Bids To Glendale For Arena

Six million dollars a year is the number being politically bolstered through the local media by the City of Glendale as the amount they consider to be legitimate for managing their arena.

ModernTimesMagazine.com

AZ Roller Derby
(ModernTimesMagazine.com)

It’s clear that, very soon, the NHL will be presenting the group allowed to purchase the Phoenix Coyotes. There is considerable jockeying in front of and behind the scenes to be the group selected. I’ve heard yet another “deadline” has been issued by the NHL for bids to be done.

Man, are we all sick of deadlines and vague rumors?

Once that deal is done, Gary Bettman and crew will join the new owner group and jet to Glendale to present their proposition to the City of Glendale. That proposition is what we’re talking about here.

Hockey Or Fire Trucks?

In the meantime, bids are being prepared and submitted to Beacon Sports Capital for the “we don’t need hockey” people. The NHL has stated they won’t be participating in the Beacon bid process, so it’s logical to assume that the bids received will be from firms that have no legitimate plans for an anchor tenant. You should expect to see upwards of TWENTY bids in the hands of Beacon, including from heavy hitters AEG and Global Spectrum.

I’ve heard rumors of minor league hockey teams and the like, but that’s simply not realistic. To generate the revenue needed to pay for the arena the voters of Glendale approved, a real anchor tenant (40 nights of 11-13k people) is necessary.

The National Lacrosse League team “Arizona Sting” was a tenant for awhile, that is the anchor tenant model the “non-hockey” people will be able to provide if they’re lucky. Maybe AZ Roller Derby is what they had in mind? Unworkable as a real draw for 40+ events, in other words, especially in an area with so many pro sports teams and venues.

Regardless of all that, politically the propositions can be filtered down and one will probably be found (legitimate or not) that could allow the City to present something to the public, probably through an Arizona Republic article. With their presentation, their budget will be balanced with an apparent way to lose less money on their arena while keeping all their fire trucks.

Let’s first review the potential players and then examine the importance of an anchor tenant.

Likely Bids From Three Groups

I won’t debate whether ANY of the three groups discussed here are legitimate or not, that’s a story with a lot more words than this. I will say the initial Pastor bid was rejected by the NHL and the league appears to be moving forward aggressively with the Renaissance group.

Renaissance

After the deadline for the Jamison deal expires, Renaissance’s Anthony LeBlanc told the Arizona Republic:

“Look, the reality is that any potential owner, myself included, will require a deal with the city that is very, very similar to the one that was on the table over the last several months.”

The deal on the table was an average of $15M per year. So let’s peg the Glendale obligation requirements of Renaissance at $13M-$15M per year.

Jamison

Among the groups on the sidelines rumored to be still working on submitting bids to the NHL is Greg Jamison. In discussions with Glendale Council Member(s) that became public, it appears Mr. Jamison will be looking at something in the $10M-$12M range.

Pastor

Craig Morgan’s piece on the bid rejection story states:

“According to sources, the maximum amount Pastor’s group was willing to pay for the team was about $277.5 million, while the group was asking for either $8 million annually from Glendale to manage the arena or 5 percent less than the lowest other bid.”

So let’s use $8M-$10M as the range for Pastor.

Anchor Tenant Revenue

The Coyotes provide a minimum of 41 nights of people to Glendale. Minimum attendance (with no playoffs and POOR attendance) means 509,241 people in Glendale during hockey season. Last season the attendance was actually closer to 660,000. Revenue to the city from these people has been a difficult number to obtain, I don’t have it. As an example, if people paid for parking and $5 of each parking instance ended up in the pockets of Glendale, how much DIRECT money would Glendale receive? Let’s round to keep the math simple and VERY conservative.

Hockey at  Jobing.com Arena

Hockey at Jobing.com Arena
(image from Axs.com)

Start with 500,000 people attending games. Remember that number is with NO playoff games and, despite attendance and season ticket sales trending UP, admittedly terrible attendance numbers.

Let’s assume THREE people were in each car being parked (we all know it’s closer to two). 500,000 (people, rounded DOWN, NO PLAYOFFS) divided by 3 (people per car) = 166,666 “parking events”. Since that number is too devilish, let’s round that DOWN (in the direction AWAY from making the point of my argument) to 160,000.

We now have 160,000 times $5 per “parking event” = $800,000 directly into the general fund of the City of Glendale every single year regardless of the performance of the hockey team. That number would, of course, increase substantially with playoff games. The same math last season would have netted Glendale $1,100,000.

