Phoenix CXXXVI - Coyotes up for sale again

[Cor]

Why would they be investing Now, and not at any one of a dozen better times in the past decade?

Edit: this thread is nothing but a megathread with the cheapest of paint jobs over it.

Recently became a hockey fan? Maybe just got the money to buy a team? Thinks they can be the one to bring change?

 

[Tom ServoMST3K]

Recently became a hockey fan? Maybe just got the money to buy a team? Thinks they can be the one to bring change?

In terms of recently becoming a hockey fan - maybe that's a reason.

The other two. I look to history.

Whats your estimate of how much of their own money combined, not lent, did IA and Barroway combined put into this team.

Mine is under 100 mill. Way under 100 mill.

The price tag now is Way, way higher. This would be probably the worst time ever to buy this particular team.

And If someone has come into enough money since Barroway joined the party, there is no way their financial advisor would let them waste it on the yotes.

 

[Mightygoose]

In terms of recently becoming a hockey fan - maybe that's a reason.

The other two. I look to history.

Whats your estimate of how much of their own money combined, not lent, did IA and Barroway combined put into this team.

Mine is under 100 mill. Way under 100 mill.

The price tag now is Way, way higher. This would be probably the worst time ever to buy this particular team.

And If someone has come into enough money since Barroway joined the party, there is no way their financial advisor would let them waste it on the yotes.

Perhaps the situation is very dire and Barroway can only hang on for so much longer, springing a band of investors and possibly past players making one last attempt before the financial reality kicks in and some tough decisions needing to be made.

According to Pagnota, this is expected to close by the end of the year, possibly early 2019. Looking at the early part of the timeline, I would think we should hear names (doesn't have to be sale agreement) from the mainstream media at the minimum by next Monday month's board of governors meeting.

Looking at the later part of the timeline, we should hear by the board meeting during the All Star Game in late January.

Otherwise, they remain a mystery group for a reason.

 

[Tom ServoMST3K]

Perhaps the situation is very dire and Barroway can only hang on for so much longer, springing a band of investors and possibly past players making one last attempt before the financial reality kicks in and some tough decisions needing to be made.

According to Pagnota, this is expected to close by the end of the year, possibly early 2019. Looking at the early part of the timeline, I would think we should hear names (doesn't have to be sale agreement) from the mainstream media at the minimum by next Monday month's board of governors meeting.

Looking at the later part of the timeline, we should hear by the board meeting during the All Star Game in late January.

Otherwise, they remain a mystery group for a reason.

Has group ownership ever worked well in the NHL?

 

[lifelonghockeyfan]

Has group ownership ever worked well in the NHL?

If it's a money losing proposition, in hockey or any business, some co owners will want out. I don't know how the Coyotes have held on for so long. It's been a constant shell game of real estate and arenas. Little thought ever went into the NHL team.

 

[Mightygoose]

Has group ownership ever worked well in the NHL?

Depends on how much stake the lead investor has...assuming there is a significant one.

Edmonton had EIG until shortly after the salary cap came in and Katz bought out the partners.

Nashville had group ownership for a while after buying out Leopold.

Then there was Ice Ariz.....oops...never mind...

 

[aqib]

His net worth is around $400MM...so likely not...
unless he sells the Suns...valued at $1.2B...
and buys the Coyotes instead...

He bought the suns for about $400 million. Lets say he used a lot of debt to buy them. Now they if they are worth $1.2 billion, unless he has been using the team to as collateral for other debts that additional $800 million would be reflected in his networth wouldn't it?

 

[aqib]

No - but this is based on my memory:

Gary Bettman took over as NHL Commissioner on 1 February 1993. By that time, the NHL had 24 playing franchises and two more granted in December 1992. Also, the prior interim administration had "allowed" the move of the Stars to Dallas.

In 1994 the lockout happened. The attempt was to get a hard cap in order to have cost certainty. One of the reasons given by Mr. Bettman was that without cost certainty and a cap there will be teams moving. At the end of that lockout-shortened 1995 season the Nordiques were sold off to Comsat to play in the under construction Pepsi Center in Denver.

