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Guest Post: The Coyote Conspiracy, Relocation To Las Vegas Makes More Sense Than You Think

One of our goals here at SinBin.vegas is to be the voice of the valley when it comes to the NHL. In trying to do so we often have the opportunity to interact with some incredible people (and excellent writers) who are equally as passionate about hockey in Las Vegas as we are. Therefore, we wanted to give you, our readers, the opportunity to let your voice be heard via guest posts to the site.

Our next guest post comes from Eric Biro.

Las Vegas is getting a hockey team, just not how you think we are.

We all know Las Vegas is very likely getting an NHL team in the near future to play at the new T-Mobile Arena on the Strip. Bill Foley has got the money and desire to bring the NHL to Vegas and it looks like it’s happening soon.

But what if the team we’re all excited to watch is already playing? Down Highway 93 is the Arizona Coyotes, the constantly rumored relocation candidate. Every time a city or potential owner shows interest in purchasing an NHL team it’s going to be the Coyotes that gets relocated. It’s not a secret the Coyotes haven’t done well in the Valley of the Sun. Through poor ownership, bankruptcy, terrible on ice performances, etc. the Coyotes have always had a good base of support in the Phoenix Metro area. However, it’s never really been enough to financially support the team and keep the red ink off the Coyotes’ balance sheet.

In 2001, the Coyotes were sold to a new majority owner, Steve Ellman, a Phoenix area real estate developer, with hopes to create a sports and shopping Mecca on the west side of the Phoenix metro area. The Coyotes’ new arena and the University of Phoenix Stadium for the Arizona Cardinals of the NFL were to be the centerpieces of Glendale, Arizona’s “Westgate” development. For Vegas people, it’s essentially Downtown Summerlin with a hockey arena and football stadium. As time went on, Mr. Ellman wasn’t as able to capitalize on his ideas as much as he’d hoped and after construction of the Coyotes’ new arena, the team was sold as well as their lease to the (now) Gila River Arena.

Team performance suffered in the following years and declining revenues led to the Coyotes filing for bankruptcy protection in 2009 after the league itself took over operation of the franchise. We won’t go into all the bankruptcy issues, but finding a new owner for the Coyotes was not easy while the team was being reorganized in court and the time that followed. The City of Glendale guaranteed to cover the Coyotes’ losses to keep them in the metro area and especially in the arena at Westgate.

Finally, in 2013, after the team being essentially operated by the NHL for years, there was a new owner for the Coyotes. They would come in and purchase the franchise for $225 million and operate it in Glendale’s Gila River Arena. The City of Glendale would pay the owners to operate the arena to the tune of $15 million per year. The new ownership group would then use that arena management fee to cover any losses for the franchise. This arena management contract was essentially a subsidy from Glendale to the Coyotes to keep the team in Glendale. The ownership group was also given a loan and a line of credit secured by the league itself to keep the team afloat.

Last year the City of Glendale found their way out of that agreement and it was determined in the courts that Glendale was able to terminate the arena management deal with the Coyotes as well as the lease for the Coyotes to use Gila River Arena. This decision reduced the Coyotes revenue by fifteen million dollars per year, but did include some increases of revenue to the Coyotes via streams that would have gone to the city under the previous agreement. Glendale and the Coyotes agreed to a two-year lease for the arena and put a bandage on what could have been a pretty ugly situation where a professional team could have had no place to play.

So, we fast forward to today. The Coyotes have just finished the first season of their two-year lease on Gila River Arena. They’re frantically trying to find a place to play after the 16-17 season. The ownership group has stated that Glendale is “not a long term solution.” In the past few months, the Coyotes ownership group has approached Arizona State University for a shared arena near campus with construction funded by a special sales tax district. The tax district was shelved in the Arizona legislature. They have approached the Salt River Tribe on the east side of Phoenix to build an arena on reservation land. There have been rumors of a new arena in downtown Phoenix that would be shared with the Suns of the NBA.
However, there are some things that remain constant in this situation.

  • The Coyotes were losing money annually with the $15,000,000 “subsidy” with Glendale and they’re likely losing just as much now.
  • The Coyotes have no place to play after 16-17 unless someone decides they want to construct a new arena for them in the next few weeks, and even then they’d likely need to find a temporary location while it is constructed.
  • Whoever builds a new arena for the Coyotes will need to compete with not only Talking Stick Arena (the former America West Arena and home of the Phoenix Suns) and the arena that replaces it for concerts and events, but also compete with the Coyotes’ current home at Gila River Arena. It seems like an additional arena in the area would have a major uphill battle getting acts, especially now that AEG, T-Mobile Arena part owner and owner of the LA Kings, looks to be the arena manager that will replace the Coyotes for management services at Gila River Arena. Further, Robert Sarver ,the owner of the Suns, has a very attractive lease with the City of Phoenix now, and he’s likely to be in a position to get another attractive lease with the city without having to split arena revenue with the Coyotes, which they, and most other NHL teams, would need to make financial sense.
  • The Coyotes do have an unknown amount of debt that’s secured by the other owners in the NHL, so if everything works perfectly the 29 other owners will likely be on the hook for debt incurred by the Coyotes until they get this thing turned around and start paying down that line of credit and overall debt. Of course, this is all occurring after the team has lost money the vast majority of the years it has spent in the Phoenix area.

Enter Bill Foley.

Bill Foley is willing to pay $500 million for an expansion team in Las Vegas. This represents an enormous increase in franchise value for an NHL team, especially when you consider the Coyotes sold for $225 million just about three years ago. We have an arena in Las Vegas that is absolutely ready to welcome an NHL team and we’ve got around 14,000 deposits for season tickets in that 17,500 seat arena. Foley’s team will have a monopoly on pro sports in the largest US metro area without pro sports, and Bill Foley can support increasing team valuations after the sale of the Clippers to Steve Ballmer for the insane amount of $2 billion dollars.

