Hurricanes sale formally closed, Tom Dundon now majority owner

[Isles72]

what are the approx. terms are left on the canes lease ?

 

[Headshot77]

The current trend of cord cutting is going to prevent any major increases in TV contracts.

The NHL needs to come out ahead of this and turn their Gamecenter Live app into the premiere way to watch NHL hockey. For $100/year, have all teams, all games, highlight packs, talk shows, vintage games, everything available with just one click. It would show extreme foresight so obviously the NHL won't do it.

 

[AD Skinner]

They had vintage games for a while and it was awesome but for some reason they stopped doing it. Totally lame. And this is off topic a bit but they used to let you watch commercials/intermission reports/pregame shows and now everything that's not in-game action gets that "will return shortly" graphic that really kills the flow.

 

[tarheelhockey]

what are the approx. terms are left on the canes lease ?

This, while not the actual lease, is the most detailed document that has surfaced in the public sphere:

https://law.marquette.edu/assets/sports-law/pdf/lease-summary-carolina-hurricanes.pdf

TYPE OF FINANCING: An $18 million contribution from North Carolina State University (NCSU), $48 million from Wake County and the City of Raleigh, $22 million from the state, $50 million from the sale of bonds, and $20 million from the team helped finance the arena. Additionally, the state covered the infrastructure costs.

Annual rent of $3 million paid in quarterly installments on the first day of each quarter. – Section 3.1(a), pg. 16–17

Additional Rent: “Commencing with the fourth (4th) Lease Year . . . , in addition to the Annual rent, Additional rent equal to the amount by which (i) the sum of (A) Six Percent (6%) of Gross Arena Revenues during such Lease Year up to $55,000,000 plus (B) Three Percent (3%) of Gross Arena Revenues during such Lease Year in excess of $55,000,000 (items A and B, the ‘Additional Rent’) exceeds (ii) the Annual Rent. Additional Rent shall be computed and paid within one hundred twenty (120) days after the end of each Lease Year.†– Section 3.1, pg. 16– 17

Rent Deductions: Possible rent reductions exist for “each Lease Year during the Initial Term:
(i) Annual Game Day Costs Deduction . . . [and]
(ii) Temporary Facilities Deduction.†– Sect. 3.2, pg. 17

ESCAPE CLAUSES

DEFAULT: “Each of the following events shall constitute an Event of Default:
(a) If any representation or warranty made by Lessor or by Lessee herein shall at any time prove to have been incorrect in any material respect as of the time made, and if the party making such representation or warranty fails to cause such representation or warranty to become correct within thirty (30) days after written notice that such representation or warranty was incorrect[.]
(b) If (i) Lessee shall fail to pay any Rent within ten (10) Business Days after the date on which it was due, (ii) if Lessee shall breach its obligations under the provisions of Article 5.1 or (iii) either Lessee or Lessor shall breach its obligations under Article XI [Insurance] and any such breach is not cured within thirty (30) days after written notice by Lessor or Lessee to Lessor, as applicable.
(c) If Lessor or Lessee shall materially breach any of the other covenants or provisions in this Lease and such failure is not cured within 30 days after written notice; provided, however, that if it is not reasonably possible to cure such failure with the exercise of due diligence within such 30 day period, such cure period shall be for an unlimited period of time if within 30 days after such written notice the curing party commences diligently and thereafter continues to cure.
(d) If (i) Lessor or Lessee shall be adjudged a bankrupt or insolvent in a formal judgment that is unappealable or not appealed, (ii) any receiver or trustee of all or any part of the business or property of Lessor or Lessee is appointed and is not discharged within sixty (6[0]) days after appointment, (iii) Lessor or Lessee makes any general assignment of its property for the benefit of creditors, (iv) Lessor or Lessee files a voluntary petition in bankruptcy or insolvency, or applies for reorganization or arrangement with its creditors, under the state, federal or other bankruptcy or insolvency laws now in force or hereinafter enacted, (v) an involuntary petition of bankruptcy or insolvency under the state, federal,
or other bankruptcy or insolvency laws is filed against Lessor or Lessee and is not
dismissed within sixty (60) days after filing.
(e) If either Lessee or the Team shall breach its obligations under the provisions of
Article XV (Non-Relocation) of this Lease.†– Sect. 17.2, pg. 45–46

