Vegas would be “disaster” for NHL expansion, Seattle not much better, according to Fivethirtyeight’s numbers

Fivethirtyeight has taken a look at the hard numbers behind the possible NHL expansion targets [or at least as hard as you can get from counting up Google searches for "NHL" — see comments], and pretty much concurs with what I said off the top of my head the other day: Quebec could work, as could Toronto (leaving aside the pesky problem of the Maple Leafs wanting that market all for themselves), but Seattle and especially Vegas would be pretty lousy NHL sites:

Teams in markets with fewer than 300,000 hockey fans, however, have tended to lose money, and that’s where the wisdom of adding franchises in Seattle and (especially) Las Vegas gets iffy. We estimated that Seattle contains about 240,000 NHL fans — fewer than that of Phoenix and Florida’s Tampa Bay, home to two franchises that have struggled to turn a profit for many years. And if Seattle is an enigmatic choice by this metric, Las Vegas would be a disaster. According to our estimates, there are only 91,000 hockey fans in the Vegas media market, which is nearly 40 percent fewer than even Nashville, Tennessee, the least-avid current NHL city, has.

Interestingly, Fivethirtyeight estimates that Kingston and Halifax, and maybe even Moncton, Sherbrooke or Sudbury, could viably support an NHL team better than the U.S. cities under consideration — and better even than five current NHL cities, Phoenix, Columbus, Raleigh-Durham, Miami, and Nashville — thanks to the fact that there are actually people who like to watch hockey in Canada. No doubt there are other factors here at work as well — TV networks, in particular, care as much about overall media market size as whether the market contains any actual hockey fans — but it’s still a worthwhile reminder that just because a city has possible arena plans and some name recognition doesn’t mean it’s necessarily a good place to start up a sports franchise.

NHL to add four new teams for $1.4B by 2017 purple monkey dishwasher

If you loved last March’s unsourced rumors about how the NHL is ready to expand, expand, expand, you’ll love today’s similarly unsourced rumors about the exact same thing! Take it away, Tony Gallagher of British Columbia’s The Province:

Sources close to the situation have indicated Las Vegas is a done deal, the only thing to be determined being which owner will be entitled to proclaim that he brought the first major league sports franchise to Sin City…

A new team close to the newly renamed Arizona squad and California’s big three is all but assured, the only question being when and with which other city. Or should that be plural?

With all the activity going on in the Seattle area in the last little bit it would be quite a stretch to imagine that much time and effort being spent by so many wealthy men being frittered away for nothing.

(Is it just me, or does this entire thing read like a gossip column? I kept waiting for “What mid-sized city was spotted on the dance floor, cavorting with NHL deputy commissioner Bill Daly?”)

As Deadspin notes, Howard Bloom of Sports Business News then upped the ante by predicting that Quebec, Seattle, Las Vegas, and a second Toronto team will all be joining the NHL by 2017, in exchange for $1.4 billion in expansion fees.

This is simultaneously crazy and not-crazy. On the not-crazy side, $1.4 billion, people! In a world where Steve Ballmer is willing to plunk down $2 billion for an NBA team, and MLS franchises are going like hotcakes, it would be foolish not to at least consider taking some of the money that the world’s billionaires are waving around like drunken sailors.

On the crazy side, with the exception of Quebec, all of these are seriously problematic markets. Seattle doesn’t have an arena that really fits hockey, and any hopes of building one would depend on the NBA first approving a new basketball team for Seattle, which doesn’t sound like it’s happening anytime soon. Vegas is Vegas, which is a small, poor city with a bunch of people with lots of spending money visiting all the damn time, which isn’t a great recipe for season ticket sales. Toronto would run up against the Maple Leafs corporate buzzsaw, which would undoubtedly try to seize a chunk of that expansion fee as payment for incursions into its territory.

So, there are some stumbling blocks that make one wonder if Gary Bettman has really thought this thing out. (Not that thinking things out in advance has exactly been Bettman’s strong point in the past.) If the reports are true, and NHL officials are thinking clearly, it seems far more likely that this is a trial balloon designed to see what arena concessions they can get by waving a possible expansion team under a few municipal noses. Guess we’ll find out soon enough — 2017 isn’t that far away.

