Vegas, Quebec now frontrunners for NHL expansion teams, because nobody else bothered to bid

Official bids to own an NHL expansion franchise (assuming the NHL actually expands) were due yesterday, and of the several motley candidates, only two ended up submitting an actual bid, along with a $2 million non-refundable deposit: The Bill Foley/Maloof brothers group in Las Vegas, and Canadian telecom company Quebecor in Quebec City.

If the neo-Quebec Nordiques and Las Vegas Black Knights (that’s seriously what they’re considering calling the team — one can only hope their team motto will be “Tis but a flesh wound!“) happen, it will be because the NHL thinks it can get $500 million apiece in expansion fees, which would be worth the roughly $20 million a year in TV revenues the other teams would have to give up to each of the new franchises. Neither city would be a guaranteed success — Quebec probably has a better shot, if only because people actually watch hockey there, but they’d both be among the NHL’s smallest markets — but then, if there were an obvious expansion market, it would already have a team by now.

There was one bigger market considering a bid, or actually two bids: Seattle, where both Chris Hansen and Ray Bartoszek were reportedly interested in teams for their prospective arenas in downtown Seattle and suburban Tukwila. Neither ended up bidding, though, which would leave Seattle looking at being the home for a relocated team at some point, assuming either Hansen or Bartoszek is really that interested in the NHL.

And that, ultimately, is what the NHL would be giving up here, even more than a sliver of TV revenues: leverage. Right now, cities undergoing arena battles face a slew of marginally believable bogeymen where their team could be said to be relocating to if they don’t agree to demands. If Vegas and Quebec get new teams, the league would pretty much be down to Seattle as a threat, and while one city will certainly suffice for this (look at what the NFL has done with L.A.), it’s less than ideal.

All of which is to say that Glendale officials should probably feel comfortable taking a hard line with the Arizona Coyotes owners in their lease battle. There’s reportedly been some progress in those talks, but if the worst-case scenario ends up being that the Coyotes might move back to a new arena in Phoenix, leaving that city stuck with how to keep afloat a money-losing franchise with subsidies, that’s the kind of chance that Glendale should feel comfortable taking.

UPDATE: Deadspin thinks that this is going to hurt the NHL’s leverage in getting the highest price for expansion teams, since now they can’t get a bidding war going. I’m less sure — the league can still refuse to assign any new teams at all if it doesn’t get what it wants — but this certainly doesn’t help the NHL’s racket, let’s put it that way.

NHL to take expansion bids from Vegas, Quebec, Seattle, etc. because MONEYYYYYY

The NHL is taking bids on expansion franchises starting July 6, which doesn’t necessarily mean it’s going to expand, but does mean it’s testing the waters. And given the price tag, it’s easy to see why:

That’s kind of aggressive, considering that Forbes estimates the average NHL team to be worth $490 million, and given the markets we’d be talking about here (more on that in a minute), these teams would be below average. But then, the magazine’s team value figures always seem to lag a bit behind actual sale prices — as Forbes notes, there’s a bit of a bubble thanks to the fact that “Wall Street guys like Joshua Harris (New Jersey Devils) and Andrew Barroway (trying to buy a controlling interest in the Arizona Coyotes) are willing to pay a lot of money for hockey teams that lose money.” (It also doesn’t hurt that they can get huge tax breaks on their purchase price.)

The next question, obviously, is where, and everybody from Deadspin to the New York Times is assuming that one of the cities will be Las Vegas. This seems pretty daft from here — Las Vegas would be the second-smallest NHL TV market (ahead of only Buffalo), it’s in the middle of the Sun Belt where hockey franchises go to die, and it has a relatively poor permanent population. (A proposed Vegas team has managed to get $150 deposits on 11,500 season tickets, though those are refundable if there’s no team starting in 2016.) But it does have a new arena going up, and those things are guaranteed gold mines, right?

If Vegas were one team, the other would likely be either Quebec (where telecom giant Quebecor is almost certain to throw its hat in the ring) or Seattle (which has interest but still no solid NHL arena plan). Quebec would actually be the smallest media market in the NHL (smaller than Flint, Michigan!), but it’s in Canada, so maybe that compensates? Also, new arena!

