Westhead: Coyotes' survival hinges on arena deal battle

[Fugu]

Most NHL teams (with higher payrolls) require roughly $90 M in revenue to break even. Do the math, which assumes the Coyotes with gate revenue of only $17M (using this reporter's figures) only took in a maximum of $23M in all other revenue in order to lose $50M. What color unicorn do you ride?

Of course, the per game gate number the author cites to is ridiculously low, and it equates to an average ticket price of $30 for paying customers of around 13,200. In fact, the average Coyote ticket price was just over $56 in the 2013-2014 season, and because of reconfiguration, re-pricing, and inclusion of "premium" games for more attractive opponents, the average price for 2014-2015 was "reportedly" closer to $67. Subtract the fees the Coyotes don't keep, and let's be extremely conservative and say the average price is only $50 (my tickets in the lower bowl are over $100 each, but who is counting). Assume they comp 1,000 a game (which is higher than reported but I'll assume for argument's sake). Multiply 12,200 paying customers on an average ticket price of $50 a game, X's 41 game, and conservatively the gate figure was $25M. Forbes reported a gate figure of $27M for 2013- 2014, but who is counting. The point is, some of the loss numbers reported are "fantastical". You just don't get to $50M in loses. Particularly when where it came to the single largest expense of payroll, the Coyotes had the lowest payroll in the NHL, coming in below $50M when calculated in terms of actual cash.

Logic aside, it doesn't ever stop people from reporting unverified loses in the stratosphere. It really is silly.

For the record, I believe realistic loses of between $10M - $15M a year should be expected until attendance improves to more acceptable numbers of over 90% capacity, and they can squeeze a few playoff games out most years. The Coyotes hit the "out clause" in three years, and we rinse and repeat on relocation, etc.

We know their player costs. Add $15-20 MM for operations, conservatively. Add debt servicing. NHL "fees."

Just eyeballing it, I could easily see $35+ MM.

 

[checkerdome]

If we were to conservatively allow for $30 million for first year losses and again, conservatively, for $30 million of losses in the 2014-2015 season. the $50 million benchmark that triggers relocation has already been more than attained as we speak.

Astounding that $50 million in losses could be stockpiled so quickly!

 

[Fugu]

I read this article and I must confess, I am having difficulty connecting the dots. It is hard to separate fact from fiction. Some curious observations:

1.) The CoG is saying the Coyotes understated loses, and that is cause for breach of the Arena Management deal? How do the team's loses impact enforcement of a contract between the City and the Arena Manager? I'm not seeing a link. Perhaps the CoG is really saying that the Arena Manager is not accounting for fees owed to the City, but that would presuppose more revenue, and not necessarily greater loses. It doesn't make sense to me.

Perhaps it's as simple as the matter of accurate disclosure. Since the COG is giving them money, the requirement is accurate disclosure of expenses and revenues, especially if the loss side is used to trigger the out-clause potentially.

2.) Assume this is true (that someone lost more money than reported), why would the team understate loses? Does anyone really believe that the fans care whether it was $50M or JUST $34.5M in 2013 loses? There are also tax consequences and serious financial consequences with misrepresenting a company's financial condition. And, assuming basically no gate revenue, with national and local television money, merchandise and concessions, and revenue sharing, it is almost impossible with a payroll of around $55M, to lose $50M. The media has thrown around almost fantastical numbers when talking about team loses. This would assume that the Coyotes lost 5X's the next worst team in the NHL. I'm not buying that without a clear explanation complete with seeing the actual financials.

No, not really. What the owners do with tax filings, or other legal disclosures can be a private matter, with only the IRS having the right to know.

What they disclose to anyone else (as this is a private entity) will be stipulated in the contract between the two parties.

3.) Whether the AMF goes to retire the loan or not, it must be treated as revenue to EITHER the team or the arena management entity. And, if it is really going to pay down the team's loan, it is revenue on the team side of the ledger which would have to be accounted for against team loses. So add in $15M against the "larger" loses the audit supposedly revealed. If it is paid to the arena manager, who then uses that to pay down a debt owed by the team, than the money still needs to go on the team side of the ledger, but now not as revenue but as a reduction of expenses. Either way, it doesn't go into the ether simply because it is not used to cover direct operating costs.

