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December 15, 2010
Glendale votes to give $197m to rich guy, so he can buy Coyotes for $170m
The Glendale city council last night approved a new lease agreement with the Phoenix Coyotes that opens the way for a sale of the bankrupt franchise, promises to keep it in town long-term, and in its insane complexity reminds me why I hate writing about the Phoenix Coyotes lease. Once more, into the breach:
- Under the deal, Glendale will issue $100 million in bonds, then immediately hand over the cash to Matthew Hulsizer, a Chicago hedge fund manager. The city would also pay $97 million to the team over the next five years for the grueling task of operating the arena during concerts and other non-hockey events.
- Hulsizer will turn around and hand most of his newfound lucre to the NHL, paying $170 million for the Coyotes franchise, which has been in league hands since last year.
- Glendale will gain control of 5,500 parking spaces in lots surrounding the Coyotes arena, and will attempt to earn some of its money back by charging between $5 and $20 for parking, as well as by, insists the Arizona Republic with a straight face, "selling advertising and naming rights on the lots."
While the lease requires Hulsizer to keep the Coyotes in Glendale for the next 23 years (and "work to rename" them the Arizona Coyotes; what, he has to lobby the Swedish Naming Bureau for approval?), he also gets an out clause that would let him terminate the lease if the city (in the Republic's words) "failed to meet its financial obligations to the team or faced a lawsuit that invalidated part or all of the deal." Then Hulsizer gets to keep the team and the $197 million in cash, and go wherever he likes with them.
Given that the Arizona-based Goldwater Institute is already threatening to sue to block the deal, this is a not inconsiderable risk. And, of course, Glendale is out $197 million either way. Jerry Reinsdorf is starting to look not so bad in retrospect...
Does this seem to be the worse stadium deal ever? Seriously.
The buyer nets $27 million. Is my math correct? $100M + $97M - $170M = $27M, yes?
This deals goes beyond the idea of buying an asset with no money down.
Posted by bevo on December 15, 2010 07:26 PM
Living in Mesa, AZ, I'm glad that someone has stepped up and taken the Stupid Giveaway of the Year prize from us... and with only 15 days to go in 2010!
Posted by Dave Boz on December 15, 2010 08:56 PM
What an amazing deal. Although after reading it, if there is a breach Hulsizer walks with the $100,000,000 for sure. Of the other $97,000,000 only $10,000,000 is paid up front. The other $87,000,000 is dished out over 5 years. So the amount he walks with is dependent on when this falls apart. Wait, I mean if this falls apart.
Posted by Thomas on December 15, 2010 10:12 PM
Good one, Dave Boz!
Yes, this deal stinks. I think everyone knew when CoG agreed to cover the losses the league would endure this year that they would, pardon the vulgarity, open wide for the next owner.
One thing is clear, Hulsizer stands to get a free NHL franchise 6 years out (the league has imposed a 7 year "no movement" clause on the new owner... but hey, who would move when someone else is paying you to play in their building?).
The parking purchase is really something... during the Bankruptcy last year, the franchise revealed it's parking and ticket surcharge (both then payable to the city) had generated a maximum of around $4.5M and an average of closer to $2m p/a over the life of the arena. So, it should pay for itself roughly... never.
As for the parking charge increase, well, they might try that. But Coyote fans show up in extremely modest numbers, and pay an average of $36 per ticket (roughly 65% of NHL average prices).
It doesn't seem like there's much room to bump prices on anything, but hey, good luck, Glendale.
Posted by John Bladen on December 16, 2010 12:31 AM
Was an empty arena that bad? I mean, wouldn't they have zero scheduling problems with other events like NCAA games. Couldn't they have made some bold bid to lure the Frozen Four down there and stacked the rest of the year with tons of concerts and given the Suns arena a run for its money? There was nothing else they could've done here that involved no further money going into the arena and making the best of a horrible situation?
Posted by Andrew T on December 17, 2010 06:19 PM