Quote:
Originally Posted by nfotiu
All posturing aside, Ken King's comment that this deal doesn't make financial sense for the Flames may be valid. It may be true that they don't think they can make enough extra revenue to cover their portion of a 600 million dollar arena. If the people of the city aren't willing to contribute more than 200 million, then what?
It brings up the questions of whether Calgary really needs a 600 million arena. It becomes all about Edmonton I guess. If they didn't get theirs the public pressure for a new building here would be far less. I get it though, it's irrational and silly, but it's hard for most Calgarians to accept that Edmonton can have a new, shiny arena and we can't.
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I think this is spot on.
Using forbes data for operating income and making the following assumptions ...
1) Forbes operating income is for hockey only revenue and expenses
2) Operating income grows at 2.5% year per year
3) 10% discount rate used for NPV
4) Building at a cost of $600M 100% paid by CSEC
Investment NPV is a loss of $345M
So then you ask what is the non hockey income? Don't have that, but I'd have to assume it's less than hockey related income as a starting point. But if I make it equal to hockey related income then the NPV of the building investment improves to a loss of $145M, still doesn't make sense.
So really as you say, they can't really go it alone. The deal is dead if that's their option.
So you can get $200M covered by the city, and then risk that the market can handle the tax on the tickets (is a risk if people won't pay the hike), and you're left with a $200M investment.
$200M gets you a +NPV of 18M on hockey income, and $217M IF you assume non hockey related revenue is equal.
So in a sense they may have to get this or the building concept is dead.
But to suggest there is another market out there that would be better is foolish. The only way they move is if someone gifts them an arena and even at that they'd better have good data to make sure they get positive operating income from a non traditional market.