Arizona Coyotes going for 1 Billion, does this increase other Franchises?

[S E P H]

I thought this was an increasing topic to think about. Forbes 2024 list had the Coyotes valued at 500 million, Sportico valued the team at around 650 million, and Roustian had them at around 1.1 billion.

It is safe to say that as fans, they were probably worth between 400 to 700 million give or take who's buying and the arena situation. However, since the NHL came in and bought them for 1 billion and sold them to Ryan Smith for 1.2 billion, that is way more than the way a lot of these independent parties valued the Coyotes, so will this increase the valuation of other NHL teams because an owner could say, "hey Coyotes went for 1 billion, then my "x" team is worth 3-4 billion" quite easily. Or would you consider this a special case and does nothing to help the rest of the franchises?

https://www.forbes.com/lists/nhl-valuations/?sh=751a45d14109

NHL Franchise Valuations Ranking List: From Maple Leafs to Coyotes

Check out Sportico's full NHL team values ranking list, from the Maple Leafs to the Coyotes.

www.sportico.com

https://thehockeynews.com/money-and-power/the-hockey-news-nhl-team-valuations-by-w-graeme-roustan

Forbes list of the most valuable NHL clubs - Wikipedia

en.wikipedia.org

Click to read more...

 

[Fenway]

Gary and the BOG have the luxury of setting the price if they know somebody will pay.

 

[No Fun Shogun]

Sports franchises are more or less analogous to houses in a desirable neighborhood. The more someone pays for a house there, the higher the asking price neighborhood-wide goes up.

Obviously, bigger houses will be worth more, and houses closer to the community pond will be worth more, and houses that have been better upkept will be worth more, but deep down everyone in the neighbood is damn glad when the smallish, run down house on the corner furthest from the pond sells for above asking price because, in the long run, that means that their selling price went up, too.

I'm still convinced that the shocking overpay for the Clippers instigated a continent-wide shift in pricing regardless of sports. Prior to that, the Thrashers could be moved for a mere $170 million, the Texas Rangers went for under $600 million, and the Sacramento Bucks and Milwaukee Bucks fetched only a bit over a half billion apiece.

Nowadays we're basically looking at teams across the board being worth in the very high nine figures at the absolute lowest, and the Yotes probably set a standard that a billion is the new floor.

 

[StreetHawk]

Sports franchises are more or less analogous to houses in a desirable neighborhood. The more someone pays for a house there, the higher the asking price neighborhood-wide goes up.

Obviously, bigger houses will be worth more, and houses closer to the community pond will be worth more, and houses that have been better upkept will be worth more, but deep down everyone in the neighbood is damn glad when the smallish, run down house on the corner furthest from the pond sells for above asking price because, in the long run, that means that their selling price went up, too.

I'm still convinced that the shocking overpay for the Clippers instigated a continent-wide shift in pricing regardless of sports. Prior to that, the Thrashers could be moved for a mere $170 million, the Texas Rangers went for under $600 million, and the Sacramento Bucks and Milwaukee Bucks fetched only a bit over a half billion apiece.

Nowadays we're basically looking at teams across the board being worth in the very high nine figures at the absolute lowest, and the Yotes probably set a standard that a billion is the new floor.

Clippers were roughly what like $300-400 mill higher than the next best bid? Then Houston went for $2.2 bill and it seems to be how Minnesota was valued at $1.7 bill which came in instalments with the option for ARod and his group to buy the majority at that price.

TB lightning sold at a valuation of $1.4 bill for 40% so this amount (not sure if we have the true numbers since this was done by the nhl in a hush hush manner.). But it’s with the intent of maintaining the current valuations. NHL wants more than what TB got values at for any expansion to Atl which is a larger market.

 

[Yukon Joe]

The value of something is 100% determined by what a willing seller and a willing buyer agree to. There's no government agency that sets the price of things (or at least when governments try to do that it fails pretty quickly).

Now some assets are bought and sold on a day by day, or even minute-by-minute, basis. You can easily tell what the price of a barrel of oil, or a single Apple stock, by checking the commodity or stock market price.

