[News Roundup] CSEC/City arena deal UPDATED: Third Party Facilitator

[The Yen Man]

Originally Posted by Freeway

Plan A:
-City pays 40% and owns building
-CSEC pays 60%, operates building via lease and gets profits for doing so as fee for operating building

Plan B:
-City pays 40% and owns building
-Someone else (Oak View? AEG?) pays 60%, operates building via lease and gets profits for doing so as fee for operating building
-CSEC is a tenant of the "Someone else" group within the building, books dates from them and gets the revenue for those dates within the building

I mean, first off, this magical someone else sounds about as realistic as a unicorn, so I struggle to believe this someone else actually exists.

Second, the Flames will for sure be the primary tenants. Who else in town can guarantee at least 41 nights booked throughout the year? Plus, they'll be leasing the office space, gym facilities, etc. So they will for sure have a big say on how this thing is built, either way.

And lastly, if Plan B was how the city wanted to go about it all along, I fail to see how the Flames wouldn't already be on board. Get a publicly funded arena completely paid for by another party, assume none of the risks of owning a depreciating arena asset, and still be able to sell luxury boxes and tickets? Seems like a pretty sweet deal to me.

[Rutuu]

Originally Posted by dino7c

Compared to the rest of Canada, which is a low bar...the comparison made here was New York and the Las Vegas strip. The funding model suggested doesn't work in Calgary. Flames deal is the best the city is gonna get if they want an arena.

A few things that we need to be clear on as a fanbase:

1.The Flames are mid pack for capital value according to forbes, and the assumption is they are break even to profitable under the current arrangement.
2. With the current math a previous poster went through, relocation devalues the franchise by $100-$200m from the Forbes valuation
3. The city doesn't really want a new arena, they want a place to hold concerts/events...if you have been to those specialized venues they can be amazing compared to an arena. They also want a field house...and should probably have 5 already.
4. The Flames want a new arena so they can take their gate from under $2m to mid $3m per game like the Oilers. That extra money is coming from the fans, which is why a ticket tax is touchy with the CSEC, as that's "their" increase being taken. This lift in revenue will lift the capital valuation to $1bn+ like the Oilers just received.

Now with those comments in mind...someone would finance the arena, but they would charge the Flames market rates. They haven't even gone down the private path, because the playbook in North America previous to the past 5yrs has been to leverage public funds and maximize revenues and valuation. The big cities have stopped doing those stinky deals as populations have become more educated. It is not a LV, NYC, SF, etc thing. Its a Flames ownership group trying to get the best deal for them. If they REALLY needed a new building there are tons of debt funders that would work with the city and take a 3%-7% yield in a city with Calgary's demographics.

Finally...the Flames aren't moving.

[Rutuu]

Originally Posted by The Yen Man

I mean, first off, this magical someone else sounds about as realistic as a unicorn, so I struggle to believe this someone else actually exists.

Second, the Flames will for sure be the primary tenants. Who else in town can guarantee at least 41 nights booked throughout the year? Plus, they'll be leasing the office space, gym facilities, etc. So they will for sure have a big say on how this thing is built, either way.

And lastly, if Plan B was how the city wanted to go about it all along, I fail to see how the Flames wouldn't already be on board. Get a publicly funded arena completely paid for by another party, assume none of the risks of owning a depreciating arena asset, and still be able to sell luxury boxes and tickets? Seems like a pretty sweet deal to me.

I was catching up with some commercial property guys down here today and the equivalent of a Rona warehouse just went for under 4% yield (up 30%) with a 10yr lease on it with the option to extend. There were 200 groups that approached to be considered for the deal with 8 groups putting in firm offers.

There is a LOT of capital out there starving for yield. The Flames could easily get a pension fund to build them a barn...but that pension fund isn't going to give them a sweetheart rent agreement and 100% of the non-hockey event revenue.

[Jay Random]

Originally Posted by Rutuu

A few things that we need to be clear on as a fanbase:

1.The Flames are mid pack for capital value according to forbes, and the assumption is they are break even to profitable under the current arrangement.

IIRC, Forbes had the Flames' operating income at a whopping $400,000 in the last non-COVID year. So… break-even if costs don't go up (which they always do) and revenue isn't affected by COVID (which it has been every year since).

Originally Posted by Rutuu

There is a LOT of capital out there starving for yield.

See the above. A hockey team in the post-COVID era is not where you go looking for yield. And don't tell me about the alleged value of the franchise: that's fool's gold in a business where only a handful of franchises are making any worthwhile amount of money. Cord-cutters are still cutting their cords, local media revenue is on the way down, gate revenue (70% of the business in a non-COVID year) is uncertain at best. The fan base is aging rapidly, as young people are less interested in sports generally than they used to be.

In these circumstances, a small-market pro sports franchise is not a sound investment. At best it's a toy for a billionaire to play with, and we're starting to see a new generation of billionaires who don't care about sports franchises because they are too busy playing with their private space programs.