Ginormous Vegas project with retractable-roofed basketball arena gets go-ahead, just needs ginormous check

Remember that $1.3 billion project featuring a basketball arena with a retractable roof because of course a retractable roof that a former NBA journeyman named Jackie Robinson announced he wanted to build last December? You’ve been trying to forget about it and hoping it would go away, haven’t you? Well, Robinson hasn’t, and now he’s gotten it approved by the Clark County Commission:

The approval is a first step for the proposed $1.3 billion project spearheaded by former UNLV basketball and NBA player Jackie Robinson. The plans presented today also include a 44-story hotel, a movie theater and an events plaza with food and retail.

So now all he needs is, let’s see, $1.3 billion. Robinson has said he doesn’t plan on asking for public money or tax breaks, though he has mentioned the possibility of EB-5 green-cards-for-loans financing; more to the point, it sounds like he won’t build anything until he gets an NBA team, which good luck with that. And even if he does get one, the way things are going in the sports franchise value game, he’d have to pay up close to a billion dollars either for an existing one or an expansion franchise, which means then he’d need two point three billion, and … I guess this could happen, but I’m still not holding my breath just yet.

Mostly, I’m pleased that this news has given KLAS-TV the chance to run the most directly honest headline I’ve seen in a while:

Plenty of plans for Las Vegas arenas

Ain’t that the truth.

Las Vegas hockey team not building inflatable arena on casino roof after all

Aw, man! That Las Vegas minor-league hockey arena on a casino rooftop that sounded too crazy to work turns out, in fact, to be too crazy to work:

The Las Vegas Wranglers hockey team Wednesday has pulled the plug on its ice rink-arena project at the Plaza hotel parking lot in downtown Las Vegas because it cost too much, leaving fans wondering about the team’s future in Las Vegas.

“We’re disappointed. It was a cost issue. It was a time issue,” said Billy Johnson, Wranglers president. “It’s heart-breaking for me.”

Johnson said he will pursue “other opportunities” to find a new home ice for the independent Double-A East Coast Hockey League team, but acknowledged that there’s “always that chance” that the Wranglers’ next season — and future in Las Vegas — could be jeopardized.

The Wranglers had already modified their plan to put the arena in the casino parking lot instead of on the roof, because building an inflatable 3,500-seat arena on a rooftop turned out to be, surprise surprise, crazy expensive. Except apparently it’s too expensive to build in the parking lot, too. With the Wranglers actually kicked out of their current home at the Orleans Arena as of this fall, it seems pretty likely that the team will now relocate, but maybe somebody else has some more crazy ideas up their sleeve.

Privately funded MGM-AEG arena in Vegas actually breaking ground in May

It looks like one of Las Vegas’s umpteen proposed sports venues is actually going to get built, as AEG and MGM have announced a May 1 groundbreaking for their $350 million 20,000-seat arena on the Strip. The Las Vegas Review-Journal reports that the building wil be built to “NBA and NHL specifications” but will at least at the beginning rely on “programming such as concerts, MMA fight shows, sports events, award shows and boxing matches.”

The AEG-MGM arena is also being built entirely with private money — so far as I can tell, the developers never even tried to get public subsidies — which just goes to show that 1) in certain circumstances, privately funded arenas can work, and 2) those certain circumstances are largely “be in Las Vegas.” Trying to pay off arena construction entirely with revenues from concerts and the like is usually impossible unless you can guarantee 200 or so nights a year of activity — but apparently AEG and MGM think that’s doable in the bizarro world that is the Vegas tourist economy. Either that, or MGM so desperately wants to beat all its competitors to the punch to get a new arena built, it’s willing to treat it as a loss leader for the rest of its casino/hotel/murder mystery business.

Either way, Vegas will now have a new arena to dangle in front of the NBA and NHL for a new team, though we’ve seen how well that’s worked for Kansas City. In the short to medium term, expect this to mostly be a snazzier place to watch Cher, Billy Joel, and Justin Timberlake. Man, tell me why people like to go to Vegas again?