I think this is really a nonissue. The lender, as I understood it originally, required the direct payment. However, if that is a problem for COG, well, it's easy for the AM to pocket the COG money, and pull money from the Coyotes side of the ledger to pay FIG. Then funnel the COG money into it's operation. It's just a shell game.

That said, everyone knew the money was going to the Coyotes, so I have no idea what this guy is on about.

4.) The old "Jobbing" naming rights were currently paying $1M a year so the author is a little wrong on that. The new naming rights are in excess of $3M a year. According to the arena management deal, 20% of that has to be paid to the City. Is the City saying the Coyotes have breached the contract by not paying the money, or is the issue the money is not yet due under the contract and this is much about nothing?

That would be a serious allegation, however I think if the contract says they have to pay COG 20%, the city will get 20%.

<snip>

6.) Does the CoG want to get out of this deal with the Coyotes? I think the answer is yes, and so this could be something fabricated by the City to advance an agenda of getting out of a deal it no longer likes, and maybe renegotiating a lower arena fee. Accordingly, it may have nothing to do with the Coyote's actual operating numbers, and more to do with politics. The funny thing is THIS SAME REPORTER also said City officials were pleased with what the arena manager was doing with increasing non-hockey related events, and the overall improvement in the conditions of Westgate and the other tenants due to arena operations. Reporting on these two facts seems inconsistent which should make a reporter ask which fact is really true. I would think the reporter would be careful not to be used and embarrassed by the City if they have an agenda that may cause them to bend the truth.

<snip>

As others have suggested, it may be posturing, but maybe not posturing for politics but for the request by IA to open up the deal to get some changes they wanted. We may not know everything that the AM side has asked of the city.

 

[JMROWE]

Start playing the funeral march for the Arizona Coyotes because they are about to be road kill & will relocate soon where who knows but this could of all been avoided if the NHL. just let the coyotes move to Hamilton during that whole fiasco back a few years ago but no they had do this the hard way & drag this out for years throwing money down the toilet by propping them up & the NHL. has to ask them selves this question was it worth it .

If the NHL. just let that sale go through with Balsille & let him move the coyotes to Hamilton we would not have this mess now you have the Florida Panthers & Carolina Hurricanes on the brink of relocation the NHL. could see as many as 3 teams relocating within the next 5 years .

{Mod}

 

[goyotes]

We know their player costs. Add $15-20 MM for operations, conservatively. Add debt servicing. NHL "fees."

Just eyeballing it, I could easily see $35+ MM.

Forbes reported the Coyote's revenue for 2013 -2014 at $80M. Seems people have mixed feelings about what Forbes reports when it comes to the NHL. I have no basis to accept or reject that number. Add gate revenues, US and Canadian national television contracts, local television deal, concessions, merch., sponsorship, and a full share of NHL revenue sharing, and I could see $80M not being unrealistic.

I guess my point is trying to get a true picture of the Coyotes financial situation from what reporters say, without having access to the actual financial statements and audit, is like a blind man explaining what the Mona Lisa looks like.

 

[CasualFan]

However, I'm seriously confused, or is Hughes that's confused, because COG knew the money would be going directly to the lender. There was a filing showing this was set up.

Sometimes, what a politician is looking for is a catalyst:

05-09-2015, 01:01 PM: Regardless, the most important people to that conversation may actually be the new Glendale City Council configuration. Assuming the audit finishes someday, it will give anyone who wants a pulpit on the subject an opportunity to start a narrative.

 

[goyotes]

Sometimes, what a politician is looking for is a catalyst:

Bingo.

 

[madhi19]

What is clear is that Glendale is having some serious buyers remorse & appears to be looking for a way out OR... it could just be cheap political talk & posturing. Thats pretty common. All bark & no bite.

My money on whining and barking for the next three years. When they do finally leave the backlash will be minimal. "See we tried, it those damn (New York lawyers) who screw us up!"

 

[aqib]

For some reason TSN hates American and I can't access the video from here. Can someone summarize whats in there thats not in th article?

 

[Killion]

My money on whining and barking for the next three years. When they do finally leave the backlash will be minimal. "See we tried, it those damn (New York lawyers) who screw us up!"

Could be, yes. Just like Green Acres only in a reverse parallel universe huh madhi?.

