Hawks for sale, winning bidder must buy arena too, NBA says they’re not moving anyway, so there

Bill Simmons’ invisible friend may or may not be right that some rich guys are interested in buying the Atlanta Hawks and moving them to Seattle (okay, he’s right about Chris Hansen, because Chris Hansen would buy his own grandmother and move her to Seattle if he could clone her four times and get her to suit up for NBA games), but the Hawks are indeed for sale, as announced yesterday by the team’s owners. And not only that, but the lucky winner will be buying not just the team, but operating rights to Philips Arena, which was built way back in 1999 when the team was still owned by Ted Turner. (The county paid most of the construction cost, though most of that the team is paying back in rent; though the county owns the building, so Turner got a tax break … I’m not going to start calculating subsidy totals for a 16-year-old arena deal, sorry, not on a Friday.)

Anyway, the interesting bit here is: Does including the arena in the deal make it less likely that a new owner could try to move the Hawks? (The NBA actually released a pretty strong statement on Wednesday that the team isn’t going anywhere, but it’s a sports league’s prerogative to change its mind.) After all, if Hansen, let’s say, were to buy the team and move it to Seattle, he’d have to pay a premium to get the arena as well, then would have to figure out what to do with it with no sports team to play in it. (I guess it would still have the Dream, which is separately owned by two women who share the same hair.) They could try to fill dates with concerts, I suppose, but even a guarantee of 41 sparse Hawks crowds a year might be better than starting from scratch with empty dates and hoping that Ariana Grande has a sister.

Without seeing how the internal finances of the Hawks/Philips Arena management structure look, there’s no way to tell, and don’t hold your breath waiting to see that. Unless … I bet they’d have to open their books to qualified bidders, right? So if we said we wanted to buy the Hawks… Quick, who has a few hundred million dollars free on their AmEx?


11 comments on “Hawks for sale, winning bidder must buy arena too, NBA says they’re not moving anyway, so there

  1. This is the same ownership group that sold the Thrashers to Winnipeg, not sure why they’re so adamant on the Hawks staying in Atlanta.

  2. Meant to mention this in the original post, but what with Mayor Reed having offered $150m to get new owners to extend the lease, you have to wonder if that’s still on the table:

    http://www.fieldofschemes.com/2014/09/18/7844/atlanta-mayor-offers-hawks-150m-not-to-move-not-that-they-were-threatening-to/

    If so, you also have to wonder why the NBA is undercutting new owners’ leverage to take advantage of this offer by saying they won’t move. Unless the league meant it more as a “The Hawks aren’t moving … if you make it worth their while” gambit. Or they realize that having to pay $175 million to break their lease makes the whole thing completely implausible anyway.

  3. Hawks are finally drawing again (probably thanks to that so-called racist email), so the talk that the Hawks are staying is primarily to keep ticket sales from plummeting.

  4. Might have a smidge to do with the fact that they’re in first place for the first time since they were in Tri-Cities, too.

  5. Not sure “having” to buy a 16yr old arena (which we all know are worthless, or less than worthless actually, in today’s marketplace. Ask Arthur Blank, or Stan Kroenke or…) operating agreement would be a huge factor either way.

    The market value of that building should be staggeringly low in 2015… in fact, it might be just the value of the land underneath the arena itself. However, depending on what the operating agreement (which is what the prospective owner appears to be buying) requires the new owner to pay in rent and upkeep (and I don’t remember what the deal was @ Philips 16yrs ago either), that may or may not make a difference.

    If another Ballmer (you just can’t get those dance moves out of your head can you?) steps forward with $800m – $1.2Bn to buy the Hawks, does anyone really think an extra $175m leasebreak for the arena OA is going to scare them off?

    And while you might have to buy that operating agreement (or even the arena itself, who knows what they might come up with next down there…), you do not have to keep it in the same company that owns the basketball team (see Panthers, Fla). So you buy both, set up an operating company to run the arena and then let it go bankrupt (or really hike the rent you charge the WNBA team and dog shows). Maybe you can even extract subsidies from Atlanta when the viability of the WNBA team is threatened by the very operating agreement you willingly took with the team. Stranger things have happened.

    I tend to take the NBA’s word that they will not allow the Hawks to move (not because they are honourable, but because they want expan$ion in Seattle, something they can likely never hope to get in Atlanta if they let the Hawks move). But I don’t see the arena operating agreement being a big impediment either way.

  6. If the buyer can get the arena and the team for $650M, isn’t that what they were willing to pay for the Kings? Seems to me you sell the arena for whatever you can get, and even if it’s $50M, you’re money ahead.

    Any bidder will look at the arena value and conclude that it’s worthless, and they’ll factor that into the size of their bid. A 16 year old arena just doesn’t have any value any more.

  7. if a new owner does have to buy the stadium, leaving it empty after moving the Hawks (if they were so inclined) probably wouldn’t hurt them that much. You’ve pointed out- Kansas City is able to make actual money with the Sprint Center without a pro team, I’m guessing that Atlanta might be able to as well (not that I want the Hawks to leave so much as I want their ugly uniforms out of the league by any means).. http://www.kansascity.com/opinion/editorials/article4645824.html

  8. Harry — KC isn’t making a dime on their arena. The only reason that project is afloat is tax hikes. The new tax revenues just about cover the arena’s losses.

  9. Well, not quite, MikeM. The Sprint Center is making money on operations — it’s just losing money hand over fist when you take into account paying off the construction debt.

    The problem in the Hawks’ case is that the team is on the hook to pay off the remaining arena debt (~$100m) if it leaves, plus a $75m penalty if it leaves before 2018. So even in a best-case scenario for a Hansen, he’d have to pay for the team ($600m? They’ve got to be worth more than the Bucks, right?), plus $100m to pay off the arena debt, plus whatever the arena operating agreement is worth, then wait three lame-duck years to move the team and figure out what to do with an arena that just lost 41 nights a year of scheduled dates. All while also finding the money to build his own new arena.

    He *could* do it, sure. But more likely somebody who wants to keep the team in Atlanta steps up and outbids him (or gets the NBA to approve them as preferred buyers, anyway). Especially if Reed sweetens the pot with some operating subsidies.

  10. Mike- my comment appears to have been truncated- I meant to say that this site has pointed out that most arenas with pro sports teams don’t bring in money for the municipalities they were built by and use the KC story to show that having a pro team-less arena in Atlanta might not be a bad thing. The story I posted shows the arena’s operators presenting KC with a near million dollar check, fwiw.

  11. As I read it any new owner isn’t required to purchase the arena. It is county, not team owned, IIRC. However, the operating agreement for the arena does go with the team… as noted above, that doesn’t seem like a huge liability to me. And if it turns out to be, let’s face it, the new owners will just demand it be renegotiated and the city will almost certainly cave.