Some assets though are on the market much less often. So to try and determine a value you have to look to comparables. @No Fun Shogun brought up real estate which is a great example (which I've used before). If you're trying to sell your house, your exact house hasn't been on the market for many years. So what you look for is what similar houses in similar neighbourhoods have sold for recently.

All of which is a way of saying - absolutely the sale price of the Coyotes for $1.2 billion will impact the price of all other NHL franchises. The Senators sold just one year ago for "nearly one billion", but now clearly the benchmark is now set at $1.2.

 

[aqib]

The value of something is 100% determined by what a willing seller and a willing buyer agree to. There's no government agency that sets the price of things (or at least when governments try to do that it fails pretty quickly).

Now some assets are bought and sold on a day by day, or even minute-by-minute, basis. You can easily tell what the price of a barrel of oil, or a single Apple stock, by checking the commodity or stock market price.

Some assets though are on the market much less often. So to try and determine a value you have to look to comparables. @No Fun Shogun brought up real estate which is a great example (which I've used before). If you're trying to sell your house, your exact house hasn't been on the market for many years. So what you look for is what similar houses in similar neighbourhoods have sold for recently.

All of which is a way of saying - absolutely the sale price of the Coyotes for $1.2 billion will impact the price of all other NHL franchises. The Senators sold just one year ago for "nearly one billion", but now clearly the benchmark is now set at $1.2.

In 2018 in Carolina Panthers sold for $2.2B in 2020 Dan Snyder bought out his minority investors in Washington, paying $875M for 40% which equates to a $2.2 billion valuation (now of course there is a premium for a controlling interest). In 2023 he sold the team for $6.05B. In between the Broncos sold for $4.65B.

So while lots of people point to Ballmer, there has been a lot of inflation of team values more recently. Ballmer had already bid for 2 other teams and came up short and just decided "I'm rich and bored. I don't need to mess around with valuation"

 

[sneakytitz]

Yeah Ballmer was an anomaly. A year later the Atlanta Hawks got sold for half of what the Clippers fetched and it's not like either team has a storied past. The Hawks deal actually included an entire arena and not just a team so Tony Ressler made out like a bandit.

The value of something is 100% determined by what a willing seller and a willing buyer agree to. There's no government agency that sets the price of things (or at least when governments try to do that it fails pretty quickly).

Bingo.

Gone are the days where multi-millionaires and billionaires treated these things like toys, they're businesses now, except for eccentrics like Ballmer. I think a billion is a fair number for an NHL expansion these days. If ran right, that investment could be paid off in 10 years and, if so, future profit in the order of $100 million or more per year is a very good ROI on a billion dollar investment.

 

[Yukon Joe]

Gone are the days where multi-millionaires and billionaires treated these things like toys, they're businesses now, except for eccentrics like Ballmer. I think a billion is a fair number for an NHL expansion these days. If ran right, that investment could be paid off in 10 years and, if so, future profit in the order of $100 million or more per year is a very good ROI on a billion dollar investment.

See, I think you're wrong (or at least focusing on the wrong numbers). The P/E ration on pro sports teams is terrible. You're suggesting a P/E ratio of 10, that a NHL franchise earns $100 mil per year in profits. I don't think it's anywhere near that number. If you look at the Forbes valuations (which are highly speculative) only a handful of teams have a $100 mil or more in earnings, and those that do have estimated values of much more than $1 bil.

The reason billionaires see pro sports though as a good investment is just the year-over-year increase im the value of the team itself.

The Coyotes (according to Forbes) had earnings of $19 mil last year. Compared to a purchase price of $1.2 bil is a P/E of 63 - terrible. Now obviously Smith thinks that number will be a lot higher in Utah, but it gives you a starting point to work from.

 

[LPHabsFan]

Firstly, we assume that they're going for that much when we will likely never know the full details.

Secondly, they're only going "for that much" due to the amount of debt that's associated with the team, which for me, at this point, could very well be in the 700 - 800 million range given what we know through official and unofficial sources.