Let’s assume a new deal will be similar to the “Jamison deal” as regards ticket surcharges and go with $2.94 per HOCKEY ticket directly to the city. 500,000 (people) times $2.94 (per ticket) = $1,470,000 directly into the general fund of Glendale.

I’ll continue, but if we do the math now with ONLY parking and ticket surcharges, we can easily make a case for an arena manager WITH the Coyotes as an anchor tenant. How? Let’s use the ridiculously low $6M number the City is pushing hard with leaks and spreadsheets as the “base” number. Let’s now justify the increased amount the owners of the Coyotes will certainly request.

So far, our very conservative numbers have us with $2,270,000 additional revenue to the City WITH the Coyotes. Let’s add that to the $6M the City is indicating they are willing to pay. We’re up to $8,175,000 as an easily justifiable arena management fee with the Coyotes. Darin Pastor, who had his bid rejected by the NHL, has been identified as willing to accept the $8M amount. Boom.

Naming Rights

The naming rights for Glendale’s arena will be up for bids soon. Jobing.com paid $25M in 2006 for ten years of naming rights. They laid out that cash with the Coyotes as the anchor tenant. It would be foolish to think any company would pay as much for an arena without a prestigious anchor tenant. How much less would they pay? I don’t know, but ten years of naming rights is worth at least $2.5M per year which could rightfully be claimed by the owner of the arena. Of course that’s negotiable but we need to do some math here.

If you think it’s easy dealing with “no anchor tenant” naming rights for a roughly 20,000 person city owned venue in Phoenix, check with Live Nation and ask them about their Desert Sky Pavilion. Yes, I’ve been there and am very aware it’s not REALLY that comparable to Glendale’s arena, but for this purpose it is. In 2011 they briefly resurrected the Desert Sky moniker. Ashley Furniture jumped in with a five year sponsorship deal that included naming rights. I couldn’t discover how much they paid. I also didn’t bother to continue this thread of research, but that five year deal must have collapsed because that venue is now back to being named Desert Sky Pavilion. So Desert Sky became Blockbuster became Cricket became Cricket Wireless became Ashley Furniture HomeStore became Desert Sky.

Pretty stable, huh?

If we update our expectations to reflect today’s market, HP Pavilion gets $3.1M per year with an anchor tenant (the San Jose Sharks). An arena in Charlotte without an anchor tenant gets $125,000 per year from Bojangles. By the way, click here for an interesting summary of arena naming rights done by Sioux Falls.

Let’s not use those numbers, let’s multiply the Charlotte (no anchor tenant) number by more than TEN to be fair and knock $100k off the Shark Tank number. That gives us a difference of $1.5M per year of direct revenue WITH a legitimate anchor tenant.

An anchor tenant with the prestige of an NHL hockey team is worth $1.5M per year. Let’s add that to the $8,175,000 for a new total with naming rights of $9,675,000 MORE paid into the Glendale general fund with the Coyotes. Now we’re EASILY getting within shooting distance of the low range we figure Jamison would propose.

Plenty Of Other Things

Given time and some additional research, I could easily justify any bid number up to and including the high side of the Renaissance guess, $15M. I simply don’t have time and this piece is already 1500 words.

You might expect some sort of additional bed tax could be in the mix for the Renaissance Glendale Hotel & Spa. I’ve heard a $1M per year number bounced around, but it would be solely contingent on the Coyotes remaining in the arena.

Some intrepid reporter should contact the Westgate people and ask them if two potential tenants immediately cancelled when the deadline passed for the Jamison bid and hockey came into question. He or she should also ask if at least one more is on the fence waiting to see if the Coyotes stay. All of that revenue is STRICTLY dependent on having the Coyotes as the anchor tenant.

Sales tax revenues and other revenue to the City that’s dependent on the Coyotes isn’t yet available in a format we can digest, but the City is working on them as we speak. Once published, everybody will have the opportunity to review them and decide for themselves.

What Now?

Here’s the politics of it.

It doesn’t even matter what is proven about hockey revenue. Politically, the $15M number is a non-starter. If the group anointed by the NHL shows up in Glendale with a $15M and a take-it-or-leave it stance, they will be asked to take the Coyotes and shove them into a dark place (like some northern city with no sunlight half the year). Of course they’d probably be in that dark place without a Equipment Manager, Captain, GM or Head Coach.

Anything less than that is justifiable, but maybe not politically viable.

There is real danger here that swagger on both sides of the fence could have a VERY doable deal that’s beneficial to the citizens of Glendale AND the new owners of the team fail.

Of course, if everybody would just listen to me…

Oh and all this has to be done before July 1, six weeks away. SIX WEEKS FROM TODAY.