TERMINATION:
(a) Termination of Lease by Lessor. Lessor at its option may terminate this Lease upon thirty (30) days written notice following an Event of Default by Lessee specified in Section 17.l(d) or 17(e). Upon the effective date specified in such notice, Lessee shall immediately vacate the Arena and surrender possession of the premises to Lessor.
(b) Termination of Lease by Lessee. Lessee at its option may terminate this Lease upon thirty (30) days written notice following an Event of Default by Lessor specified in Section 17.1(d). Upon the effective date specified in such notice, Lessee shall
immediately vacate the Arena and surrender the premises to Lessor.
(c) Automatic Termination of Lease. This Lease automatically terminates upon any
lawful termination of the Development Agreement in accordance with its terms, except for a termination as a result of the delivery and acceptance of the Arena in accordance with the terms of the Development Agreement and this Lease.†– Sect. 17.7, pg. 48

RETENTION

Non-Relocation Agreement: “As additional consideration for Lessor's willingness to execute and deliver this Lease, Lessee specifically covenants and agrees that from the Lease Commencement Date and continuing until the Lease Expiration Date, (i) the Team shall play all of its Home Games and home playoff games at the Arena and shall not play any of its Home Games or home playoff games at any other location except for games at neutral sites as required by the NHL and, with Lessor's consent, which shall not be unreasonably withheld, games played from time-to-time at other arenas in North Carolina, South Carolina or Southern Virginia, as part of the Team's marketing program, and (ii) Lessee and the Team shall have at least 50% common
ownership. All obligations of the Team to play its Home Games at the Arena pursuant to this Article shall be suspended during any Abatement Period, the cause of which prevents the playing of Hockey Events in the Arena and/or prevents the attendance by the public at such games. The Team shall hold and maintain all rights and franchises to play hockey as a member of the NHL in good standing. The Team joins in the execution of this Lease for the purpose being bound by this covenant and agreement.†– Art. XV, pg. 40–41



Note: The original term of the lease was extended, and now ends in 2024.

 

[MNNumbers]

^^^^^^

thh,

So, basically the team pays 3M in rent annually + a portion of Gross Revenues.

Would I be correct to assume that the team gets all the profits from the use of the arena for other events? In other words, they have full management rights?

Is that correct?

And, does the team and/or the management side of the organization get anything else?

Naming rights? etc.

 

[tarheelhockey]

^^^^^^

thh,

So, basically the team pays 3M in rent annually + a portion of Gross Revenues.

Would I be correct to assume that the team gets all the profits from the use of the arena for other events? In other words, they have full management rights?

Is that correct?

And, does the team and/or the management side of the organization get anything else?

Naming rights? etc.

Critically, the profits/rights aren't going to the Carolina Hurricanes but to an organization called Gale Force Holdings, LP. Even though that organization is almost indistinguishable from the Hurricanes franchise, it exists on paper as a separate entity which manages the arena.

Remember when Karmanos was trying to sell the team without giving up management rights? Basically what that meant was that he was trying to sell ONLY the Hurricanes but NOT Gale Force. And only a fool would agree to that arrangement -- they would be taking on the costs of the expensive NHL franchise without getting the profits of the revenue-generating arena management entity.

This is almost certainly why the offer for the team seems so out of whack with what people were expecting. I'm sure the Hurricanes themselves are only worth $200M or whatever, but that's only one of the shells involved in this particular game.

 

[MNNumbers]

Critically, the profits/rights aren't going to the Carolina Hurricanes but to an organization called Gale Force Holdings, LP. Even though that organization is almost indistinguishable from the Hurricanes franchise, it exists on paper as a separate entity which manages the arena.

Remember when Karmanos was trying to sell the team without giving up management rights? Basically what that meant was that he was trying to sell ONLY the Hurricanes but NOT Gale Force. And only a fool would agree to that arrangement -- they would be taking on the costs of the expensive NHL franchise without getting the profits of the revenue-generating arena management entity.

This is almost certainly why the offer for the team seems so out of whack with what people were expecting. I'm sure the Hurricanes themselves are only worth $200M or whatever, but that's only one of the shells involved in this particular game.