I believe the North American pro sports business has already passed peak asset value. Assuming that any old NHL club can sell for a billion dollars because John Henry paid $900 million for the Penguins is wishful thinking.

[Freeway]

With zero home game revenue, Forbes had the Flames as a middle-of-the-road revenue team in the NHL last year.


They ain't moving.

[Rutuu]

Just wanted to thank you for putting together a well thought out response.

Originally Posted by Jay Random

IIRC, Forbes had the Flames' operating income at a whopping $400,000 in the last non-COVID year. So… break-even if costs don't go up (which they always do) and revenue isn't affected by COVID (which it has been every year since).

We agree, and I am a big believer that the Flames would be more successful on ice if they took care of their off ice business. Playoffs and running a budget below the salary cap would help both the bottom line and our on ice product in my opinion.

Originally Posted by Jay Random

A hockey team in the post-COVID era is not where you go looking for yield. And don't tell me about the alleged value of the franchise: that's fool's gold in a business where only a handful of franchises are making any worthwhile amount of money. Cord-cutters are still cutting their cords, local media revenue is on the way down, gate revenue (70% of the business in a non-COVID year) is uncertain at best. The fan base is aging rapidly, as young people are less interested in sports generally than they used to be.

In these circumstances, a small-market pro sports franchise is not a sound investment. At best it's a toy for a billionaire to play with, and we're starting to see a new generation of billionaires who don't care about sports franchises because they are too busy playing with their private space programs.

I believe the North American pro sports business has already passed peak asset value. Assuming that any old NHL club can sell for a billion dollars because John Henry paid $900 million for the Penguins is wishful thinking.

Your point is noted, I do disagree with your assessment of the value of the product. We have seen the NHL expand twice in the last 5yrs, the majority of the franchises are healthy, and they just got brought back to ESPN. Content is king in the new world, and live sports is a big part of that. There are many revenue streams that will appear that will replace the beer and nachos crowd. Fun fact NBA Topshot generated $230m in revenue...that's like 7% of the NHL! The NHL is a gate driven league, but even keeping things the same can pay an annuity on debt funding.

As for Calgary...Canada has net migration and that in itself is enough to keep Calgary growing. The town also has an entrepreneurial spirit with an educated population that has a 8month winter. It will be a top hockey market for a long time. There is only one pro team in town. It's like buying a house on the beach...they're not making more of it.

[Enoch Root]

Originally Posted by Rutuu

Just wanted to thank you for putting together a well thought out response.



We agree, and I am a big believer that the Flames would be more successful on ice if they took care of their off ice business. Playoffs and running a budget below the salary cap would help both the bottom line and our on ice product in my opinion.



Your point is noted, I do disagree with your assessment of the value of the product. We have seen the NHL expand twice in the last 5yrs, the majority of the franchises are healthy, and they just got brought back to ESPN. Content is king in the new world, and live sports is a big part of that. There are many revenue streams that will appear that will replace the beer and nachos crowd. Fun fact NBA Topshot generated $230m in revenue...that's like 7% of the NHL! The NHL is a gate driven league, but even keeping things the same can pay an annuity on debt funding.

As for Calgary...Canada has net migration and that in itself is enough to keep Calgary growing. The town also has an entrepreneurial spirit with an educated population that has a 8month winter. It will be a top hockey market for a long time. There is only one pro team in town. It's like buying a house on the beach...they're not making more of it.

It is difficult to be competitive in the NHL, spending to the cap. Running under the cap is all but impossible. There are no teams doing it consistently.

[Badgers Nose]

Originally Posted by FlamesAddiction

I was mocked a while back for suggesting that arena amenities for players plays a big role in signing/keeping players, but I recall Iginla gushing about the facilities in Pittsburgh and the comfort of the dressing room.

I think it really does make a big difference. These guys spend a lot of time at the arena. I think it is especially true in cold climates if the arena can also be more like a club house for players for rest, recreation, and relaxation, and isn't just a concrete brick that they want to leave as quickly as they possibly can.

It's like any worker really, given a choice of two jobs with everything else being equal you'll probably go with the one that has the best workspace/amenities.

[carmenshoes]

Gondek counters arena deal critics, says cost overrun terms were 'abundantly clear'


https://www.msn.com/en-ca/news/canad...?ocid=msedgntp

[Cecil Terwilliger]

Originally Posted by Badgers Nose

It's like any worker really, given a choice of two jobs with everything else being equal you'll probably go with the one that has the best workspace/amenities.

Except everything else isn’t equal so I doubt many players are making a decision based solely on facilities.

[Rutuu]

Originally Posted by Enoch Root

It is difficult to be competitive in the NHL, spending to the cap. Running under the cap is all but impossible. There are no teams doing it consistently.