At the beginning of the 1995-96 season the Jets were sold to Burke and Gluckstern with the intent on moving the team. There was the ill-fated attempt to move the team to Minneapolis, then landing in Phoenix. I believe the bids for the next expansion started in summer 1996.

Pepsi Center wasn't under construction yet. They didn't start building until 1997. IIRC Joe Sakic's offer sheet from the Rangers was part of the team's leverage to get the city to make the deal

 

[aqib]

That’s great and all, but who is going to pay for that proposed arena? Because if the suns get the Reno done at the TSRA for their cost of between $300-$400 million you have another arena to compete for events. Does that work for either arena?

LA has staples, the old forum, the sports plex where the clippers used to play and the Honda Center 45 minutes away. And now Ballmer wants to build one for the clippers.

NY has msg, Barclays, Nassau, and the isles want to build at Belmont. Plus the prudential center isn’t that far away either.

LA and NY have the population to have that many buildings so close but does Phoenix?

Is it financial viable for 2 buildings to be profitable in that area?

The Clippers arena has been torn down and and MLS Stadium is there now

 

[cbcwpg]

Has group ownership ever worked well in the NHL?

It's actually against the NHL Constitution... unless Gary really wants the team to stay.

But, over the last few season with the yotes we saw what happens with quasi group ownership.. in-fighting and buyouts. The bigger the group the more problems you are going to have in the long term. The Coyotes need a single strong owner with insanely deep pockets willing to put in the time and effort, and risk their money.

 

[cbcwpg]

Well it’s good to see this thread get relegated into a bunch of “what if’s??” or stomping over old ground again. With an occasional drive by thrown in...

Been a few days since Pagnotta dropped his little “bombshell” and not one person usually associated with news like this has touched it.

Makes you wonder.

That's because they have heard it before, seen what becomes of it, and decided it's not worth giving it any notice.

Not every 40 car pile-up is worth stopping to look at.

 

[powerstuck]

At some point, the NHL will be forced to reconsider that stance. A team that hemorrhages money isn't going to be good for the NHL or its owners. If you can't find a suitable arena and responsible ownership willing and able to keep it in Arizona and turn it into a profitable franchise, then you might as well cut your losses and move on.

I used to have the same opinion...but it's been 20 years Coyotes haven't been profitable. NHL is way to invested publicly to just pay the losses and move on. Besides, soon you will have two strong voices at the BOG table who will work their best to keep the Coyotes sale/value above $500M or more.

Many including my self had doubts about Carolina's sale price. Karmanos looking for that much, no way he can get it, Vegas overpaid, reason why Quebec didn't get in etc. Well, truth is, Karmanos did sell his controlling part of the team for an amount that puts the value at $550M. So, maybe Coyotes will never be sold at 100% of shares, but what ever price they are sold for...will by some magic accounting, point out to a global value well north of $500M.

 

[Tom ServoMST3K]

I feel like whenever a yotes topic pops up after a megathread hiatus, we see a huge increase drive bys that just bash the market or call for relocation.

Threads like this give the regular megathread crew a bad rap IMO.

 

[BattleBorn]

I used to have the same opinion...but it's been 20 years Coyotes haven't been profitable. NHL is way to invested publicly to just pay the losses and move on. Besides, soon you will have two strong voices at the BOG table who will work their best to keep the Coyotes sale/value above $500M or more.

Many including my self had doubts about Carolina's sale price. Karmanos looking for that much, no way he can get it, Vegas overpaid, reason why Quebec didn't get in etc. Well, truth is, Karmanos did sell his controlling part of the team for an amount that puts the value at $550M. So, maybe Coyotes will never be sold at 100% of shares, but what ever price they are sold for...will by some magic accounting, point out to a global value well north of $500M.

How does the unprofitable for twenty years work out if they value the team at $500MM today? Surely the team’s appreciation offsets some of the losses.

I feel like whenever a yotes topic pops up after a megathread hiatus, we see a huge increase drive bys that just bash the market or call for relocation.

Threads like this give the regular megathread crew a bad rap IMO.

The megathread is dead.

There’s no need to keep mentioning it.

 

[Dirty Old Man]

I feel like whenever a yotes topic pops up after a megathread hiatus, we see a huge increase drive bys that just bash the market or call for relocation.