 

[Inkling]

The thing that has me shaking my head is the story that you have a majority owner of an NHL team and he won't meet with the city council that's partially bankrolling his team, apart from an offer of a 90 minute meeting in New York. It's obvious he spends little to no time where his team is actually located, or else he would presumably have been able to meet with the mayor by now.

Poor ownership seems to be the root cause of much of the NHL's troubles and it keeps coming up over and over again. They do a poor job at due diligence and they accept almost anyone. It's been going on for decades.

 

[ucanthanzalthetruth]

I'm taking a couple points home. The audit, apparently, has been completed. Why no one in the Phoenix media picked up on that is... well, I'm not sure what it is.


And it seems some on the COG council don't like the lease and maybe have figured out what we've all known. It costs the city more than it helps the city.

I am confused, I'm not really reading anything definitive at all here, it just seems to me like their government is trying to get out of a bad situation

If we were to conservatively allow for $30 million for first year losses and again, conservatively, for $30 million of losses in the 2014-2015 season. the $50 million benchmark that triggers relocation has already

Except it's a 5 year deal.

For some reason TSN hates American and I can't access the video from here. Can someone summarize whats in there thats not in th article?

If you use chrome (which you should) download Hola and change country to America.

 

[Glacial]

I think the NHL wants Seattle as the backup for the Coyotes though depending on the speed at which things unfold, Seattle may not be ready if the Coyotes come up quick or soon. Quebec City seems the most likely destination for a team that becomes suddenly available. I think Vegas is already on a timeline to get an expansion team and they aren't planned to be a landing spot for the Coyotes. Of course, if the NHL is planning to expand by 2 teams and it's Vegas & Quebec City, they may have to go to Seattle early (Key Arena and its issues IIRC).

We have to remember this is all still in talk mode to begin looking into this. A lot can go wrong inbetween to derail this process.

Start playing the funeral march for the Arizona Coyotes because they are about to be road kill & will relocate soon where who knows but this could of all been avoided if the NHL. just let the coyotes move to Hamilton during that whole fiasco back a few years ago but no they had do this the hard way & drag this out for years throwing money down the toilet by propping them up & the NHL. has to ask them selves this question was it worth it .

This has been the Coyotes saga routine for quite some time...

It feels like the odds favor the Coyotes staying at any given time because there's been so many false alarms. One alarm may be real but the Coyotes have been run over so many times, the tire tracks are starting to look like tattoos . They are nothing if not persistent.

 

[madhi19]

If we were to conservatively allow for $30 million for first year losses and again, conservatively, for $30 million of losses in the 2014-2015 season. the $50 million benchmark that triggers relocation has already been more than attained as we speak.

Except it's a 5 year deal.

It been said before but in business when all sides are hurting most contracts are not considered to be suicide pact. The big exception to that rule is always politic.

 

[Fugu]

The thing that has me shaking my head is the story that you have a majority owner of an NHL team and he won't meet with the city council that's partially bankrolling his team, apart from an offer of a 90 minute meeting in New York. It's obvious he spends little to no time where his team is actually located, or else he would presumably have been able to meet with the mayor by now.

Poor ownership seems to be the root cause of much of the NHL's troubles and it keeps coming up over and over again. They do a poor job at due diligence and they accept almost anyone. It's been going on for decades.

Article did state that there was a meeting planned, but COG had to cancel. Since then, Barroway has been in NY.

 

[Fugu]

Forbes reported the Coyote's revenue for 2013 -2014 at $80M. Seems people have mixed feelings about what Forbes reports when it comes to the NHL. I have no basis to accept or reject that number. Add gate revenues, US and Canadian national television contracts, local television deal, concessions, merch., sponsorship, and a full share of NHL revenue sharing, and I could see $80M not being unrealistic.

I guess my point is trying to get a true picture of the Coyotes financial situation from what reporters say, without having access to the actual financial statements and audit, is like a blind man explaining what the Mona Lisa looks like.

Isn't that site that Llama likes to track able to reverse engineer the actual attendance?

So they may get $20-27 MM in gate receipts. Another $10-ish MM for in-arena. $4-5 MM on the Fox deal.

That's not enough to cover player costs yet. Figure $14-18 MM from the NHL for revenue transfer, then the TV money and 'revenue sharing."

