Arena Negotiation Discussion v2

[Locke]

Originally Posted by Frequitude

With the exception of for tax purposes or bragging, no it’s not. Investing is about current value, the expected return on that value, and expected future value.

Right. What did the Flames owners buy the team for? It was $16M in 1980.

Sure, they may have hemorrhaged cash for operations in the meantime but that initial $16M investment has grown!

Brand new teams with nothing are worth $500M.

So they've made some money on their investment. Thats how it works.

[Strange Brew]

Originally Posted by New Era

You can only get expansion fees if someone is willing to pay them. If there isn't interest, and the league seriously wants to get into a market, then the other avenue is relocation. That's just the reality. The league likely recognizes that it is a 32 team league - max. They will expand by one more team, but after that, they will play the NFL card and move teams around. There are only a few sacred cows that would be on the "never move" list, but Calgary is not one of those teams. Relocation is a possibility. I wouldn't say a great one, but if the arena deal doesn't go down soon, and ownership continues to see no light at the end of that tunnel, relocation becomes a viable strategy, especially if Houston is available as a target.

Difference being in the NHL most of the relocations involve the owner taking the team to a different city. That is not the scenario in Houston for the NHL. The Rockets owner, Fertitta, wants to own the team.

So if Edwards is done here, he’d have to sell.

[Major Major]

Originally Posted by DiracSpike

Yea.....that's how investing works. What a bizarre statement.



I'm sure he does this too. He probably looks at an oversaturated sports market, valuations approaching bubble levels, and an eroding building in a economically stagnant city with no solutions to either of those problems in sight.

Anyway, your original statement was that no one benefits from the team being sold. Clearly Edwards and the owners benefit. Not even debatable.

He only benefits if that is the top price he can get Vs what the team is worth now.

My point is, I hardly think that Edwards or other billionaires measure their gains against what they originally invested to build their companies decades ago. They see what they currently have and try to maximise value and return.

You read the tea leaves and see tons of negativity in the market. That's fine, he may be similarly resided, but amid the negativity, he has given this terribly stagnate city a cap team locked in for years. And he has a city council coming to him to potentially make his business value shoot through the roof. Something tells me it's not as negative as you think.

But it presents an interesting question and I'll use hypothetical numbers. If Edwards sold his team for 400 million to a local buyer who had an arena built within a decade. The franchise is now worth 700 million and climbing. Did he benefit?

Anyhow, we've both spoken in pretty certain terms on a subject that actually has lots of room for debate. But the point I'm most convinced of in the flames relocation discussion is that the BOG will never let it happen.

[Matt Reeeeead]

Originally Posted by Major Major

You might be right, and if they've learned anything, caring enough to fight for it will cost them. Still, that's a ton of revenue that is protected from them.

The players benefit by getting another $70M in player salaries per annum.

The deal was mutually beneficial to begin with.

[Major Major]

Originally Posted by Matt Reeeeead

The players benefit by getting another $70M in player salaries per annum.

The deal was mutually beneficial to begin with.

Agreed, but things change. They may get dollar signs in their eyes and want a piece. I for one hope they like the status quo and auto renew

[dino7c]

Originally Posted by Locke

Right. What did the Flames owners buy the team for? It was $16M in 1980.

Sure, they may have hemorrhaged cash for operations in the meantime but that initial $16M investment has grown!

Brand new teams with nothing are worth $500M.

So they've made some money on their investment. Thats how it works.

They didn't make anything unless they sell it

[Locke]

Originally Posted by dino7c

They didn't make anything unless they sell it

Really? You dont think they've borrowed against the value of the franchise for other investments? That they put up personal cash for CSEC as opposed to leveraging it for investment?

CP still never ceases to surprise me.

[TheIronMaiden]

Originally Posted by dino7c

They didn't make anything unless they sell it

https://www.forbes.com/nhl-valuations/list/#tabverall

This is old numbers (2017) but the annual operating income of the Flames is over 5 million a year.

The Franchise value is around $430 M

It seems they are on the lower end of the NHL in both regards.

That said, the team holds very little debt.

[Flash Walken]

Originally Posted by TheIronMaiden

https://www.forbes.com/nhl-valuations/list/#tabverall

This is old numbers (2017) but the annual operating income of the Flames is over 5 million a year.

The Franchise value is around $430 M

It seems they are on the lower end of the NHL in both regards.

That said, the team holds very little debt.

a new arena will kick up that valuation considerably.

[TheIronMaiden]

Originally Posted by Flash Walken

a new arena will kick up that valuation considerably.

That and a couple of Stanley Cups.

[powderjunkie]

There are multiple NHL teams that could be seeking new ownership, or new locations (Ottawa, Carolina, Arizona, etc.). The question is, which ones have potential local buyers? I would think there are more likely options in Calgary than most cities (Shaws jump to mind, among others).

For Fertitta, it's hard to imagine Calgary is any more attractive than the others. For the league, there is exactly one reason to let Calgary move, which is making a demonstration that they aren't afraid to move teams if their local gov'ts don't pony up (ie. future threats are not hollow); there are dozens of reasons to not move them.

The bigger question is, who would they be 'demonstrating' this for? Who are the next franchises that will need to hold their cities up for money? A whole bunch of arenas opened between '93-'98, but it's hard to see any of them needing replacement in the next 15 years.

There would be sound business reasons to move either Arizona or Ottawa if they don't get new arenas downtown (less so with Ottawa considering TV deals). Less relevant, but assuming Seattle expansion, Arizona would probably be the odd team out of the Pacific division - moving to Houston would make geographical sense for Central division.

