76ers owner to buy Devils for reported $320m, now faces arena glut challenge

The New Jersey Devils are not, in turns out, being taken over by the NHL. Rather, they’re being sold by broke former Lehman Brothers exec Jeff Vanderbeek to not-yet-broke former Drexel Burnham Lambert exec (and also Philadelphia 76ers owner) Jeff Harris, who will reportedly pay $320 million for the privilege of owning the team and operating rights to Newark’s Prudential Center.

The Bergen Record calls this “a stunning price for a team that has been mired in debt,” but read a bit further and it’s actually not all that stunning: Harris isn’t taking on Vanderbeek’s $200 million in debts, just allow him to pay them off and still have a nice chunk of change left over. And the team itself looks like it’s been at least breaking even since moving to Newark in 2007-08, so while this is a high price, it’s not a crazy-high one.

The big question here is how lucrative the arena management rights will be once they’re owned by somebody with the cash flow to actually book concert acts. Things are very different in the NYC arena world than they were in 2007 when the Prudential Center opened: Brooklyn’s Barclays Center has opened, Madison Square Garden has just completed a $1 billion renovation, and even Nassau Coliseum is about to have a redeveloper announced later today. (The Devils’ former home, the Izod Center, is still hanging around too, though from a look at its upcoming concert calendar, it may not be for long.) The New York City metro area is huge compared to any other U.S. city, but even it can be susceptible to arena glut if you have too many venues fighting over too few acts.

If nothing else, the upcoming four-way competition is likely to make concert promoters really happy, since they’ll be able to play arenas off against each other for the best deal like never before. This hopefully won’t have any dire effects on either concertgoers’ or taxpayers’ wallets — just on the bottom lines of guys like Harris — but it’s probably best to keep in mind the saying about the elephants and the grass just in case.


14 comments on “76ers owner to buy Devils for reported $320m, now faces arena glut challenge

  1. I assume the team sold for what it did in large part due to it’s success over the last 2 decades. Only the Red Wings have done more in that time frame, and the Devils were in the finals just one year ago. It’s not often a team like this comes up for sale, so if you want to own a team that wins, now was one hell of a shot at getting one. The fact it comes with a fairly new arena outside the biggest market in the US is just an added bonus (even if that arena has a lot of competition).

  2. Media conglomerates will just engineer more poorly conceived acts and market it to the non-savy consumer kids. Look forward to more Power Ranger Extravaganza/Beiber Fever/Disney’s Planes on Ice shows that you have to take the kids to.

  3. Should be interesting to follow what goes on with this franchise. According to Team Marketing Report, the NJDevils were one of 3 teams to have a lower average ticket price this last season than the year before which is odd considering the Devils made it to the finals. They also saw the 3rd highest increase in AVG attendance this year.It blows me away that Vandeerbeek couldn’t make this work.

  4. It may have been no more than a case of “too much debt”, as noted elsewhere on this site. I don’t believe Vanderbeek ever intended to be effectively the sole owner of the club. That said, former banking execs are quite some way down the list of creatures I would ever feel sorry for, no matter what appalling fate befalls them.

    Neil: Do you recall what he & his partners paid for the franchise? I am wondering if this is another loss leader win for a short term team owner (less egregious, but something like Frank McCourt engineered, with his league’s profound support)? You know, own it for a while… lose money every year (maybe not small money either), then turn it over to someone else for enough of a windfall that your accrued losses are a mere triviality…

    Was listening to a radio sports show the other day. The suggestion was made that Vanderbeek and his partners had always intended to profit by losing money on ops, taking the franchise into bankruptcy (which would have needed league agreement), then emerging on the other side with a new arena and much reduced debt obligations. I don’t know how, why or even if the radio hosts knew this to be true… but it did seem like operating the franchise “as is” was never going to work for Mr. Vanderbeek.

  5. Ryan: The on ice success of the club is probably not a major factor in it’s saleability. Winning does improve the bottom line for any team, obviously, but it’s the underlying business that earns the money.

    It has been two decades since the Canadiens last won the cup and nearly five since the Leafs did. Yet both are thriving businesses. Until very recently, competitive ineptitude and relative business success were also true of the Bruins and Blackhawks (who are certainly doing better since they’ve started winning… it’s the difference between a disenchanted fan base and a disinterested one, as evidenced in some other US markets).