Thirdly, what people never talk about is that I don't believe we've seen a sale of an NHL team in recent memory that doesn't come with an arena along with an entertainment company. That in of itself is a massive part of the sale price and 100% props up the sale price. The NHL can then use that to justify asking for the exorbitant prices they do, but people need to realize that the sale price that we hear about is not just for the hockey team.

 

[S E P H]

Firstly, we assume that they're going for that much when we will likely never know the full details.

Ehhhh, Friedman and Servalli both confirmed the amounts; NHL bought them for 1 billion and then sold them to Utah for 1.2 billion. If you don't believe them, that's totally fine, but they are in the top 5 best and most reliable insiders in hockey.

 

[Yukon Joe]

Firstly, we assume that they're going for that much when we will likely never know the full details.

Secondly, they're only going "for that much" due to the amount of debt that's associated with the team, which for me, at this point, could very well be in the 700 - 800 million range given what we know through official and unofficial sources.

Thirdly, what people never talk about is that I don't believe we've seen a sale of an NHL team in recent memory that doesn't come with an arena along with an entertainment company. That in of itself is a massive part of the sale price and 100% props up the sale price. The NHL can then use that to justify asking for the exorbitant prices they do, but people need to realize that the sale price that we hear about is not just for the hockey team.

First - The numbers have been widely reported, so I doubt very much they're just completely false.

Second - counting the debt assumed is completely legit in talking about the price. If you buy a house for $500,000, but it's only $50,000 down and the rest is a mortgage - you're still paying $500,000 for your new house.

Third - valuing the arena is tricky. It is an asset, sure, but it also comes with liabilities. That's why a lot of teams seem to prefer to have the city/county/whatever own the arena, but rent it to the team for a very low rate. That way the team isn't on the hook for maintenance, and then after 20-30 years the team can then threaten to move unless the city builds a new arena. If you own your arena though it's much harder to play that sort of game.

The example of Rogers Centre (the former Skydome) is instructive. It was built for $570 million in 1989 for $570 mil (just over $1 bil in today's dollars). It was then sold to Rogers in 2004 for $25 mil - a tiny fraction of the construction cost.

 

[LPHabsFan]

First - The numbers have been widely reported, so I doubt very much they're just completely false.

Second - counting the debt assumed is completely legit in talking about the price. If you buy a house for $500,000, but it's only $50,000 down and the rest is a mortgage - you're still paying $500,000 for your new house.

Third - valuing the arena is tricky. It is an asset, sure, but it also comes with liabilities. That's why a lot of teams seem to prefer to have the city/county/whatever own the arena, but rent it to the team for a very low rate. That way the team isn't on the hook for maintenance, and then after 20-30 years the team can then threaten to move unless the city builds a new arena. If you own your arena though it's much harder to play that sort of game.

The example of Rogers Centre (the former Skydome) is instructive. It was built for $570 million in 1989 for $570 mil (just over $1 bil in today's dollars). It was then sold to Rogers in 2004 for $25 mil - a tiny fraction of the construction cost.

1 - I know they've been reported and obviously the reporting is from the most credible sources. It's more that I just don't believe that the relocation fee is only 200 million when we compare that to the 60 million it was in 2011 given what we've seen from the increases in expansion fees. For the owners as a whole to put all that time, effort, and money (via LOC's to cover debt) to just walk away with 6 or so million per team just seems......odd.

2 - The point of my mentioning the debt was to say that the purchase price of the team was so high because of the debt rather than the value of the asset. This analogy may or may not work but using the house example, you pay a million for the house when it's actual value is 400k but have to pay the million because there is 600k in unpaid taxes. The house isn't worth the million but that's the cost.

3 - My mentioning the arena was simply to point out that franchise sale prices have been generally elevated due to the arena and entertainment management company being included in the sale price. The Sens sold for 900 million but it could easily be argued that the value of the franchise was at 600 million while the arena and entertainment management company is worth 300 million. I'm making up those numbers just for the example. That's why I say that franchise value does not mean sale value yet people are using them as one in the same when they aren't.

 

[tucker3434]

I still don't get it. I mean, I get that things are worth what people are willing to pay for them, but we're effectively saying that Nashville or Ottawa would have been worth more homeless.

