The problem is, a fancy new arena in a city the size of Calgary is a money-losing proposition. No banker in the world will agree to finance it out of its future cash flow, because it's not going to pay for itself.
That's why public money is needed, or failing that, a huge down payment out of the owner's own money – which he can't get without mortgaging or selling his other businesses.
If this is true (who knows if it is), then that sounds like a "you" problem, not a "me" problem.
Or put another way, that sounds like an "Edwards/Flames/Flames fan" problem not a "taxpayer" problem.
As an aside: the Flames are worth $680 million USD. That implies a significant amount of cash flow to support debt, not to mention a valuable piece of collateral in addition to the building itself. The players make $80 million per year. There is plenty of collateral and cashflow within an NHL team in its entirety to support the financing of a building over 30 years.
If this is true (who knows if it is), then that sounds like a "you" problem, not a "me" problem.
It's true. And if it is Edwards' problem, then you have no right to tell him to spend his own money to fix it.
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Or put another way, that sounds like an "Edwards/Flames/Flames fan" problem not a "taxpayer" problem.
Then say goodbye to the Flames, and prepare to have no arena at all once the Saddledome reaches the end of its useful life.
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As an aside: the Flames are worth $680 million USD. That implies a significant amount of cash flow to support debt,
It doesn't imply anything. In the first place, stated franchise values are WAGs at best unless the franchise has recently been sold. There is no liquidity in the market and there are few comparable assets changing hands. In the second place, the values placed on luxury assets have no correlation with cash flow; and a sports team, to the owner, is definitely a luxury asset. One doesn't buy a Bentley because it's profitable to operate it as a taxi.
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not to mention a valuable piece of collateral in addition to the building itself. The players make $80 million per year.
That's an expense, and it eats up the majority of the team's revenue all by itself. The NHL as a whole is profitable, but three big-market teams – Toronto, Montreal, and the Rangers – make over half of the total profits. Small markets make little if any profit.
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There is plenty of collateral and cashflow within an NHL team in its entirety to support the financing of a building over 30 years.
No, there is not. You can't use money spent on players to finance a building, because it has already been spent and was contractually required to be spent.
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Sounds like Markstrom wasn’t too impressed with how the 2 Allstars handled the contract situation. Not in a bad way but perhaps he’s in the same opinion that you either want to be here or GTFO.
Good for Marky, I support his honesty.
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It's true. And if it is Edwards' problem, then you have no right to tell him to spend his own money to fix it.
Then say goodbye to the Flames, and prepare to have no arena at all once the Saddledome reaches the end of its useful life.
It doesn't imply anything. In the first place, stated franchise values are WAGs at best unless the franchise has recently been sold. There is no liquidity in the market and there are few comparable assets changing hands. In the second place, the values placed on luxury assets have no correlation with cash flow; and a sports team, to the owner, is definitely a luxury asset. One doesn't buy a Bentley because it's profitable to operate it as a taxi.
That's an expense, and it eats up the majority of the team's revenue all by itself. The NHL as a whole is profitable, but three big-market teams – Toronto, Montreal, and the Rangers – make over half of the total profits. Small markets make little if any profit.
No, there is not. You can't use money spent on players to finance a building, because it has already been spent and was contractually required to be spent.
It is not the taxpayers' responsibility to pay for the facility for a private enterprise because that enterprise can't control its own expenses.
As for a lender's ability to use the franchise itself as collateral: it's the lender's job to determine what the market value of the franchise might be and then subsequently determine how they want to integrate that value into their security package. The value of the Flames would certainly be material when added to the intrinsic value of the building (which would form the bulk of the collateral for the financing).
To be fair to Markstrom, he WAS asked directly by Friedman whether he thought the team was better with Gaudreau and Tkachuk out and Huberdeau, Weegar and Kadri in. If he did the interview with Rosen right after that (if I understand correctly they're all in Paris to specifically speak to the media), that probably would have been the same answer that he would have given to anyone regarding that topic generally.
So I like the conviction but I don't know if Markstrom was necessarily trying to take an indirect shot with his answer.
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It is not the taxpayers' responsibility to pay for the facility for a private enterprise because that enterprise can't control its own expenses.
Then you want the Flames to go out of business. Understood – but don't go telling Murray Edwards to go blowing his money on a losing proposition.
By the way, ‘can't control its own expenses’ is an insufferably moralistic way of phrasing the problem. The Flames don't have control over their own expenses, because the CBA dictates how much money they have to spend on player salaries. If they don't abide by those rules, they don't have a team in the National Hockey League. They aren't just spending money because they're too stupid to be cheap.
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As for a lender's ability to use the franchise itself as collateral: it's the lender's job to determine what the market value of the franchise might be and then subsequently determine how the want to integrate that value into their security package. The value of the Flames would certainly be material when added to the intrinsic value of the building (which would form the bulk of the collateral for the financing).
The value of the Flames' franchise is an opinion, nothing more, unless the team is actually sold. It would be a foolish lender who accepted such an obviously illiquid and intangible asset in lieu of hard collateral.
As for the intrinsic value of the building, there really isn't one. Privately funded arenas in Canada have a history of going bankrupt, because those arenas are very expensive to operate and can't be repurposed without losing most of their revenue potential.
Every major Canadian city has seen major-league arenas turn into white elephants. Some of those buildings are kept empty and maintained at considerable expense; some of them have been demolished at far greater expense. Two of them have been repurposed. Maple Leaf Gardens is now a supermarket with a university arena above it; the Montreal Forum is a multiplex theatre. Neither one of those uses generates anything like enough free cash flow to justify converting a $500 million building. Those sites are only economic to maintain because the construction costs in the 1920s and 1930s were much smaller, the buildings had long since been paid for and written off, and the repurposed structures only had to pay for the cost of the renovations.
In a city the size of Calgary, building an arena with private money is a stupid investment and everyone in the industry knows it.
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I have it on good authority Weegar was actually very impressed with the Flames facilities (locker room probably aside). Florida doesn't have a number of amenities we have behind closed doors.
It's true. And if it is Edwards' problem, then you have no right to tell him to spend his own money to fix it.
Then say goodbye to the Flames, and prepare to have no arena at all once the Saddledome reaches the end of its useful life.
This BoLevi's problem is he isn't a Flames fan I think, he just like to find something he can dump on the Flames, anything. He doesn't care about the Flames moving.
It is not the taxpayers' responsibility to pay for the facility for a private enterprise because that enterprise can't control its own expenses.
As for a lender's ability to use the franchise itself as collateral: it's the lender's job to determine what the market value of the franchise might be and then subsequently determine how they want to integrate that value into their security package. The value of the Flames would certainly be material when added to the intrinsic value of the building (which would form the bulk of the collateral for the financing).
Lenders secure loans against hard assets owned by the business or individual. They rarely lend against business value. They can take hard asset collateral - real estate, machinery and sell it. Can’t do that easily with a business, especially one with special sale restrictions like an NHL team. What’s more, the major owner is non-resident making it more challenging.
Private debt financing is an option but would be very costly.
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Sounds like Markstrom wasn’t too impressed with how the 2 Allstars handled the contract situation. Not in a bad way but perhaps he’s in the same opinion that you either want to be here or GTFO.
Good for Marky, I support his honesty.
I think Markstrom knows that the best player from that line last season is still on the team.
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