NHL ready to expand to Seattle as soon as it builds arena that it’s not going to build for hockey

It’s time for another round of “Where will the NHL expand next?” with your old pal, David Shoalts of the Globe and Mail! Shoalts reports that expansion talks are “happening at the highest level,” with Seattle, Las Vegas, and Quebec City “the cities in play.”

Quebec has a ready-made fan base for a reformed Nordiques and an arena already under construction; Las Vegas has more arena plans than you can shake a stick at and a couple of potential ownership groups (one of which, alarmingly, is the Maloof brothers). Seattle, meanwhile, says Shoalts, “seems to be the darling of many NHL governors (even though its arena plans are tilted more to the NBA).”

That’s a revealing little parenthetical, because right now the Seattle arena plans actually require the NBA: Would-be builder Chris Hansen has only committed to the project if he first gets a basketball franchise that he can turn into a revived Sonics. That deal could be revised for hockey, but Seattle city council president Tim Burgess says it probably won’t be:

Responding to an email from Sportspress NW, City Council president Tim Burgess wrote Tuesday that the memorandum of understanding is unlikely to be changed because the financial risk is too high.

“I don’t believe the MOU could be modified to allow an NHL team to go first,” Burgess wrote. “During our initial consideration of the MOU, it was quite clear that the financial risk to the city increased dramatically with the NHL-first scenario.”


A source within the group helping Hansen, the Seattle native who has proposed a $500 million basketball/hockey arena in SoDo, said Hansen has given no consideration to asking the city to change.

“Chris has not proposed changing anything,” he said. “He’s always said he’s a basketball guy.”

What’s so special about basketball, anyway? For starters, Hansen actually likes the sport — all signs are that he’s willing to overpay for both a franchise and an arena if it gets him a hoops team to sit courtside for. Also, Seattle has a proven track record with basketball that it doesn’t with hockey (most of the fans of the 1917 Stanley Cup-winning Seattle Metropolitans aren’t so much around anymore), and the NBA is in general a more profitable entity than the NHL — leaving more money floating around to potentially fill in all those gaping holes in the arena construction spreadsheet.

All this is, of course, subject to change. But right now, it looks more like the NHL is using Seattle for leverage with the other expansion candidates, while holding out hope that somehow an arena deal will emerge overnight once Hansen, Burgess, and the rest catch hockey fever. Shoalts can talk all he wants about how adding two West Coast teams would make conference scheduling easier, but when it comes down to it, this decision is going to be made based on what plan makes Gary Bettman’s owner friends the most money.

Vegas hockey team building arena in tent on casino roof, because Vegas

Las Vegas already has oodles of arenas and virtually no sports teams to play in them, plus plans to build oodles more, so naturally enough the minor-league Wranglers hockey team is doing this:

 When the Las Vegas Wranglers move to new ice downtown, team owners will invest $4 million in a 45,000-square-foot, fabric-shell structure to house a hockey rink and seating for 3,500 on the roof of the Plaza Hotel casino.

That would be here, where the basketball and tennis courts are now. The building below was formerly a parking structure, so is overengineered enough to support an ice rink plus 3,500 people, according to Wranglers president Billy Johnson.

This is easy to laugh at — in fact, let’s do it now — but it’s actually a lot crazier to build entire new buildings for sports teams that don’t exist than to come up with a temporary tent to house a team that may or may not survive the next few years. (Not to demean the Wranglers or their fans in any way, but minor-league hockey teams aren’t exactly a secure long-term investment.) Spending $4 million on a space to play in (the casino will get a cut of concessions revenue) is far more in the budget of a minor-league franchise, and the Wranglers deserve some props for thinking outside the box. Though I do wonder whether in Vegas it’s going to be so hot outside the box that we’re likely to see a repeat of this.

Arena consultant: Cordish’s Vegas venue unlikely to draw 140 events a year

So the city of Las Vegas hasn’t taken my advice yet to ask an arena manager whether the Cordish Cos.’ arena revenue projections make any damn sense, but Benjamin Spillman of the Las Vegas Review-Journal did, and here’s what he found:

Guy Hobbs, an economic consultant who has worked on other major local event venue proposals, said Cordish’s expectation of attracting nearly 140 events annually is overly optimistic, meaning the project would have to balance out with income from far fewer events.