I assume Smith knew the expansion fee cost, and figured if he was going to pay it for expansion several years from now, why not just pay it for a team today. But it sure feels like Bettman extorted that money out of him in order to keep the up coming expansion fees high.

If the Yotes had stayed home in AZ, I expect they would've sold for ~$700m. I think there's currently a strangely high appetite for expansion and there were 3 markets willing to write the big check to bring a team to their city. The price tags are mostly reflective of that alone. If I was one of these potential owners, I'd definitely make sure that I planned to hold for at least 10 years. Seems like there could be a bit of that new car depreciation early on with them.

 

[KibbleandBlitz]

I still don't get it. I mean, I get that things are worth what people are willing to pay for them, but we're effectively saying that Nashville or Ottawa would have been worth more homeless.

I assume Smith knew the expansion fee cost, and figured if he was going to pay it for expansion several years from now, why not just pay it for a team today. But it sure feels like Bettman extorted that money out of him in order to keep the up coming expansion fees high.

If the Yotes had stayed home in AZ, I expect they would've sold for ~$700m. I think there's currently a strangely high appetite for expansion and there were 3 markets willing to write the big check to bring a team to their city. The price tags are mostly reflective of that alone. If I was one of these potential owners, I'd definitely make sure that I planned to hold for at least 10 years. Seems like there could be a bit of that new car depreciation early on with them.

coyotes aren't going for billion. it's a transfer of players but if utah wanted in the nhl they basically had to pay expansion fee.


that's what this really is

 

[many76]

The example of Rogers Centre (the former Skydome) is instructive. It was built for $570 million in 1989 for $570 mil (just over $1 bil in today's dollars). It was then sold to Rogers in 2004 for $25 mil - a tiny fraction of the construction cost.

Rogers Centre has a issue that u are only getting the building not the land it sits on, it is two of the main reasons why it only sold fo $25 mil, without owning the baseball team and the land, a baseball stadium is worthless

 

[aqib]

First - The numbers have been widely reported, so I doubt very much they're just completely false.

Second - counting the debt assumed is completely legit in talking about the price. If you buy a house for $500,000, but it's only $50,000 down and the rest is a mortgage - you're still paying $500,000 for your new house.

Third - valuing the arena is tricky. It is an asset, sure, but it also comes with liabilities. That's why a lot of teams seem to prefer to have the city/county/whatever own the arena, but rent it to the team for a very low rate. That way the team isn't on the hook for maintenance, and then after 20-30 years the team can then threaten to move unless the city builds a new arena. If you own your arena though it's much harder to play that sort of game.

The example of Rogers Centre (the former Skydome) is instructive. It was built for $570 million in 1989 for $570 mil (just over $1 bil in today's dollars). It was then sold to Rogers in 2004 for $25 mil - a tiny fraction of the construction cost.

Rogers Centre went through 2 other sales. The first was a few years after it was built because the Province wanted to be rid of the losses. It sold for like $150M. Then Interbrew which owned 49% put it into bankruptcy in 1999 hoping they could buy the whole thing because it didn't make sense for the Jays and stadium to not be under one umbrella. They got outbid buy Sportsco who was formed by Pat Gillick to buy the stadium and the team. Sportsco was hoping they would be able to convince Interbrew to sell them the team. Instead they sold it to Rogers. So then Sportsco sold it to Rogers but not before selling the attached hotel.

One of the big reasons for the bankruptcy and decline in value is the fact that when the stadium was first opened their were 10 year leases on the luxury boxes so they expired in 1999 when the team was garbage and the Air Canada Centre opened. It was the perfect storm of crap. Also the Jays only had a 10 year lease (I don't know why) and they wound up renewing on good terms for them and bad terms for the owner. They actually went so far as to threaten to move back to Exhibition Stadium and even paid the city to delay its demolition.

So that's a long way of saying that when you're valuing an arena separate from a team the old school cash flow valuation models still do come into play.

Fun fact one of the groups that bid on SkyDome was actually planning to buy the Expos and move them to Toronto.