Threads like this give the regular megathread crew a bad rap IMO.

As opposed to those in the "regular megathread crew" that just bash the market and call for relocation? As if doing it repeatedly somehow makes it okay?

 

[TheTotalPackage]

Because anyone who examines the history of this team will realize that if someone actually competent were to own it and "make a go of it" as a poster so eloquently put it above, it could actually turn a profit at some point.

The Coyotes are a distressed asset, but many, many NHL teams have been distressed assets at one point or another and have yet survived. Ask around Chicago how much money the Blackhawks made - and how full their arena was - during the "Dollar" Bill Wirtz years. Or recall how the Hamilton Penguins almost became a reality.

Is there someone actually competent out there that is going to invest a whack of money to make a go of it though?

I'd say a distressed Blackhawks franchise would have had more appeal to potential owners/investors than the distressed Coyotes franchise we are seeing right now.

 

[Tom ServoMST3K]

As opposed to those in the "regular megathread crew" that just bash the market and call for relocation? As if doing it repeatedly somehow makes it okay?

Besides Llama, no regulars were doing that.

 

[NorthCoast]

From where do you get your 30% number?

I'm not arguing, but, for example, league wide HRR has increased probably 20% over the last 5 years, and the national TV contract hasn't changed. Where is the $$ coming from to increase that league-wide HRR?

Okay, so I stretched it a bit because I knew the Sens are in the 35-40% range and figure that maybe another team is even higher. Also, I'm copying the following straight from another post so it might read a bit weird out of context, but it should answer your question.

----------------------------

BREAKDOWN OF NHL TEAM REVENUE SOURCES

Here's a chart just on Ottawa revenue over the years. I go with 120 because obviously 2016/2017 had the playoff bonus. (If you look at teams on Forbes you will see this is in the middle 3rd of revenues)

I may be off a little on some of these but essentially, it is the TV deals:

45 mil - Tickets
15 mil - NBC, National US TV
30 mil - TSN, Local Coverage
15 mil - Sportsnet National CAN TV
2 mil - stadium naming rights
8 mil - Merch, concessions, parking, arena advertising, other
5 mil - Revenue sharing

All the TV numbers above can be found online so I can't imagine the forbers numbers are too far off. Running published attendance numbers times avg. ticket prices gets you pretty close to the ticket number. We know that the league provides about 150 mil in revenue sharing every year to 20+ teams. I'm guessing at the naming rights but they opted out of the previous naming rights deal early that was 1.2 mil per year, so guessing this one must be close or above 2 mil per year.

--------------------------------

It's been a few months since I did the above research and couple things that have come up in discussions since:

- Is concessions part of gate, if not...then what about tickets that include concessions/parking
- I was wrong on the naming rights. The figure above likely too high. Basically, Melnyk didn't opt out for a more lucrative sponsor. He opted out of the previous naming sponsor because it was a bank, and the bank would give/extend his load, and he got pissy and cancelled the contract. My owner = Facepalm.
- There is obviously an ongoing debate on the total revenue numbers because any team that owns or controls the other arena business (concerts) fixes the accounting to pull more revenue out of Hockey Related Revenue into Arena revenue, and vice-versa with costs, in order to shaft the players.

Is this the standard revenue breakdown for every team. Definately not. A team like SJ gets almost no local TV rev and so the % they get from gate is probably 60-70%. But for most Canadian teams I am pretty positive gate rev is well under 50%. A very quick search on MLSE and I can see 110+ mil in TV contracts and naming rights out of their 211 mil avg revenue.

I keep posting this info and nobody challenges it, yet not a lot of people seem to realize that when they talk attendance, it is vastly different than revenue, especially if you are talking Canadian teams.

Appreciate that at least one person is reading

 

[cbcwpg]

How does the unprofitable for twenty years work out if they value the team at $500MM today? Surely the team’s appreciation offsets some of the losses.

And that's the whole debate... the actual value of this franchise.. in Phoenix. The value of the team is only $500MM because Bettman says it's so. Do you honestly believe someone is going to walk up to this franchise and plop down $500MM in cash to buy it and assume all the debt on top of that? I don't. Assuming it's actually sold. I see it being sold, and kept where it is, for $100MM - $150MM in cash and full debt assumption, with the NHL telling everyone it was sold for $600MM.

