Yeah, it looks like Seattle is getting an NHL expansion team ASAP

Looks like Seattle is being fast-tracked to get an NHL expansion team now that it’s getting a renovated arena:

A Seattle ownership group has been authorized to file an application for an NHL expansion team that would begin play in the 2020-21 season, NHL Commissioner Gary Bettman said Thursday.

The cost of the team would be $650 million, and Commissioner Bettman said the NHL is looking at only Seattle for possible expansion…

“That doesn’t mean we have granted an expansion team,” Commissioner Bettman said following the Board of Governors meeting. “We have agreed as a league to take and consider an expansion application and to let them run in the next few months a season ticket drive.”

So basically, “show up with a $650 million check and some season-ticket pledges, and you’re in.” If anyone thinks that the Seattle ownership group — which includes both former Philip Anschutz lieutenant Tim Leiweke and Hollywood mogul Jerry Bruckheimer — can’t muster that, please raise your hand.

The only surprise here is that the NHL didn’t wait to use Seattle as leverage to get arenas for all the teams seeking them — hell, Calgary was already getting ready to freak out that this might cost them the Flames if they didn’t build a new arena, but now that’s off the table. Presumably the lure of $650 million in quick cash — up from the $500 million that the Las Vegas Golden Knights owners paid just last year, NHL deputy commissioner Bill Daly explained, because of market size differences (sure, okay) and “inflation” (um, in one year, seriously?) — outweighed the benefits of having a great move threat, especially when there’s always Houston for that.

Is an NHL franchise in Seattle really worth $650 million? The average team value, according to Forbes, is $594 million, though the magazine has a tendency to underestimate sale prices (though that could also just be a sign that team owners have a tendency to overpay for teams). That means Bruckheimer & Co. could presumably pick up a low-value franchise for a lot less than that and move it to Seattle, but by signaling that it’s expansion or nothing, the league cuts off that option and means the Seattle group has to meet its asking price if it wants an anchor sports tenant for its new arena.

Really, the only surprise here is that the NHL didn’t ask for $1 billion, because why not? Unless you think that sports league operators have any shame, which, nah, can’t be that.

20 comments on “Yeah, it looks like Seattle is getting an NHL expansion team ASAP

  1. Makes complete $en$e, because the NHL wants to leave Houston open for relocating the Coyotes.

  2. Makes sense. NHL wants the cash along with another team near Vancouver. Houston (and Portland to a lesser degree) are still there as a relocation threat. Someone will pony up the $$$. Plus they are beating the NBA to Seattle. Smart move, and good timing.

  3. I’m sure this isn’t coincidence. 538 had an interesting article on this a few years back about why Canadia cannot win the cup.

    Did you guys hear about the sub-prime used car lender buying the fricking Carolina Hurricanes for $500MM?!?! They are literally a minor league team (attendance wise) drawing under 10k per game. I cannot fathom the price in relation to any business metric that doesn’t involve heavy subsidies (like the Atlanta Hawks after they immediately bought the team) or relocation

    I sweat I read a really good article by someone who described a niche sport league as a ponzi scheme. I can’t remember where though this sounds awful MLSy to me.

    • It’s not a normal business metric: I think around $400m was for 51%, and the remaining 49% was $100 million.

      Owning a major pro sports club is a limited opportunity for a lot of very rich people to pursue. The cachet of doing so heavily distorts the market in a lot of ways.

  4. I don’t know if you even really need an honest relocation threat. Saying that Calgary better pony up money or they’ll move to Kansas City, Hartford or Salt Lake City, is probably enough to get Joe Hockeypants to yell at Nenshi to give Ken King a billion dollars and some land.

    • Did you see those election results? They’re pretty strong proof that Joe Hockeypants would be drowned out by Sally Student, Terri Taxpayer, and Rory McTory saying tax dollars shouldn’t be wasted on the Flames.

    • Seattle SeaLions:) With green and yellow unis similar to the Sonics and striping similar to the California Golden Seals.

  5. Anticipation of not having to pay taxes at all has the 1% over paying for crap. Didn’t these guys pass on paying $500 million a few months back ? Don’t blame the NHL fast tracking this before they change their minds.

    • No, nobody “passed on” paying $500m — they didn’t have an arena deal in place then.

    • When the round of 2015 expansion bids that begat Las Vegas was happening, Seattle was rumored to offer bids from Victor Coleman (once connected to the SoDo project) or Ray Bartoszek out of Tukwila. Neither actually offered a bid though.

  6. At some point, the city council is going to have to entertain either actually doing the I-91 calculation on the keyarena property/lease or exempting this OVG deal from it. Just like the Port of Seattle lawsuit about I-91 resulted in being told an MOU wasn’t contractual enough/was told it “wasn’t ripe”, OVG’s MOU probably isn’t transactional enough to warrant the challenge, but I’d expect there to be one. The bar to issue the I-91 complaint is low and some Seattle resident is going to want a chance to be butt-hurt about SoDo in the limelight. I’d almost be for giving I-91 the axe, but I think the Mariners’ lease is up soon.

  7. When I saw the $650 million price tag the first thought I had was “what a scam!” and then I remembered it’s a bunch of rich jerks ripping off some other rich jerks, so I moved on. Why not charge a billion, indeed.

    • Exactly. If only these moments weren’t generally accompanied by hundreds of millions in tax dollars going into arenas as well.

      What these guys do with their own money I don’t care about. What they do with taxpayer funds, I do.

  8. I would love to see the ‘cancelled check’ that paid the Vegas expansion fee. I feel the same way about Seattle.

    When/if the team is issued, they will announce that the fee has been paid I’m sure. But was it?

    Or was this another Bettman construct… we’ll announce the sale price/expansion fee as X. That floats valuations even higher – much like the Leafs sale raised their Forbes ‘valuation’ from $460m to $1Bn in one season.

    Average NHL markets generate less than $10m in profit each year (some owners claim they lose money every year on adjusted operations. I believe 6-10 of them are probably telling the truth on that front). Even good second tier markets like Calgary, Edmonton, Minnesota and Pittsburgh tend not to top $20m in profit. Many franchises not in the top half in revenue only manage to break even because of revenue sharing.

    On a $500-650m capital investment (which is just the expansion fee, let’s not forget), this represents a 3-4% return annually.

    Are we really expected to believe that rich folks do that?

    • Yeah, I think they probably do, for two reasons: 1) there are only so many major-league teams out there if you really want to own one; and 2) you can always justify it on the grounds that a bigger sucker is likely to come along eventually to take the team off your hands if you get tired of the poor returns.

      This, I’d say, is the main reason why the Forbes franchise valuations are typically lower than actual sale prices. I’d like to say the franchise value bubble will burst at some point, but so long as #1 above holds, it probably won’t.

  9. Quebec City residents are finally starting to realize that the $400,000,000 investment for a new arena will not get them a team anytime soon. At least their investment was in Canadian dollars. On the other hand, accounting tricks have hidden another 50 million or so that was sunk into the project.

  10. Neil, forgive my ignorance on the Seattle arena topic, but what exactly are OVG doing to KeyArena with this renovation?

    Are they ripping off the roof & gutting the interior? Is it all coming down? Thx.