We will have to disagree as I do not believe that making the playoffs and spending to the cap is as causal as people believe. What I do think has causality to every GM spending to the cap is the abundance of long term deals (let's cap the Flames at 3yr deals and see what happens) that represent BAD money.

...but that is my opinion.

Let's set the budget and make Brad use our farm system and drafting past the 1st round to fill out the roster (our best players have come from developing assets this way).

[Enoch Root]

Originally Posted by Rutuu

We will have to disagree as I do not believe that making the playoffs and spending to the cap is as causal as people believe. What I do think has causality to every GM spending to the cap is the abundance of long term deals (let's cap the Flames at 3yr deals and see what happens) that represent BAD money.

...but that is my opinion.

Let's set the budget and make Brad use our farm system and drafting past the 1st round to fill out the roster (our best players have come from developing assets this way).

All of these things happen already - with every team. Even spending to the cap, you still have to find cheap talent everywhere you can, in order to compete.

Name a team that has been able to be consistently competitive while being a budget team.

[Rutuu]

Originally Posted by Enoch Root

All of these things happen already - with every team. Even spending to the cap, you still have to find cheap talent everywhere you can, in order to compete.

Name a team that has been able to be consistently competitive while being a budget team.

We don't really have the data to show a budget team being successful. Interesting that we agree that you need to spend your money efficiently, but we disagree setting a budget below the max spend would be beneficial.

Plus we're both Flames fans...we've been cap maxed since the inception of the cap...and our lack of success is thrown in our faces every day. Why not try something different if its clear cheap talent drives the bus in this league?

[Enoch Root]

Originally Posted by Rutuu

We don't really have the data to show a budget team being successful.

Yes we do - every budget team has not been successful

Interesting that we agree that you need to spend your money efficiently, but we disagree setting a budget below the max spend would be beneficial.

Not particularly interesting - pretty straight-forward: you need to manage the cap efficiently AND you need to use all that is available, if you want to have a change in an ultra-competitive league.

[GioforPM]

Originally Posted by Rutuu

We don't really have the data to show a budget team being successful. Interesting that we agree that you need to spend your money efficiently, but we disagree setting a budget below the max spend would be beneficial.

Plus we're both Flames fans...we've been cap maxed since the inception of the cap...and our lack of success is thrown in our faces every day. Why not try something different if its clear cheap talent drives the bus in this league?

You need cheap talent but that’s so you can pay your elite talent. You are still at cap.

[Rutuu]

Originally Posted by Enoch Root

Yes we do - every budget team has not been successful


Not particularly interesting - pretty straight-forward: you need to manage the cap efficiently AND you need to use all that is available, if you want to have a change in an ultra-competitive league.

Carolina and Colorado are budget teams...St Louis has had an internal cap before. Ottawa has a budget...they'll be good in the next few years. Please tell me your definition of a budget team so we can get on the same page.

Now...in your scenario, where your budget is the cap...how do you make moves? Only in the summer? Your style is killing trade deadline coverage on TSN.

[dino7c]

Originally Posted by Rutuu

Carolina and Colorado are budget teams...St Louis has had an internal cap before. Ottawa has a budget...they'll be good in the next few years. Please tell me your definition of a budget team so we can get on the same page.

Now...in your scenario, where your budget is the cap...how do you make moves? Only in the summer? Your style is killing trade deadline coverage on TSN.

Lol wat?

Carolina 83M
Avs 81M with their top player on a steal of a contract

Sens will be good? Maybe and when they are they will have to pay their players and be a cap team. They just paid Tkachuk 8M

[Rutuu]

Originally Posted by dino7c

Lol wat?

Carolina 83M
Avs 81M with their top player on a steal of a contract

Sens will be good? Maybe and when they are they will have to pay their players and be a cap team. They just paid Tkachuk 8M

There's more than this year in a sample...budgets can change too.

[dino7c]

Originally Posted by Rutuu

There's more than this year in a sample...budgets can change too.

They aren't budget teams...they may have been fortunate for a couple years with players on entry level contracts ect.

Most of the league is at or over the cap other than a few rebuilding teams

https://puckpedia.com/teams

find the good teams, terrible take is terrible

Sens have 10M in cap space...its all gone when a couple entry level deals swing over

Flames at 79M are one of the budget teams lol, half the league is over

[ComixZone]

Originally Posted by carmenshoes

Gondek counters arena deal critics, says cost overrun terms were 'abundantly clear'


https://www.msn.com/en-ca/news/canad...?ocid=msedgntp

The arrogance and incompetence of this Mayor annoys me.

Gondek said there are also many who don’t want to see more public money going toward the Saddledome’s replacement.

Then they don’t want a Saddledome replacement/they don’t want the Flames.

I actually just wish we could vote on this issue. Put it to a plebiscite, and then if the people of the city vote that they don’t to help fund the arena - then so be it, and the city can then move forward without an NHL franchise.