I don't know about that. I think both sides can walk away, as the arena isn't urgent need. What makes it easy is that both parties want the same outcome: A new arena.
What makes this easy an easy negotiation is that both sides can work out the financials quickly and accurately. You have very good accuracy on ticket revenue as you will know total seats, additional luxury boxes and average ticket uplift for a new arena.
You can also get a good idea of additional concession revenue by looking at other new arenas that focus more on experience. Note that I wouldn't be surprised to see outside vendors in the next arena, as the Flames have not shown any skill in managing concessions so far.
I think this negotiation comes down to who pays what and when do they pay it.
The reason for this is the Flames likely have a healthy discount rate for any investment they make (I'd guess 12-15%). This means future revenues get diluted down to nothing, while immediate spending comes in at almost full dollar value. Basically, Flames spending money now means they take a lot later.
The reason this is important is that governments don't look at IRR. They often look at borrowing costs. So city can raise capital significantly cheaper than 12%-15%.
I suspect a deal where the Flames put less money in to start and more money in later would be easier to make the numbers work.
Ultimately, I think you could convince the Flames that a new arena where the additional revenues are largely offset by an increased yearly rent would be a good outcome. It would improve player experience. It would add prestige to owners. It would increase the value of the franchise. It would also make fans enjoy the product more.
The big caveat here is Ken King. He does not seem terribly skilled or competent in anything he has undertaken for the Flames. My experience with people like Ken is that he may not recognize / understand the implications and financials of the deal. Instead he will cling to an outcome that is never going to occur. His involvement and champion the past version of an Arena would be the biggest stumbling block to a deal.
Quote:
Originally Posted by ynwa03
That's a terrible starting point.
I get the feeling the deal will be better for the Flames than the City. Otherwise the Flames would have been more receptive to the last deal. And this time around, it will be moved along under the guise of NDA's, close door negotiating, and no public input.
I hope i'm wrong, but the only way a deal gets done is if public funds are used in a way that massively benefits the Flames. Why else would the Flames come back to the table?
|