Part XV: Phoenix - the battle of evermore (UPD #443ff 14-Dec agenda/lease links)

[Snarky Coyote]

Correction: the giant purple dragon was deported back to Mexico under SB 1070under Sheriff Joe's orders...I'll try to find the article

Until then, we will continue to celebrate in AZ. 78 degrees today, perfect for a BBQ.

And a home NHL game at 6:00

hmm shorts or long pants decisions decisions

 

[aj8000]

an analyst already posted the costs for running the arena at around 20 million a year, so 17 is plausible. COG didnt just pull this out of there *****, they made the whole deal with GWI in mind.

Does that include the running of the Coyotes as well.

Or is it an analysis on how much to run the place empty?

 

[aj8000]

See my posts above..and if you did, read them again.

Didn't see your last post before You asked me "Why" since I was reading the posts backwards, at least your honest about it.

 

[AllByDesign]

My friend...that is not my quote it is your mate's quote. I just modified it to show its ridiculousness...it was sarcasm.

My mate?? Hehehe... I think the pro-relocation crowd views me as a bur in their saddle.

I cannot truly say whether this agreement puts COG in a financially vulnerable position because (1) I have not poured thru the lease agreement and (2) Only time will tell whether this agreement was successful for both Hulsizer and the COG.

Even if you just read the highlights it would be evident. You are either naive or lying in the bolded statement.

COG has spent lots of money building the arena and is faced with spending lots of money if it has no tenant.

Oh yes... they have spent. Here is the problem I have with that reasoning. Mayor Scuggseepoo says they figure it would cost the City 17 million to manage the arena and bring in other venues to fill the dates. Ok.. lets say I buy that. In the lease arrangement you are paying Matt Hulsizer (Who has zippo experience in this field) to do that job. On top of that you are cutting a cheque for 100 million smackaroos. So this resolution is essencialy $100,000,000.00 more expensive than the other option.

So...the way I see it is I want to spend my money in the COG but I likely won't if the Yotes aren't there. Is that selfish...yes...but in a good way.

The selfish part has nothing to do woth where you spend your discretionary income. It has to do with... ahhh I'm getting tired, re-read my previous post.

 

[gollybass]

Is he not also recieving the profits from non hockey events? They are paying him to operate the arena and also pocket the profits from it.

For the first two Fiscal Years, the City shall be entitled to
receive the first Five Million ($5,000,000.00) of such Consolidated Net Earnings and fifty
percent (50%) of such net earnings in excess of $5,000,000, with the balance retained by the
Arena Manager/Team; and
(ii) For the third Fiscal Year, the City shall be entitled to
receive the first Two Million ($2,000,000.00) of such Consolidated Net Earnings and 50% of
such net earnings in excess of $2,000,000,
For each Fiscal Year commencing with the fourth Fiscal
Year and ending upon the earlier to occur of (a) the Arena Management Fee and the Extended
Arena Management Fee are no longer payable by the City, and (b) the later of the dates upon
which the Arena Revenue Bonds and the Parking Revenue Bonds, respectively, mature, are
repaid or are retired (but no later than the later of the respective original maturity dates for such
bonds), the City shall be entitled to receive 50% of such Consolidated Net Earnings

So the money isnt just going into Hulsizers pocket if they make profit

they also get 2.80 of every ticket sold

 

[Killion]

I think MH has found a way to almost eliminate his risk and get enough breathing room to make some good money at the end of 6 years. That is some stellar negotiating...

First off, he is only paying $70 million for the team, with the $100 million parking and naming rights thing from the COG. If he can expand only a small part of the fan base and reduce his losses to between $10 million to $15 million a year (which, in my opinion is easily doable), he could have between $10 million to $35 million in his pocket after the six years.

With his max outlay at between $35-$60 million after 6 years (if he can reduce the losses as above), his upside is huge, and he certainly won't lose any money, if he decides to firesale the asset.

However, if I were a Coyotes fan, I definitely would not be celebrating yet. This deal is manna from heaven for Goldwater. Just re-read Turken v. Phoenix, and the similarities are striking.

At the very least, Goldwater has the opportunity to file suit in court and delay this thing indefinitely - looking at this objectively, there are enough merits to the case where it will go the distance.

One clause stuck out for me in re-reading the case (page 20):

In contrast, our Gift Clause
jurisprudence quite appropriately focuses on adequacy of
consideration because paying far too much for something
effectively creates a subsidy from the public to the seller.
See Wistuber, 141 Ariz. at 349-50, 687 P.2d at 357-58; Kromko,
149 Ariz. at 321-22, 718 P.2d at 480-81.