An out-of-town sale, as an option, changes everything.

 

[BattleBorn]

And that's the whole debate... the actual value of this franchise.. in Phoenix. The value of the team is only $500MM because Bettman says it's so. Do you honestly believe someone is going to walk up to this franchise and plop down $500MM in cash to buy it and assume all the debt? I don't. Assuming it's actually sold. I see it being sold, and kept where it is, for $100MM - $150MM in cash and full debt assumption, with the NHL telling everyone it was sold for $600MM. An out-of-town sale changes everything.

Okay, so say it’s worth $500MM and portable. It’s the same question. Has it been unprofitable? Also, investing $150MM cash and taking on $350MM in debt isn’t financial trickery or anything, that’s selling the team for $500MM.

People didn’t think the Canes would sell either, and yet here we are not talking about the sale of the Canes anymore.

 

[powerstuck]

How does the unprofitable for twenty years work out if they value the team at $500MM today? Surely the team’s appreciation offsets some of the losses.

Honestly I am not knowledgeable enough to explain it. But sport franchise values are very speculative. Some teams own arenas, other rent them, yet prices do not necessarily reflect the difference between a team A (owner) and team B (renter) in their respective values (just one example).

So, why are TML worth over 1B while other teams are worth under 200M (lets take Forbes numbers) ? TML may be more profitable than some teams but then again. It cannot be championships/history either...or does it. Habs have won more cups than anyone else but are not the most worthy franchise. They are not on the bottom either.

I guess, a good part of the ''value'' is the ''privilege'' of owning a pro-sports hockey team in the best hockey league in the world.

 

[MNNumbers]

And that's the whole debate... the actual value of this franchise.. in Phoenix. The value of the team is only $500MM because Bettman says it's so. Do you honestly believe someone is going to walk up to this franchise and plop down $500MM in cash to buy it and assume all the debt on top of that? I don't. Assuming it's actually sold. I see it being sold, and kept where it is, for $100MM - $150MM in cash and full debt assumption, with the NHL telling everyone it was sold for $600MM.

An out-of-town sale, as an option, changes everything.

Too deep a dive, as usual, but here we go again:
NHL paid 140M out of BK
NHL owned for 4 years (it's 5 1/2 years since they sold to IA. Can you believe that?)
In those 4 years, I estimate the total losses at 50M, because they extorted Glendale for 25M/yr for 2 years.
That makes 190M.
IA owned the team for 2 years under the 15M/yr AMF. They admitted 35M losses in year 1, including an approx 15M buyout. Add that 35M and you get 225M. Add 6% interest on the already 190M debt (this is probably debatable because we don't know exactly how everything was structured. But the FIG load was 8-9%, so I'll take 6% for conservativeness) and you get about 235M.
Salary floor up in year 2. Fewer seats sold (marginally). I'll take the 20M from year 1, add 2M. 257M. Add interest, and you get 270M.
Year 3. Change the Arena Management Contract. Team loses, in net, maybe 4M extra. That makes 26M so we're up to 296M. Add interest on the 270 and you get about 310M.
Change of ownership, and Barroway comes in. No AM contract at all. Probably increases losses another 3M. Salary cap floor up maybe a total of 5M (again, conservative - this is back of napkin stuff), and you're talking 33M in losses. Now, we're up to 343M. Add interest and it's 360M.
Last year - let's do the same. 33M in losses. Interest of about 20M.
Total already invested in franchise: 410M. 240M of that is debt.
Add this year. It's going to be about the same, or slightly better. 450M or so what's invested in this franchise right now - cumulatively, by someone.

Let's say Barroway sells for 500M (Carolina sold for about that). That gets Barroway back his investment, and 50M extra for his time. It would, of course, be reported as a 500M sale. But the truth is that only 220M of that would actually be team value (the original 170 + the 50M for Barroway's pocket). The rest is debt. (Note: this excludes Barroway's 35M share of the expansion cash for the 2 places.)