    The Devils appear to be a better buy than many other NHL teams would be at present. However, their attendance dropped dramatically after moving to the new arena that was supposed to “fix” their business (which, it must be said, wasn’t actually broken at the Byrne arena – they did pretty well there). It has recovered as you note, but it may be some time before they are in truly positive territory.

    Their shiny new arena is on the edge of the biggest metropolis in the US… however, they are also in Newark. Maybe in 10 years that won’t be the impediment that it is right now… but it’s not a positive in a market where they must compete with MSG and Atlantic Yards: equivalent properties in vastly superior locations.

  6. It looks like Vanderbeek spent $175m on the Devils in 2004, but he was already a minority owner, so not clear whether that was the full franchise price or just what he spent. Also he put $185 million into the arena, though I don’t know how much of that was cash and how much will still need to be paid off by the new owners.

    It doesn’t look like it was a great investment if he just meant to flip it, though. This looks more like “Oh, crap, my other investments went south. Better take everything in the garage and put it on eBay.”

  7. According to N.J..com Harris is denying he plans to move the Sixers to Newark since in Philadelphia he is a tenant of Spectacor, (which owns the Flyers) while in Newark he is the “de-facto” owner of the Prudential Center. It really makes no economic sense to own franchises in two different cities under these circumstances.

    http://www.nj.com/sixers/index.ssf/2013/08/sixers_wont_be_moving_to_new_j.html

    However, if the franchise is moved, this allows the NBA to have two expansion franchise(s) one in Philadelphia and one in Seattle.

    Remember, this has happened to Philadelphia before-the Warriors moved to San Francisco and the Syracuse Nationals moved to Philadelphia (and became the 76ers).

    The questions are:

    1. Would the NBA allow it?

    2. How much would the Knicks demand to waive their territorial rights-the Nets already waived theirs as part of the agreement to play in Newark until the Barclays Center was completed.

    3. Could the New York market support three NBA teams?

    4. Will Harris sell the Sixers instead?

    5. Which franchise is more valuable-a hockey franchise in which you have control of a new arena or a NBA franchise in which you are a tenant?

  8. Wait, does NJ.com seriously think that Newark is “right across the river” from Philadelphia?

    1. No.
    2. Too much.
    3. It could barely support the Nets when they were in Jersey.
    4. No.
    5. What’s wrong with having both?

  9. Did the Nets (like the Devils) draw better at Brendan Byrne than they did at the new building?

    I don’t see the NBA allowing a Sixers move (in the unlikely event that the owner wants to abandon Philadelphia for Newark). It might make a good bargaining chip when Harris next has to negotiate a lease w Spectacor, but I don’t see it happening.

    Could he schedule 5-8 “home games” a year for the Sixers in Newark without raising the ire of the NBA/Knicks? Would he get permission to do this? Would he even want to?

  10. Neil: Thanks. I thought it was under $200m as well, but was not clear whether that was the total purchase price or his share of the partnership etc.

    As I understand the present deal, the new owners did not assume any of Vanderbeek’s arena related debts as part of the purchase. They bought the team and lease for $320m and Vanderbeek was required to clear the debt.

    Is that your understanding of it?

  11. @Drew

    Neil already answered your question but I’ll chime in as well.

    I seriously doubt that the Nets and Knicks will give up territorial rights and it would be stupid on Harris’ part to move there. You’re better off being the only NBA team in Philly as opposed to the 3rd team in the tri state area, especially if it means you are in Newark.

    If the Nets couldn’t get anything going with just the Knicks as metro area competition for the NBA than the Sixers sure as heck won’t with both the Knicks AND Nets nearby.

    The NBA would put up a fight as well. Not being in Seattle is bad enough but losing Philly would sting just as bad. That would make the NBA vacant in 2 of the top 13 markets as opposed to just Seattle. If the league is going to fight as hard as it did for Sacramento than it would for Philly as well no matter how much their value has plummetted after many bad seasons. It would just be lower in Newark.

  12. Why did Jeff Harris buy the New Jersey Devils? Doesn’t it complicate things? It already has and it first started with the ridiculous rumor of the 76ers moving to Newark. We all know that’s not going to happen. Don’t know why anybody or someone would start that rumor. Jeff Harris should have sell the 76ers before buying the New Jersey Devils. Yeah he can own and have both the Philadelphia 76ers and the New Jersey Devils with two different sports teams. The problem is that they are both in different cities.

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