Very clear. Thanks. In a similar way that you did above, could you quote the part of the pdf that explains what part of the management profits go to GFSH?

Thanks.

I remember Karmanos saying that GFSH had one of the best arrangements in the entire league, and an owner would be a fool to let that go.

 

[tarheelhockey]

Very clear. Thanks. In a similar way that you did above, could you quote the part of the pdf that explains what part of the management profits go to GFSH?

Thanks.

I remember Karmanos saying that GFSH had one of the best arrangements in the entire league, and an owner would be a fool to let that go.

AFAIK that information hasn't gone public. I also don't know of any complete copy of the lease agreement, either... the pdf above quotes it, but also excludes the vast majority of the text which is apparently at least 48 pages long (based on the citations).

This is part of the reason we here on BOH and Canes fans in general have been kind of shooting in the dark when it comes to the ownership situation. Some of the most important info is simply unknown to us.

 

[garnetpalmetto]

On top of what Tarheel posted I do know the team essentially double dips on the naming rights. The Hurricanes get a portion of that revenue and then Gale Force gets another separate portion of that. The naming rights pays $4M per year. The last time I looked (in 2015), the naming rights deal was in a phase where, of that $4M a year, $1.5M a year goes into a capital reserve fund, $1.15M a year goes to the Hurricanes, PNC gets $800K to cover inventory costs, NCSU gets between $356K and $362K, Gale Force gets between $150,000 and $200,000, and the Centennial Authority gets nothing.

 

[Fugu]

The NHL needs to come out ahead of this and turn their Gamecenter Live app into the premiere way to watch NHL hockey. For $100/year, have all teams, all games, highlight packs, talk shows, vintage games, everything available with just one click. It would show extreme foresight so obviously the NHL won't do it.

This just may be due to them trying to take advantage of their current audience, which is predominantly older (and for all the big four). These people still have cable. Once "we" age further, they won't really have much choice, and given the cord cutting trend, cable as we know it will probably disappear for the most part. Or certainly become much more à la carte.

 

[Melrose Munch]

According to Bill Daly 6 other cities had inquired but Winnipeg was the league's preferred choice at the time. Paul Allen might have paid $170 or something close to it. QC broke ground on Videotron in 2012, on just the chance of getting a team so if a team arrived sooner they could have accelerated that. Galardi had already talked to ASG about moving the Thrashers to Hamilton so if push came to shove the league could have swallowed their pride and made that happen. If KeyArena can be renovated to NHL standards than FirstOntario sure could.

Sure Bill Daly.... If Portland, backed by Billionaire Paul Allen really wanted the Thrashers, NHL would have made it happen. NHL always wanted a presence in the Pacific Northwest. And with the Sonics leaving Key arena a year earlier, then the Rose Garden is the best place for an NHL team to play out of since it would be a while before a suitable NHL arena became available.

Paul Allen opted not to put in a bid for the late 90's expansion for Portland. He's had plenty of opportunities to get an NHL franchise if he ever wanted one. He simply doesn't. Even the Pens back in the day, I don't recall him offering to buy them. Think they only offered the Rose Garden as a home to play out of.

I'm with Street Hawk here. The NHL would have tried to pull some funny business and frankly I think even 170 million was too much. Right now FirstOntario is awful so it could be, but it was 250 million to do so when Balsillie was gunning for the coyotes. NHL would have taken a loss for Portland and they are tying to avoid Quebec with all their might sadly. The Nordiques should be expansion, no baggage.

So many people on here actually upset at a team staying in it's city and not relocating!!! I wonder if this was Calgary would the reaction be the same!!!

I could not care any less personally.

 

[caniac247]

i dont think anyone here is actually upset they are staying, are they? i think its just that people are skeptical (to varying degrees) that anyone would pay $500M to keep the team in town ... given how long he's had it up for sale at a price much lower than this reported $500M deal. so that leads to a couple of theories ... a) he's buying more than just the team and that's why the price is that much more, or b) the purchase is intended for relocation to another market, probably QC (which just led to silly missives back and forth).

