Quote:
Originally Posted by Canada 02
the Pens opened their new building in 2010. They didn't seem to get much of a bump in value from it; there was an increase from 2009 to 2010 of about 5.5%
The Devils opened their new building in 2007 - that coincided with an increase in valuation of ~25%
The new CBA and TV deals seem to have had a much more substantial effect across the league
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I crunched numbers a few months ago...a new arena has negative value to the franchise. Hence why they 'need' a subsidy
100 luxury boxes at 200k per season is 20 mln. You'd lose about 4000 seats at 20 per game (nose bleeds) and add 1000 at 50 game. So about 19 mln profit before tax.
Throw a cost of capital of 5% on the borrowing of a new arena at 300mln and a cost of 12% on your own equity of 100mln...and you're at 27mln in additional arena cost per year.
So...19mln-27mln is -8mln. That would reduce profit by 8mln per year. How do they bridge the gap?
1) ticket fees of 4$ a game would bring in 2mln
2) no idea how much a concert brings in but assume its 5$ a ticket; so 50k per concert. Even an additional 20 concerts only bring in 1mln.
3) ask for govt hand out
4) Call it a cost of business. If Murray bought the team for 19 mln and it is worth 400mln now...he's not not doing too bad on an investment he did "for the community." The arena is simply a necessary cap ex investment required for his business and has a cost associated with it.
If they do 1 and 2, they're down to 6mln per year in economic losses and positive cash flow if you ignore the 100mln equity investment. So the flames could ask the government to pitch as little as 0 and as much as 150mln in low interest or no interest loans. The value of 150mln in government interest free loans is 7.5mln, enough to make an arena viable.