I cannot think of any other significant revenue streams.

 

[Rink Rage]

Coyotes statement from Craig Morgan who's crappy local reporter.

"There are so many mistakes in the TSN story today that there are simply too many to refute. For example, the revenues quoted are off by a significant factor; the Coyotes no longer have a banking relationship with Fortress; the Coyotes are in compliance with the arena management agreement and there is no basis whatsoever for the city to assert a material breach, and on and on.”

I don't believe this tells us anything at all, but ok.

 

[Wolf357]

This will never end...just goes on and on my friend...

 

[wildcat48]

Cupcakes anyone?

 

[Fugu]

Coyotes statement from Craig Morgan who's crappy local reporter.



I don't believe this tells us anything at all, but ok.

I raised the exit of Fortress in the first posts in this thread, but don't look at Westhead-- in the sense that he's QUOTING a Glendale Vice Mayor. Isn't that the guy who brought up Fortress? Shouldn't he have access to city filings?

 

[Evil Doctor]

Two questions.

Why is Barroway making payments, and why does Daly comment on that?

Well it's possible he received his majority stake with the promise of making regular payments to pay it down. Something like $1/week for the next 80 million weeks. How can you miss a payment like that? If he has a really big couch, he's set!

 

[MaskedSonja]

It does seem odd that looking up this story on Google, only TSN seems to have this story-I get more info by far reading the links and discussion on the BOH boards.

Just wondering what the chances are that someone at TSN has been following the boards and then comes up with this story. There are so many shades here and so many legalities that have been discussed on these boards over and over, we certainly don't have all the details, yet a TSN "investigation" somehow comes up with all the answers and definitive details? I'm skeptical. yes there are things that have been discussed and certainly there are question marks-but I just situation as being rather far from a "Glendale one meeting away from deciding Yotes fate" type of suggestion that TSN seems to be pushing here.

Not questioning about the audit itself-been lots of discussion on that-just skeptical of TSN and their sudden "revelations".

 

[TheLegend]

Cupcakes anyone?

Wins the internet!!

I raised the exit of Fortress in the first posts in this thread, but don't look at Westhead-- in the sense that he's QUOTING a Glendale Vice Mayor. Isn't that the guy who brought up Fortress? Shouldn't he have access to city filings?

Which leads one to ask again, just how much does anyone in Glendale's city government know what they're talking about.

We've been over that topic more than once.

 

[Fourier]

Your not alone in being confused as this is like something straight out of the Twilight Zone. Spacetime Continuum. I seriously had to look at the date of this article to make sure it wasnt from the fall of 2013 as it was then that IA filed publicly to have the AMF's paid directly to FIG. Publicly. On the record. Inf easily obtained. That Council Members & the Mayor were unaware of this I find very very hard to believe. Im like kinda Gobsmacked theyd be so out of it, completely out to lunch.

Absolutely crystal clear certainly to everyone here what was going on, that those so called AMF's were not going to manage the facility but were being funneled to FIG in covering IA loan pursuant to the purchase of the club. Direct subsidy. Yet Goldwater did nothing, reporters either skirted the issue altogether or were unaware entirely, I have no idea really. But this report, its like a report that tells one "water is wet". Weve known this for 2yrs and its "breaking news" to the Vice Mayor & Council in Glendale? How insane is that? Mind blowing.

And no, the numbers never did add up or make any sense whatsoever. This has just got to be the richest arena management fee ever paid to anyone anywhere on the face of the planet. I just dont know what to make of this latest development. Its like suddenly one morning the Vice Mayor wakes up from the delusion, the spell broken or what? Like a drunk suffering from alcoholic blackout then being told what a horror story he'd been & created and now suffering pangs of shame, humiliation & regret? This is at best dysfunction, ignorance; completely schizophrenic at its worst. I mean.... Im just.....

This really is the cockroach of all BOH topics. Not even a nuclear explosion could make this saga go away.

 

[PCSPounder]

I guess I'll ask these questions again, though I've already got the official Killion response that scored big on artistic expression the first time:

Am I right to believe that the catalyst for this IS someone in CoG?

Am I also right to believe that the impetus for the status quo is ALSO someone inside CoG?

Would it also be right to assert that the former has a financial background and the latter more political?