PK reportedly was wanting $420M for the team. $500M isn't much more to me. Second, PK also when first put the for sale up wanted to keep full control of the team. Now who in their right mind is going to pay >$400M and not have control of the team. It was only within the last year, that he said he may forgo all control of the team to a buyer.

Again, as others have said, that $500M could also be including Gale Force, debt, etc. He could really be selling the team for $350M, and then including Gale Force and debt into the deal to make the $500M pricetag.

I know Quebec fans had their hooks into getting the Hurricanes via relocation thinking someone would buy the team and move them. Now theres a potential buyer who would keep the team in Raleigh and the hopes of having another team disappear and we have to find other justifications to keep that hope alive.

As others have said, if this goes through and they stay in Raleigh, the relocation vultures will never go away. It will still be something. Every off season, we will still have to hear about the team relocated. It gets pretty damn old and pretty draining to be honest.

 

[Melrose Munch]

PK reportedly was wanting $420M for the team. $500M isn't much more to me. Second, PK also when first put the for sale up wanted to keep full control of the team. Now who in their right mind is going to pay >$400M and not have control of the team. It was only within the last year, that he said he may forgo all control of the team to a buyer.

Again, as others have said, that $500M could also be including Gale Force, debt, etc. He could really be selling the team for $350M, and then including Gale Force and debt into the deal to make the $500M pricetag.

I know Quebec fans had their hooks into getting the Hurricanes via relocation thinking someone would buy the team and move them. Now theres a potential buyer who would keep the team in Raleigh and the hopes of having another team disappear and we have to find other justifications to keep that hope alive.

As others have said, if this goes through and they stay in Raleigh, the relocation vultures will never go away. It will still be something. Every off season, we will still have to hear about the team relocated. It gets pretty damn old and pretty draining to be honest.

Eh, it goes away. It did for Nashville. Besides the problems are recent.

 

[tarheelhockey]

Again, as others have said, that $500M could also be including Gale Force, debt, etc. He could really be selling the team for $350M, and then including Gale Force and debt into the deal to make the $500M pricetag.

I don't think there's much question about this. It's hard to fathom anyone buying the Canes but not Gale Force.

 

[Mightygoose]

Wasn't the original 420 million price he wanted included Gale Force as well?

Always understood the control stipulation was a phased control of everything as opposed to spitting the Canes and Gale Force up. The later is not workable under any number. That's an ASG scenario.

So I would agree the 500 million includes debt service. Otherwise I don't think PK would raise the price to cover recent losses would he?

 

[tarheelhockey]

Always understood the control stipulation was a phased control of everything as opposed to spitting the Canes and Gale Force up.

At least to begin with, there was no phasing mentioned. Simply that he wanted to sell the franchise while retaining "operational control". I always took that to mean Gale Force.

 

[cgf]

At least to begin with, there was no phasing mentioned. Simply that he wanted to sell the franchise while retaining "operational control". I always took that to mean Gale Force.

Who wouldn't want to sell under those conditions?

 

[spockBokk]

Sounds as if the deal may be moving on along:

http://www.wralsportsfan.com/hurricanes/video/16827888/

 

[aqib]

Sure Bill Daly.... If Portland, backed by Billionaire Paul Allen really wanted the Thrashers, NHL would have made it happen. NHL always wanted a presence in the Pacific Northwest. And with the Sonics leaving Key arena a year earlier, then the Rose Garden is the best place for an NHL team to play out of since it would be a while before a suitable NHL arena became available.

Paul Allen opted not to put in a bid for the late 90's expansion for Portland. He's had plenty of opportunities to get an NHL franchise if he ever wanted one. He simply doesn't. Even the Pens back in the day, I don't recall him offering to buy them. Think they only offered the Rose Garden as a home to play out of.

He bid $85 million for the Pens. Lemiux had the inside track because he was the largest creditor.

 

[NotOpie]

Deal moving slowly along. Apparently being reviewed by attorneys which then leads to agreement becoming binding.

Gravley is local Raleigh sports guy.

 

[Isles72]

I don't think there's much question about this. It's hard to fathom anyone buying the Canes but not Gale Force.

I didnt want to quote the entire lease post you made but wanted to say thanks for the info

 

[Finlandia WOAT]

Critically, the profits/rights aren't going to the Carolina Hurricanes but to an organization called Gale Force Holdings, LP. Even though that organization is almost indistinguishable from the Hurricanes franchise, it exists on paper as a separate entity which manages the arena.