So, the question is… if you’re a member of the NHL Board of Governors and you’ve got a struggling franchise likely with a substantial amount of debt a few hundred miles down the road from a guy that’s willing to pay twice as much as that franchise sold for in 2013 do you encourage the owners of the Coyotes to consider selling?

Do you consider what effects the doubling of a low performing team’s valuation would do to your own team’s value?

Or do you take a risk and hope the Coyotes ownership group finds a way to construct an arena in Phoenix after years upon years of losses, bankruptcy, city subsidies?

Perhaps you hope they’ll find someone other than Foley in a place like Portland or Seattle that’s just as willing to pony up $500 million for their franchise plus a few hundred million for an arena (in Seattle’s case.)

I may be a little conspiracy oriented here, but as has been discussed before on this site, owners like Bill Foley don’t come around often and they don’t usually come around with the strong desire, the money, and a brand new arena.

The Coyotes ownership group makes a little profit for taking the franchise off the league’s hands for a few years, the debt from the Coyotes gets paid off by the sale, the league is in a much more stable situation with the franchise finally after twenty years, and you get to support your Las Vegas (please don’t call them the) Knights.

Crazier things have happened, the weird thing is that this crazy thing actually seems to make sense.

Eric Biro

If you are interested in contributing a guest post to SinBin.vegas, please email us at ken@sinbin.vegas.

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7 Comments

  1. I’d be happy to point out all the facts wrong in this piece, but I’ll have to charge you for it. You could start by revisiting the “debt” statement.

    Trolls have been after the Coyotes for many years, they’re still around. It looks like the Coyotes are buying AND moving an AHL team closer to Phoenix as we speak. Sounds like somebody getting ready to move?

  2. Eric

    The Fortress loan/subsequent loan and the Line of Credit from the NHL are pretty much common knowledge at this point, it’s been brought up a lot, especially during last year’s Glendale fiasco, and nobody has come out an deny it.

    Like I said in another tweet, I don’t think IceArizona wants to sell. I think they want to stay in Phoenix for the long haul.

    However, their desire to stay in Phoenix doesn’t overcome the fact that they can make a pretty decent profit, they lost their arena management fee, and they’ve got nowhere to play after next season.

    These are business people (and there’s a ton of them in the IA ownership group) do you hold out hope for Phoenix voters to vote on the new arena and then hope Sarver is willing to share? Do you hope ASU gets over their hurdle and Arizona creates a special tax district for that arena? Do you hope the tribe is willing to support you like Glendale did?

    Or do you make a nice $75 million profit and sell the team and work with Foley managing the AHL team in Tucson?

  3. Dave

    Robert Sarver’s arena plans do not include Coyotes
    http://arizonasports.com/story/637440/robert-sarver-suns-arena-plans-do-not-include-coyotes/

    Sharing an arena with the Suns is not happening.

    ASU building and sharing an NHL arena has always been a smoke screen.

    Unless the tribe builds them a new arena with some type of monetary support, I just don’t see the Coyotes staying in Arizona.

    • George Fallar

      Please refer to Google to determine the resolution of the “common knowledge” Fortress loan. Don’t assume Glendale City Council is any better informed than the general public.

      ASU is far from a smoke screen, whatever “information” that conjecture is based on is incorrect.

      A special district is already in place for an ASU location. Google is your friend.

      Suns/Coyotes is unlikely, nobody paying attention would think Sarver would be a cooperative person.

      The reservation site is also apparently very much still in play.

      The Vegas money for a NEW team is already in place, pretty unlikely the Board of Governors will want to give that money up for a simple relocation.

      This blog software is too tedious for me to reply to more conjecture.

      This blog software commenting is tedious, I’ll be leaving this string now.

      • Eric

        I feel a little rough responding after you’re done, but just to clarify.

        The Fortress loan is gone, yes. However, it wasn’t paid off through owner capital, but refinanced and that refinancing apparently used the franchise itself as collateral and likely personal guarantees from the ownership group. That would mean if there’s a time in the near future (after next season, for example) and the Coyotes have no place to play ownership assets would likely become exposed to the debt, which would be a major issue if the Coyotes somehow figure out a way to play in (not good for hockey) Talking Stick Arena or VMC.

        The Karsten site for the ASU arena’s tax district has been shelved for this session, and time seems to be of the essence.

        http://www.bizjournals.com/phoenix/news/2016/04/09/coyotes-arena-special-tax-district-sidelined-asu.html

        Agree on Sarver.

        I don’t know much about the reservation site, but you’re still entering a situation just like Glendale with Jobing.com/GRA. Will the tribe pay IceArizona an amount they (seem to need) to manage that arena, or even pay them to play there?

        Expansion money makes a lot less sense once you add the existing debt (and any potential additional debt from arena construction) that needs to be paid. If the league itself is exposed in any way to that debt (either through the franchise itself or actual refinancing using league resources.) In fact, if the Coyotes are sold for (say) $300MM and the NHL gets $200MM for a relocation fee to add up to the predetermined $500MM Foley is willing to pay, it makes more sense to relocate than expand in less than four years.

      • Eric

        I’ll also say this, just so we’re clear.

        I’m not super excited about the potential of the Coyotes moving here. We would lose our fairly obvious potential rival since the California teams have their hands full hating each other, we’d wind up being the example everyone uses for hockey in the desert not working as soon as something negative happens, and I like Coyotes fans.

        I hope Arizona keeps their team, I’m just writing all the stuff I see. This whole thing started almost a year ago as a way to prove they weren’t moving here and here we’ve arrived.

  4. Ken Jones

    There is a tent full of tricky clams, and George Fallar is one of them.

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