“Would have to balance out with income from far fewer events” is a bit of an optimistic way of putting it itself; what this really means is either Cordish would need to make far more money per event, or the city wouldn’t get its money back. Spillman reports that Hobbs says “he generally supports an arena but considers it unlikely that Cordish’s ‘best in class’ facility can be built without some public money,” but as to how much, nobody’s saying just yet.

Meanwhile, Spillman also reports that several local business leaders, plus three of seven city councilmembers, oppose the Cordish plan, and think the city should drop it and move on. Which may yet happen if after this latest four-month negotiating extension no one has found any magic beans to pay off the arena with, but this being Vegas, the land that can’t have too many arena proposals, we’ll see.


Vegas drops downtown business tax for arena, replaces it with “Dunno, we’ll think of something”

Turns out that crazy plan for Las Vegas to front the money for yet another arena, partly via a tax on downtown businesses, was too crazy even for the city — but only because downtown businesses squawked. The new plan: Still have the city put up $239 million in funding, but figure out how to make up the $52 million from lost business tax revenue later.

With a vote scheduled today, the arena project’s backers spent Tuesday scrambling to make changes to appease opponents. The changes, however, only increased the gap between the approximately $150 million Cordish is pledging and the project’s estimated cost.

“It gives us an opportunity to figure out what that gap may be and what are some of the viable solutions to fill that gap,” City Manager Betsy Fretwell said.

Ah, yes, it’s not a $52 million hole. It’s an opportunity. To fill the $52 million hole. With, one hopes, a giant wad of cement.

Regardless of who’s taxed to come up with the money, the big question remains whether the arena would ever bring in enough revenue to repay the city’s costs, after the arena operator extracted its own profits. Cordish Cos., the proposed arena developer (and possible operator, though the company could also choose to contract that out) has promised 139 events a year, but given that arena expert John Christison has estimated you typically need 200 events a year just to break even on operating costs, before even touching construction debt, that doesn’t seem very promising. It’s even less promising when you see that only 30 of those events would be concerts, with the rest scattered among family shows, conventions, WWE, arena football, rodeo, etc.

Cordish projects that all this would provide $20 million and up in net operating income, which would be just barely enough to repay the city’s $239 million nut, but which sounds awfully optimistic given how little other arenas have taken in as profit. If I were the city of Las Vegas, I’d put in a call to some arena managers to ask them if Cordish’s numbers make a damn bit of sense, but right now looking very expensive gift horses in the mouth doesn’t seem to be in their job description.

Vegas arena developer would get paid before city after all

I finally got around to reading the term sheet for the latest $390 million Las Vegas arena proposal, which the Las Vegas Review-Journal helpfully included with their article on Wednesday. And while the the main sales point of the plan has been that the city would be repaid its $239 million share before developer Cordish Companies got back its $151 million, it turns out that’s not entirely true.

The trick comes in the definition of “net operating income,” which is what would be used to repay the constructions costs, and which the city would indeed have first dibs on. Before that, though, Cordish would sign a 30-year lease agreement to manage the arena (or hire another company to manage it for them). In exchange, Cordish would get to extract “a competitive and market based management fee”before paying off the construction debt.

That all sounds reasonable — if it’s “market-based” it’s gotta be right, right? — except that it effectively puts Cordish first in line for arena profits. We have no idea how much the developer would get to take off the top, but if we look at the Sprint Center in Kansas City as an example, we see that it turns about a $1.8 million a year operating profit after arena manager AEG takes its cut. In Las Vegas’s case, that would be enough to pay off a little more than 10% of the city’s construction costs, after which the well would run dry.

Obviously, a lot is going to depend on how much revenue this proposed arena — which would have the advantage of being in Vegas instead of Kansas City, though the disadvantage of having to compete with the umpteen other arenas in Vegas — can bring in, and how much Cordish’s cut is. But unless it’s way more successful than the average arena and Cordish takes a cut-rate fee, things aren’t looking good for Vegas being able to get its money back.