This is very important for the purposes of revenue sharing LOL.

Not that Uncle Gary is angry, in fact I bet he's thrilled the owner entity could potentially break even or make a profit while still claiming full revenue sharing for his hockey club.

 

[Roboturner913]

Gravley also says the current minority investors are being given the option to stay on or cash out. Far as I know all or most of them are high-roller muckety mucks with business ties to Raleigh and no real reasons to sell.

 

[Svechhammer]

Gravley also says the current minority investors are being given the option to stay on or cash out. Far as I know all or most of them are high-roller muckety mucks with business ties to Raleigh and no real reasons to sell.

That would also imply the money is there to complete the purchase right now, and any additional minority owners is just icing on the cake. This might be as close as we'll get before its all finalized, which as was said on the Canes board likely won't be until December at the next board meeting. That is, unless they call an emergency session early.

 

[garnetpalmetto]

Gravley also says the current minority investors are being given the option to stay on or cash out. Far as I know all or most of them are high-roller muckety mucks with business ties to Raleigh and no real reasons to sell.

Beyond that, with regards to connections, it seems that one of the minority owners, Jim Goodmon, could have been the concierge to get the ball rolling here. Goodmon owns the Durham Bulls (of Bull Durham fame) as well as Capitol Broadcast Company who owns one of the major news stations in the area, WRAL. Goodmon previously sold the Myrtle Beach Pelicans to Greenberg (the Pelicans are the original Durham Bulls of the movie's fame. After Goodmon secured a Triple-A expansion team, he relocated the team first to Danville, VA for an interim year and then to Myrtle Beach, SC) and the two also sat on the Carolina League's Board of Directors together. I imagine some of the smaller-profile investors (the Fitches and the Colantuonis, for instance) may choose to cash out but guys like Goodmon, Michael Kahn (the owner of the Checkers), Clancy & Theys Construction, Mark and Tara Rein (of Epic Games) will likely stay in place. For reference, the current minority owners are (locals noted with an asterisk next to their entry):

• Michael Kahn (CEO, Empire Distributors, also owner of AHL Charlotte Checkers, based in Charlotte)
• Capitol Broadcasting Company (CEO James Goodmon, also owner of Triple-A Durham Bulls, based in Raleigh)*
• Ice Puck LLC (Temple Sloan, Jr.; chairman of the board for General Parts International, Inc., Trail Creek Investments, Inc. and Highwoods Properties, based in Raleigh)*
• Clancy & Theys Construction (David Tim Clancy, Joel Thomas Irving Clancy, Kathryn Virginia Clancy, Robert Todd Clancy, and Sarah Elizabeth Sturm; Construction/construction management, based in Raleigh)*
• Playmakers Management, LLC (Ron Francis; Hurricanes General Manager, based in Raleigh)*
• Hurricanes Investment, LLC (Abel and Barbara Zalcberg; co-founders of OFM, Inc., an importer/distributor of office furniture, based in Raleigh)*
• Whitney Holdings, Inc. (Frederick and Timothy Whitney; partners in Whitney Wealth Management, based in Raleigh)*
• Greengarden DRC, LLC (Eliza Kraft Olander and Brian McHenry; Community developers, philanthropist, president of McHenry Software, based in Raleigh)*
• Chuck Hammel (President and CEO of PITT OHIO, a regional transportation company, based in Pittsburgh, PA)
• Mark and Tera Rein (VP and Co-founder of Epic Games, based in Cary, NC)*
• Michael and Melissa Colantuoni (Michael formerly in charge of finance, planning, and strategy for AT&T. Melissa has been/is director of Finance and Administration for The Hive Group. Both serve on charity boards in the Raleigh area including The Frankie Lemmon Foundation and Raleigh Giving Party)*
• Iceworks, LLC (Duane and Margo Fitch; Duane's a gastroenterologist and President and CEO of Wilson Digestive Diseases Center. Margo is a registered nurse and CFO of Wilson Digestive Diseases Center, based in Wilson, NC)
• 6 undisclosed investors (identities/locations unknown)