When the court in Turken says paying $97.5 million for parking spaces is too much, I find it difficult to see the following as "fair consideration":

1) naming rights and parking lot rights for $100 million, especially when naming rights for arenas are going for about $1 million per year on average (here is a link to what the naming rights are going for across the U.S. http://espn.go.com/sportsbusiness/s/stadiumnames.html)

2)management contract for $17.5 million for an arena that doesn't even generate that much rental income in a year.

This thing is far from over...

I tend to agree with most of your post. This is absolutely precedent setting and I can find no other example nor am I aware of so lavish a "gift" being served up to private interests by a municipality, state or province in any sport, anywhere, at anytime. Glendale is buying the Coyotes for Hulsizer & Co. lock, stock & barrel. $100M up-front, app. $80M over 5yrs (Solid Gold Collateral) thus acquiring the franchise & for all intensive purposes the building itself without having to use a dime of his own or partners money, not even to service & pay off the debt from his bank of app. $80M in order to satisfy the NHL & its asking price, receiving $17M annually to do so. His actual expenditures moving forward for staffing, sales & promotions, advertising, hockey operations, concessions & the like can be minimized to begin with, increased as bookings (non hockey related) & attendance (Coyotes) increases, relying partially as well on league revenue-sharing. Sharp pencil everything & everyone in sight.

I'd have to say that virtually every other owner in every other sport worldwide owes a debt of gratitude to Mathew Hulsizer, the COG & the NHL for achieving new heights in terms of P3 Partnerships & Socialistic Capitalism. One day, soon, all teams, in all professional sport, will be owned by the cities/towns states & provinces in which they play, 110% taxpayer funded throughout North America as we embrace Marxist-Leninist philosophies, leaving Mother Russia to try her hand at Democracy & Capitalism. Im as pleased as punch to hopefully see the Coyotes remain in Arizona, but My God, I seriously wonder if this "deal" is even legal in terms of Contract Law (fairness to all parties), let alone Turken & the obvious Constitutional concerns.

 

[ultra runner]

Based on the last 15 years the words profit and Coyotes shouldnt be used in the same sentence.

 

[Dado]

Once this lease is approved and signed it is a "done deal".

Not until the bonds are actually issued and sold.

I assume the GWI will file "something" the moment council approves it. If they don't, they too are not what they claim to be.

 

[RECCE]

OK, after reading a comment about this on another thread, one in which I choose not to post this question for fear of getting flamed, I'll ask here.

Someone had mentioned that the 100 million MH is getting is spread out over a period of years, ummm, from what I've read on this thread so far, and what's in the agreement, isn't he getting 100 million up front prior to the lease agreement date and then X amount of dollars over a period of years?

Does it not say so here?:

9.9.1 In consideration for the conveyance to the City of the Arena Parking
Rights and the other rights and the assumption by the Arena Manager of the obligations set forth
in this Agreement, the City shall pay to the Arena Manager, by wire transfer of immediately
available funds to an account specified in writing by the Arena Manager on or before the
Agreement Effective Date, One Hundred Million and No/100 Dollars ($100,000,000).
9.9.2 Reserved.
9.9.3 In consideration of the Arena Manager’s agreement to perform the
management and other services set forth in this Agreement, the City shall pay to the Arena
Manager, by wire transfer of immediately available funds to an account specified by the Arena
Manager, (i) Ten Million and No/100 Dollars ($10,000,000) in the first partial Fiscal Year; (ii)
Twenty Million and No/100 Dollars ($20,000,000) in each of the first two (2) full Fiscal Years;
(iii) Seventeen Million and No/100 Dollars ($17,000,000) in the third full fiscal Year, and (iv)
Fifteen Million and No/100 Dollars ($15,000,000) in each of the fourth and fifth full Fiscal
Years.

This is confusing...

 

[gollybass]

Based on the last 15 years the words profit and Coyotes shouldnt be used in the same sentence.

interestingly though they lost what 20 million last year, now they are getting paid 17 million to run the arena. Profits are up 1 million already this year, and we havent hit the hot part of the season for ticket sales. So a profit, under this new lease, may not be far fetched at all.

End of the day MH isnt making bank and COG could well see some of that money come back before the bonds are even involved.

 

[ultra runner]

interestingly though they lost what 20 million last year, now they are getting paid 17 million to run the arena. Profits are up 1 million already this year, and we havent hit the hot part of the season for ticket sales. So a profit, under this new lease, may not be far fetched at all.

Explain to us how profit is us up $1,000,000.