This is the equation that a new owner works with, if he looks at the books closely:
He puts in 500M
Team is going to lose about 30-40M each year (again, I can't prove this, but this quick calculation is close enough for me).
Does the inflation of the franchise value league support those losses?
Does he have sufficient cash to support the losses year by year even if inflation keeps up the franchise value?
If he invests in a new arena, how much does that change the loss figure?
If so, by how much, and does he have deep enough pockets to support his part of the arena financing PLUS the team's losses?

Note: I'm not taking sides here. This is simply my best attempt to figure out what's actually happening.

 

[BattleBorn]

I think the mistake is taking the Coyotes at their word on losses. IceArizona was “losing tons of money” at a time when they were claiming they needed money to not move.

The fact that they haven’t moved makes me think they’re stretching the truth.

With a $70MM player payroll and no rent to speak of, I don’t see how it’s possible that they’re losing $33MM/year.

 

[Dynamite Kid]

Doesn't the article state only 49% of the team is for sale? Nobody is going to $500 for 49% of the team.

 

[MNNumbers]

Okay, so I stretched it a bit because I knew the Sens are in the 35-40% range and figure that maybe another team is even higher. Also, I'm copying the following straight from another post so it might read a bit weird out of context, but it should answer your question.

----------------------------

BREAKDOWN OF NHL TEAM REVENUE SOURCES

Here's a chart just on Ottawa revenue over the years. I go with 120 because obviously 2016/2017 had the playoff bonus. (If you look at teams on Forbes you will see this is in the middle 3rd of revenues)

I may be off a little on some of these but essentially, it is the TV deals:

45 mil - Tickets
15 mil - NBC, National US TV
30 mil - TSN, Local Coverage
15 mil - Sportsnet National CAN TV
2 mil - stadium naming rights
8 mil - Merch, concessions, parking, arena advertising, other
5 mil - Revenue sharing

All the TV numbers above can be found online so I can't imagine the forbers numbers are too far off. Running published attendance numbers times avg. ticket prices gets you pretty close to the ticket number. We know that the league provides about 150 mil in revenue sharing every year to 20+ teams. I'm guessing at the naming rights but they opted out of the previous naming rights deal early that was 1.2 mil per year, so guessing this one must be close or above 2 mil per year.

--------------------------------

It's been a few months since I did the above research and couple things that have come up in discussions since:

- Is concessions part of gate, if not...then what about tickets that include concessions/parking
- I was wrong on the naming rights. The figure above likely too high. Basically, Melnyk didn't opt out for a more lucrative sponsor. He opted out of the previous naming sponsor because it was a bank, and the bank would give/extend his load, and he got pissy and cancelled the contract. My owner = Facepalm.
- There is obviously an ongoing debate on the total revenue numbers because any team that owns or controls the other arena business (concerts) fixes the accounting to pull more revenue out of Hockey Related Revenue into Arena revenue, and vice-versa with costs, in order to shaft the players.

Is this the standard revenue breakdown for every team. Definately not. A team like SJ gets almost no local TV rev and so the % they get from gate is probably 60-70%. But for most Canadian teams I am pretty positive gate rev is well under 50%. A very quick search on MLSE and I can see 110+ mil in TV contracts and naming rights out of their 211 mil avg revenue.

I keep posting this info and nobody challenges it, yet not a lot of people seem to realize that when they talk attendance, it is vastly different than revenue, especially if you are talking Canadian teams.

Appreciate that at least one person is reading

Interesting NorthCoast. I'm counting about 115M before Rev Sharing there. What's more interesting to me is the not necessarily tickets, but rather LOCAL revenue. I think you are near in the details.

National Revenue:
NBC pays 200M/yr, so that's 7M to all teams.
Rogers pays 533M/yr, but I think 5% of that goes to each Canadian team, so that's about 26M.
33M PLUS league wide merchandise is all that is split Nationally.
For US teams, it's less, because their share of Rogers is 65%/24 or about 2.7% of the total to each team, which would be about 15M.

Everything else is local.

They say it's a gate driven league. Perhaps more correct is that it's a local revenue driven league.

And, that pertains to a Coyotes' sale because any owner is looking to raise awareness of the NHL team in the market, so his local TV contract can rise.