Thursday, May 24, 2007

The Preds' other suitor

Somehow missed in all of the excitement is the fact that Jim Balsillie wasn't the only one angling for the Nashville franchise:
Also bidding for the team was a group including Anschutz Entertainment Group, which had hoped to move the team to Kansas City, Mo. ...

The impending sale, if approved, would be a blow to efforts by Kansas City and Anschutz Entertainment Group, which has been looking for an NHL team to move into a new $276 million arena that will open this fall in downtown Kansas City. AEG, which also owns the Staples Center in Los Angeles and the NHL's Los Angeles Kings, already has sold all the arena's corporate suites as well as the naming rights to the building, now called the Sprint Center.
The significance here? The NHL had a choice between Balsillie (Southern Ontario) and Anschutz (Kansas City), and the Canadian bid won out.

It's a telling detail, one that would seem to indicate the league is on board with whatever Balsillie's plans are for the franchise.

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At 1:46 PM, May 24, 2007, Anonymous kwyjibo said...

The NHL had a choice

Was it really the NHL's choice, though? I mean, if I own an NHL franchise, surely it's my right to sell to whoever I want to.

Maybe Balsillie won the bid not because the league prefers him, but rather because the Preds owner prefers the larger wad of money he offered.

At 1:50 PM, May 24, 2007, Blogger James Mirtle said...

It's my understanding that the league stepped in during the Pittsburgh situation, but they failed to do so here.

Read into that what you will.

At 2:21 PM, May 24, 2007, Blogger Julian said...

The NHL still can step in, can't they? I mean the deal has to be approved by the BOG, no?

At 2:24 PM, May 24, 2007, Blogger James Mirtle said...

If the league honestly didn't want Balsillie to own a team, there's no chance he'd still be trying to make a play for a team. Bettman may have even whispered in his ear after the Penguins fiasco that he should stay in the picture given the shaky ownership situations throughout the league.

Canadian teams are generating far more revenue per team than American franchises, and a team in southern Ontario would instantly be a cash cow for the BoG. I can't see them voting against that.

At 2:30 PM, May 24, 2007, Blogger ninja said...

I choose to see this deal as a potential competitive element that might spur the Maple Leafs into getting their act together, though they'll probably just wait until LeafsTV subscriptions dip in three years time.

At 2:34 PM, May 24, 2007, Anonymous Frank said...

James, this isn't the NHL saying no to Kansas City (KC) and yes to Kitchener - Waterloo (K-W).

Bettman knows that at least two other US teams will have to relocate within the next two years.

None of these owners wants to go to K-W, and only Basillie has the mega bucks and local connections to make K-W work financially. Especcialy, if its part of an overall real estate development deal - which is probably the case (i.e. development of an arena, shopping centre, technology office park - with RIM as a lead tenant - condos etc.).

Therefore by letting the Preditors go to K-W saves KC and probably Houston for the other two teams that need to relocate.

Bettman and the Board of Governors wanted to keep Pittsburgh in the league - and Crosby in the US - for television reasons and to not give the appearance of losing a major market team.

Neither of these reasons applies to Nashville which is viewed as a secondary US market by Bettman and the US owners.

On these grounds, all US owners will approve the deal - as its "no skin off their noses". Also, the high price Basillie is paying helps to raise the bar on all franchise values across the league, and gives the appearance that an NHL franchise is still a desireable and profitable property.

In fact, I believe that if Basillie wanted to buy the team and then move it to Kansas City, Bettman and the owners would probably have blocked it, again wanting to keep KC available for existing US owners only.

Finally, all of the owners are staunch "capitalists", who are reluctant to interfere with the decision of another owner to sell or relocate his team. This is because they also want to have the freedom to sell or move their own team, if they need to.

Bettman was able to get the owners on side to blocking the Pittsburg deal only because of the importance of the market and Crosby to the league. However, he knew there was no way he was going to get the owners to again block Basillie on the Nashville deal.

Therefore, being the smart lawyer he is, he approved it.

At 4:49 PM, May 24, 2007, Blogger J. Michael Neal said...

I think that the most important bit of information is actually this, from the article:

AEG, which also owns the Staples Center in Los Angeles and the NHL's Los Angeles Kings,

Maybe everyone else knew this, and I'm just the slow kid in the class, but the NHL is letting the owners of the Kings bid on an additional franchise? Are they requiring that AEG sell with Kings if it purchases another team, or are we going to have syndicate ownership?

If it's the latter, then it's the single most destructive development in the NHL over the last thirty years, and I consider most of the Bettman regime to be a disaster.

At 5:54 PM, May 24, 2007, Blogger James Mirtle said...

You're going to have to read the entire article: AEG has an agreement setup with an owner to purchase whatever team they can woo to the city.

At 6:23 PM, May 24, 2007, Anonymous Frank said...

J. Michael Neal, if you read further on in the article you will see that AEG was simply acting as a "front man" for a third party Silicon Valley investor. If AEG was successful in purchasing the team, they would transfer ownership to the investor for the sale price plus a fee and/or some minor equity participation.

AEG's main businees is real estate development, not sports ownership. They have built this facility in Kansas City "on spec" and are now seeking tenants, both in the form of NHL and NBA franchises, arena league football etc.. They don't necessarily want to own the teams, they just want to lease the facility. Also, the arena itself in Kansas City is only a part of a much larger real estate development plan.

When they were courting Pittsburgh, they weren't offering to buy the team, they were just willing to give the existing owners (Mario and the boys) a very good long term lease agreement.

This is why buying and moving a franchise to Kansas City, even with a "sweet lease" agreement has no appeal to Balsillie. He doesn't want to be a tenant in a building, he wants to be the landlord.

I believe Balsillie's real interest in buying an NHL team is not hockey related - but real estate related. He wants to build a major arena/ commercial development in the K-W area.

Arena ownership can become a "cash box" if combined with shopping centres, and office and/or residential development. If you can convince governments to make contributions and tax concessions - all the better.

There is no way Balsillie can pay $220 million for a team and make enough hockey revenue to earn an adequate return on investment, even if he was given a rent free facility together with all the concession, luxury box and parking revenue. While gate receipts in Kitchener Waterloo will be good, he will get next to nothing for TV and Radio rights, because of the Leaf's dominance in Ontario.

Where he wants to make his money is off the arena itself, plus development around the arena. Currently, there is no large modern facility to book enternainment events in this large rich area of Southern Ontario. Everything gets booked into the Air Canada Centre. Also, the arena could be used as a convention facility with a hotel and shopping centre developed next to it. The NHL team while being a prime tenant, will only be a small part of the profit generation.

This is the same business plan that was used for the Phoenix Coyotes.

Even David Asper, Chairman of CanWest Global is offering to personally buy the Winnipeg Blue Bombers of the CFL and build and own an all weather 30,000 seat football stadium, provided he gets development rights to build a shopping and entertainment centre adjacent to the stadium, and governments fund 60% of the cost of the stadium.

In Vancouver, the current civil trial between the successful and unsuccessful bidders for the sale of the Vancouver Canucks last year is revealing that the real reason the bidders (both property developers and owners) wanted to buy the hockey team was the arena itself - and it profit generation - together with the development rights to the lands surrounding the arena for condo development. Currently, the land is zoned for office development, but if the new owner can get them rezoned to residential for condos, they will make a mint.

Balsillie may be a great hockey fan, but he is also a smart business man, and he knows you cannot make money paying $220 MILLION for a hockey team alone, unless its part of a much bigger investment.

At 6:34 PM, May 24, 2007, Blogger James Mirtle said...

Frank, you can come comment here anytime.


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