena for the NHL, know what scum bags they are like.
Will it stop cities from building arenas to attract the NHL? Not sure but I doubt it will help. Hurting the NHL is the best the CoG can hope for.
They could publish all their transcripts from private meetings with NHL brass if they're not afraid of blowback on their end. Nothing else it'd shine light onto the NHL's negotiating tactics to show cities in the future what these guys do.
The arena, team and Westgate are all up for sale for the right price. The price of Westgate and the arena is at a historical low, and is about to start going up. There are major outlets going in next door. The arena has been mismanaged to the extreme and could easily generate more revenue for a new owner. A fixed asset like an arena is also a hell of a lot easier sell compared to a hockey team. Any hawks looking to snap up undervalued real estate are going to want a major tenant in the arena. Enter Greg Jamison.
The NHL would much prefer selling the team to a new owner, idiot or not, and reap the expansion fee to QC than the alternative.
Yeah, and the same thing was said when Westgate was originally built. And who has mismanaged the arena to the extreme? The NHL? Moyes? Both? How has it been mismanaged? I agree the NHL doesn't really manage the arena as evidenced by the
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Originally Posted by Fire Feaster
Why does Jamison want to buy the arena? Unless it will do the opposite of all other arenas and appreciate in value so he can flip it, owning it doesn't put him in a better situation than what the NHL has even without the "arena management" fee.
As mentioned before in these threads, there's a reason the main setup team owners want is to be the managers of a publicly built and owned arena. It provides them with all of the benefits and minimal downside.
There are benefits to owning the arena, especially if you think is has been mismanaged and you can turn around the distressed asset.
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Originally Posted by CasualFan
It's interesting that the report of purchase/leaseback of the arena avoids minor details like selling a public facility without noticing the sale, initiating a bid process, offering incremental participation, underwriting, or any of the other requirements to privatize a public asset.
In the merry-old-land of Glendale after you convince the new owner to go against decades of the pro sports business model and buy the arena, you just spit in your hand, shake on it and it's done.
CF rides to the rescue and provides the spit!
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Originally Posted by Whileee
Exactly. It's like the old idiom about marriage... "why buy the cow if you can get the milk for free?" A prospective owner wants the arena revenues, which Glendale has offered in each previous proposed lease agreement. In fact, they have offered to supplement the arena revenues with a subsidy in the form of an "arena management fee". So, I can't see why it is preferable to purchase the arena when a prospective owner can already negotiate to get all the revenue without any investment up front. Purchasing Westgate is a separate transaction, and has already been on the market for $40 million for any prospective buyer. It must be seen as a rather high risk investment, even at that price, since there were no bidders.
So true. Westgate can probably be had for even less than that $40 mil. Here is a wildcard for you though, with the mayor and others leaving, does the lawsuit against the casino get dropped and become part of the revitalization of the area?
Quote:
Originally Posted by goalie41
Three words as to why it is favorable to own the team and the arena....
Tax Write Offs.
The arena and the team become two separate corporations. Team still pays rent to the arena(on paper anyway). Teams losses are tax write offs vs income generated by the arena.
This is a very basic synopsis, but it is the reason to own both. Sometimes it's the only way to make a franchise worth keeping.
YOu actually mean revenue transference or leveling or tax minimization. I can write anything off. the key is offsetting revenues with expenses in order to minimize the tax liability. Let's say the hockey team made a profit of $5 mil but the arena lost $5 mil. By charging the $5 mil in rent the hockey team made nothing and the arena broke even. Accounting gymnastics.
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Originally Posted by Joey Jr Shabadoo
So, Glendale needs at lest $152M for the arena (not sure if this is negotiable, or if any amount lower than that would be challenged by GWI under the Gift Clause), and the NHL says they will not sell the team for less than it paid, including its losses (guesstimate of $170M) - which would bring this transaction to $322M.
Any takers?
Maybe they should contact the three tha trecently won the Mega Millions??
Quote:
Originally Posted by DocBrown
I'd have to disagree, the tide has shifted to owning where owning the arena is actually more profitable. I know winnipeg ownership had said they couldn't have made it work if they didn't own their arena. Here's a list of some other notables off the top of my head, apologies for any inaccuracies.
Philly
Toronto
Montreal
*Edm - I believe will own new stadium
Wpg
Van
Pitts (Not sure? - Its privately funded though)
Boston
Buff (? again not sure)
Ottawa
Chicago (50%)
These teams are probably tops in the league when it comes to profits
Feel free to add to the list or takeaway any that are in errror.
Anyways, it seems the new model is to hedge other income from Arena events against hockey ops.
OT: I'm afraid that the Marlins may be learning this the hard way in a few years.
I really agree with this. Baseball is likely giving the WBC finals for the next few tourneys to try to help as much as possible. If you look into it, there are still uneasy feelings over this stadium and how it got financed...
I really agree with this. Baseball is likely giving the WBC finals for the next few tourneys to try to help as much as possible. If you look into it, there are still uneasy feelings over this stadium and how it got financed...
If Marlins Park doesn't work for 81 dates, 84 every 4th year will make it a fraction better but it's not going to make the difference between success and failure.
(Besides, can they really risk Cuba playing in Miami?)
Although having the American national season opener live on national TV in your brand new stadium with new manager and your opponent takes a no-hitter against you into the 7th...
I'd have to disagree, the tide has shifted to owning where owning the arena is actually more profitable. I know winnipeg ownership had said they couldn't have made it work if they didn't own their arena. Here's a list of some other notables off the top of my head, apologies for any inaccuracies.
Philly
Toronto
Montreal
*Edm - I believe will own new stadium
Wpg
Van Pitts (Not sure? - Its privately funded though)
Boston
Buff (? again not sure)
Ottawa
Chicago (50%)
1) For the most part, Consol Energy Center (Pittsburgh) was not privately funded unless you use a very liberal definition of private funding.
2) Hedging arena revenues against team losses can also be done if you are the arena manager and get all arena revenues. You don't need to actually own the building. That's what the Pens, Panthers, Coyotes and likely others do, and that's what the Nordiques 2.0 will do if they happen. To own vs. to rent is entirely dependent on the terms (rent, arena management revenues etc) the team can get with the owner of the building -- if rent is low enough and/or arena management revenues are high enough compared to financing charges and property taxes then it's better to rent, otherwise it's better to own.