 

[gollybass]

interestingly though they lost what 20 million last year, now they are getting paid 17 million to run the arena. Profits are up 1 million already this year, and we havent hit the hot part of the season for ticket sales. So a profit, under this new lease, may not be far fetched at all.

Explain to us how profit is us up $1,000,000.

I apologise, ticket revenue

 

[OthmarAmmann]

gollybass, I would love to do business with you.

 

[Killion]

Not until the bonds are actually issued and sold.

What, you dont think the COG will simply transfer $100M to Hulsizer the moment he receives NHL BOG Approval from the "Enterprise Fund" or even General Revenues & then float the Bonds thereafter, replenishing whichever account its drawn from down the road?. I sure do. As for the other $85M, I'd like my chances with any bank walking in with a Guaranteed $17M X 5yr Arena Management Contract to borrow another $170M in order to satisfy the NHL & cover losses for a few years moving forward. Wouldnt you?...

Someone had mentioned that the 100 million MH is getting is spread out over a period of years, ummm, from what I've read on this thread so far, and what's in the agreement, isn't he getting 100 million up front prior to the lease agreement date and then X amount of dollars over a period of years?

So its OK to come over here Flaming?. Tabernac!... See above re; $100M.

 

[peter sullivan]

So the money isnt just going into Hulsizers pocket if they make profit

they also get 2.80 of every ticket sold

Im sorry. Thank you. So he gets some of the profit not all. I wonder if that is a typical arrangement for an arena mangager?

Do we know how much the arena itself has made in recent years?

What's the $2.80 for again?

 

[gollybass]

Im sorry. Thank you.

Do we know how much the arena itself has made in recent years?

What's the $2.80 for again?

they get 2.80 of every ticket sold at the arena

 

[peter sullivan]

I know but why?

Does anyone know what a typical management fee is? Were we not discussing 5-6m a few months ago?

Is there a link to the $20m expert estimate? Maybe there are answers there.

 

[Tom ServoMST3K]

wouldnt the 20 million to run the arena go down if they did not have to sustain ice in the climate?

have to steal this from someone


If MH is buying the team for -27 million (170 - 197 = -27) ill offer to buy the thrashers for -15 million

heck i could go as low as -10 million

 

[Killion]

Does anyone know what a typical management fee is? Were we not discussing 5-6m a few months ago? Is there a link to the $20m expert estimate? Maybe there are answers there.

Arena Magmnt fee's vary from $5-8M per annum on average depending on various factors (indoor, 15,000+ seating capacity) $17M per annum (X's 5 ) paid to a neophyte inexperienced entity with no contacts, no book & no track record in the sports and entertainment field is, well.... lets just say "padded" & leave it at that.....

 

[kdb209]

- Glendale would pay Hulsizer $97 million over the next 5 ½ years to manage the arena, schedule concerts and other non-hockey events. That cost previously has been picked up by the team. Glendale's annual payments would range from $10 million to $20 million through fiscal 2016.

am i right in understanding that the team owners previously ran the arena for free and now glendale will pay them $17m a year for that privelidge?

what happens after the 5 years if he decides not to buy the arena?....will he just continue to operate it and recieve the profits without being paid that money?.....why would he buy the arena if that is the case?

After 5-Years the City and the Arena manager will negotiate a new Arena Management Fee - the Extended Arena Management Fee.

The COG has at least a plausible argument when they say the $100 million for parking and naming rights is fair consideration. Jobing.com is paying $3 million a year for the naming rates (for another 6 years), so if you take that amount over the term of the lease (I think it terminates in 2033), that is about $66 million. Are the parking spots worth $34 million over 22 years? Possibly.

The $100M is for parking rights and advertising & naming rights on the parking lots - not for advertising and naming rights in and for the arena. Those revenues remain with the Arena Manager.

 

[AllByDesign]

Arena Magmnt fee's vary from $5-8M per annum on average depending on various factors (indoor, 15,000+ seating capacity) $17M per annum (X's 5 ) paid to a neophyte inexperienced entity with no contacts, no book & no track record in the sports and entertainment field is, well.... lets just say "padded" & leave it at that.....

 

[dkehler]

Arena Magmnt fee's vary from $5-8M per annum on average depending on various factors (indoor, 15,000+ seating capacity) $17M per annum (X's 5 ) paid to a neophyte inexperienced entity with no contacts, no book & no track record in the sports and entertainment field is, well.... lets just say "padded" & leave it at that.....

No problem. MH will just hire a proper management company for $8 million and pocket the rest to "manage the management company ".