TLDR: Flames aren't moving before the Coyotes do.

[powderjunkie]

Originally Posted by New Era

There are only a few sacred cows that would be on the "never move" list, but Calgary is not one of those teams. Relocation is a possibility. I wouldn't say a great one, but if the arena deal doesn't go down soon, and ownership continues to see no light at the end of that tunnel, relocation becomes a viable strategy, especially if Houston is available as a target.

Leafs
Canadiens
Rangers
Blackhawks
Flyers
Red Wings
Canucks
Bruins
Kings

Those 9 are probably the only guaranteed unmovables...Flames are 12th least likely behind only Edmonton and Pittsburgh (due only to their brand new arenas). The other 19 teams are all more likely to relocate today, tomorrow, or in 20 years, whether Calgary builds a new arena or not.

[Lanny_McDonald]

Originally Posted by Locke

Bull.

In the modern era relocation is damned near unheard of respective of the NHL.

Winnipeg got the Jets back because of a perfect storm of economics. No local ownership interest etc.

But Phoenix, the Panthers, the lightning for a while, Blue Jackets, Islanders and Carolina have been hemorrhaging cash for years and they're not going anywhere.

In terms of 'moving teams to where they can succeed' Calgary is very, very low on the list.

There is a number of teams a league can effectively support. For the NFL that number is 32. For MLB it's 30. For the NBA it's 30. For the NHL, it appears they are headed to 32. Once the league hits that magic number, and achieves stability, that is when you'll see relocation on the table. Calgary, with limited revenue streams and a weak Canadian dollar, is a relocation candidate, just as every team with limited revenues is a candidate. If more revenues are possible in a new locale, what motivation is there to stay?



If local ownership shows they no longer have interest in maintaining the team, they will pursue other potential ownership. If a potential local owner with deep products comes forward, and is willing to accept the local revenue streams, the team will stay. If there is no one locally, other ownership options will be pursued. If the local owners want out, the market may not be as healthy as you think.

[scotty2hotty]

A new owner wouln't have to necessarily live here to be considered 'local' ownership.

Who's the billionaire Calgary dude that owns Uber?

Someone here must know him. Just tell him to buy the Flames and build a new arena. Done.

I don't know why you guys always make things so complicated. Jeez.

[calf]

Originally Posted by powderjunkie

Leafs
Canadiens
Rangers
Blackhawks
Flyers
Red Wings
Canucks
Bruins
Kings

Those 9 are probably the only guaranteed unmovables...Flames are 12th least likely behind only Edmonton and Pittsburgh (due only to their brand new arenas). The other 19 teams are all more likely to relocate today, tomorrow, or in 20 years, whether Calgary builds a new arena or not.

I think part of the issue with the other 19 teams is Calgary is next in line for a new arena. I wouldn't be surprised if the worry, for the league, is that if the Flames get a "bad deal", then that is used by other cities as a precedent for the next number of small-mid market teams that need a new arena, and the league overall, not just the Flames end up being worse off in their eyes. Worst case scenario, the Flames are a sacrificial lamb/example for other cities when they don't play by the league's rules.

[powderjunkie]

Originally Posted by calf

I think part of the issue with the other 19 teams is Calgary is next in line for a new arena. I wouldn't be surprised if the worry, for the league, is that if the Flames get a "bad deal", then that is used by other cities as a precedent for the next number of small-mid market teams that need a new arena, and the league overall, not just the Flames end up being worse off in their eyes. Worst case scenario, the Flames are a sacrificial lamb/example for other cities when they don't play by the league's rules.

But it'll be 15 years before another city needs to deal with this situation. Either a bad deal or sacrificial lamb will be irrelevant by then.

The good news for the NHL is that they won't have much to worry about arena-wise for a long time after CGY, OTT, and ARI are resolved.

[Manhattanboy]

Originally Posted by TheIronMaiden

That and a couple of Stanley Cups.

Bank it!

[GioforPM]

Originally Posted by DiracSpike

Yea.....that's how investing works. What a bizarre statement.

Well, there's present value dollars versus 1990s dollars, carrying costs, op costs, that factor in.

[Monahammer]

Originally Posted by calf

I think part of the issue with the other 19 teams is Calgary is next in line for a new arena. I wouldn't be surprised if the worry, for the league, is that if the Flames get a "bad deal", then that is used by other cities as a precedent for the next number of small-mid market teams that need a new arena, and the league overall, not just the Flames end up being worse off in their eyes. Worst case scenario, the Flames are a sacrificial lamb/example for other cities when they don't play by the league's rules.

This argument requires 31 other billionaires to value retribution/ point making over money making, which is not the thing that made them rich or got them to owning an NHL franchise. Sure it could happen but it just seems like a ludicrous proposition when you consider the alternatives.

[oldschoolcalgary]

Originally Posted by Bunk

Given what I've heard about stuff, I'm quite optimistic a deal is gonna happen.

Interesting to hear. Thanks for the insight...

not asking for sources, but just curious: does that mean that some of the higher ups with the City are now getting into the discussions and are positive with the initial discussions?

generally, a lot of the preliminary legwork gets done prior to bringing in their superiors. Everything seems very hush hush, which is what should have happened the first time around imo... the public will have a chance to scrutinize the proposal, but only after both sides feel that the deal is fair for both sides (again if there is one)

I've never been against an arena, but have always felt there's a number that could be palatable to the majority of taxpayers...for me, that's around 33% that said, the optimism suggests that number has changed from the previously disclosed numbers.