 

[peter sullivan]

Arena Magmnt fee's vary from $5-8M per annum on average depending on various factors (indoor, 15,000+ seating capacity) $17M per annum (X's 5 ) paid to a neophyte inexperienced entity with no contacts, no book & no track record in the sports and entertainment field is, well.... lets just say "padded" & leave it at that.....

yeah, i was just playing along....obvioulsy ellman and moyes have not been philanthropicaly donating $20m of services to the city of glendale every year....

in my opinion, the no 'out clause' is a massive victory for glendale......easily worth worth the $225m investment to get it.

glendale will likely give matty $225m in the next 5 years to buy the team and cover his losses....essentially in return they are getting someone locked in for 23 years.

that's basically $10m a year to matty, offset by $3-4m in parking fees and another $1.5m for the ticket surcharge, plus the $6-8m a year for the rental payments....all money they would not see if the team left.....a pretty good long term investment for glendale.

matty seems like the one getting screwed.....with the average ticket price being $37, the $2.80 surcharge and a parking fee of $20 per car.....while trying to build a market, he stands to have more than 1/3 of the cost of attending a game for every spectator (assume 2 people per car) going straight to glendale....with no control over those charges whatsoever.

does that seem like a solid foundation to run the team for 18 years?.....stuck paying these fees until the arena is 30 years old.

my guess is that after 5 years he extends his management fees for another 5 at the same $17m per year rates....or maybe more by that time.

 

[knich]

If this deal goes thru, I just hope you guys show as much interest in the Yotes as you are now...we could use the fans.

My mate?? Hehehe... I think the pro-relocation crowd views me as a bur in their saddle.

Is it a big bur..just kidding



Even if you just read the highlights it would be evident. You are either naive or lying in the bolded statement.

Lying is such a harsh word..lol. Call me naive like the rest of us people who have never run a city, run an arena, run an NHL franchise, or owned a franchise.


Oh yes... they have spent. Here is the problem I have with that reasoning. Mayor Scuggseepoo says they figure it would cost the City 17 million to manage the arena and bring in other venues to fill the dates. Ok.. lets say I buy that. In the lease arrangement you are paying Matt Hulsizer (Who has zippo experience in this field) to do that job. On top of that you are cutting a cheque for 100 million smackaroos. So this resolution is essencialy $100,000,000.00 more expensive than the other option.



The selfish part has nothing to do woth where you spend your discretionary income. It has to do with... ahhh I'm getting tired, re-read my previous post.

At least you and Hulziser have something in common...zippo experience. The difference is Hulziser will bring in an expert to run the arena or did you not read that part in his statement to the press?

Here's bottom line: Why do you think the Coyotes went from consistently averaging 15,000 fans to 10,000 fans since Mr. Blackberry tried to move the team? Is it because the Yotes sucked? No...they had sucked for years..8 to be exact. Is it because all the Glendale citizens decided not to show up anymore? No...it's because the people outside of Glendale...specifically the east valley (Glendale is in the west)...stopped showing up. It is these dollars the COG and NH are banking on to get a return on their investment. So..it doesn't matter if you live in Glendale what matters is whether the COG will re-coup its money...it doesn't care where it comes from. Do you think the City of Winnipeg said we're not going to have NHL exhibition games if the teams are not from Winnipeg? Heck the Yotes have played two exhibition games there recently. Did you go to those games? Do you think the City of Toronto said we're not going to allow Leafs fans from Hamilton to attend games since they don't live in Toronto although they bring revenues to the City?

IMO...the Coyotes wouldn't even be in this position right now if the Scottsdale City Council had listened to the citizens who voted 3 separate times for the arena in Scottsdale. Then again...Gretzky might still be owner or worse coach..but that's for another topic.

Hulziser gets it..you need to win back the hearts of the Coyotes fans and put a good product on the ice and I believe they will return. Just like the Penguins' fans did and just like the Blackhawks' fans did. The Yotes were averaging 15,000 fans in a non-traditional hockey market, with a million sports teams, plenty of outdoor activity, great weather, and a s****y team. The fans are not going to return overnight, especially in this economy where we rely heavily on tourists. A sports franchise is a long term investment, as MH noted, the COG built the arena specifically for the Coyotes as a long term investment. They are spending money now in hopes that the COG will see a return on its investment. As I said, only time will tell.
Mod: deleted.

 

[peter sullivan]

^they were actually averaging 12000....with the cheapest tickets in the NHL....and free parking.

matty will have to do much more than 'win back the hearts of coyotes fans'....if thats all he accomplishes he will be just another in the long line of failed owners after his charity runs out.

after 15 years, he is still charged with the task of creating a hockey market....not simply reviving one.....the coyotes have never been economically viable...whatever the excuse.

he has 5 years to accomplish this...he had better hope bryzgalov stays healthy.