If nothing else, all this means that Glendale should probably feel relatively secure in playing hardball with the Coyotes owners over their lease, since the NHL is unlikely to encourage the team to move to a new city if that would jeopardize a half-billion dollars in expansion fees. And with that, let’s go look as some photos of the under-construction Las Vegas arena:

Yeah, that, um, looks like an arena. With two levels of luxury suites, which I guess is standard these days, but makes for just awful views from the top deck. But hey, not like anyone’s likely to be sitting up there anyway, amirite?

Quebec gets ready to open big empty hockey arena, mayor jokes that “my cousin Réjean” will play there

That Quebec City Mayor Régis Labeaume is such a card! Check him out talking about the hockey arena that he saddled taxpayers with between $270 million and $330 million in payments on, in order to get an NHL team, and which now persists in not having an NHL team:

“What are you going to put inside?” host Marie-France Bazzo asked the man who was the project’s biggest booster.

“Listen, we’ll have public skating,” Mr. Labeaume joked. “My cousin Réjean wants to play there too,” he added, struggling to contain his own laughter.

Hahahaha! Ha! Ha.

There will be a minor-league team playing in the new arena, but that’s still not exactly what Quebecois had in mind. (Though, you know, I did kinda tell you so.) But Quebec still might get an expansion NHL team, right?

In 2011, the average value of an NHL team was US$240-million, he said. By last year it had more than doubled to US$490-million. The huge investment required to acquire a team, whether through expansion or purchase of an existing team, would make it hard for owners to turn a profit in a small market like Quebec City. The plummeting Canadian dollar only aggravates the situation.

“I don’t see how it can be financially viable in a city of 700,000 people,” Mr. Richelieu said. “To make it past the first two or three years, when the novelty and enthusiasm of having the Nordiques back is past, will be hard. After that, people might find it hard to fork out the hefty ticket price to pay for a major-league-calibre show.”

Economics aside, the league is displaying little interest in returning to the Quebec capital. When possible expansion is mentioned, the names of Las Vegas and Seattle are at the top of the list as the league seeks to balance the number of teams in its Eastern and Western conferences. And NHL commissioner Gary Bettman reiterated on the weekend his opposition to moving an existing team.

Oh, well. Cue the “cold Kansas City” jibes!

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.

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.”

And:

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.

Quebec breaks ground on arena, but now what about a team?

As promised, the city of Québec broke ground on its new $400 million arena yesterday, with plans for it to be up and running by 2015. Amid all the talk of how many blue plastic shovels were sold and which politicians were cheered or booed and how many Stastnys showed up, the CBC’s coverage buried the important information deep in the article:

Pierre-Karl Péladeau, the CEO of the Québecor empire, was also present at the groundbreaking. His company gets naming rights to the arena and will help pay for operating costs — an amount to be determined, depending on whether an NHL team ever moves in.

This is going to be the key question for Quebec: Will Quebecor be successful in landing an NHL team, and if so, when? This is important not just because the whole damn point of building a new arena (right next to the old one, which will remain) is to lure a pro hockey team, but because if there’s no team, Québecor only has to pay about $70 million worth of present value for naming rights and rent. If a team does arrive, Québecor’s payments jump all the way to $130 million — still nowhere near the $400 million that the city and provice are putting up, but better.

There are certainly plenty of teams rumored to be in play for a move: The Phoenix Coyotes if they can’t get their new lease deal and sale worked out, the New York Islanders if they decide they’d rather be the big fish in a smallish market rather than keep their cut of the New York City media haul … okay, maybe “plenty” is overstating it. And then there are other cities seeking a team as well, including Kansas City, likely Seattle if it builds a new arena, and maybe those crazy kids in Virginia Beach.

Clearly Québecor is motivated to get an NHL team — it wants the TV rights, even if it’d mean a few million dollars a year in extra payments to the city — and with the massive subsidies it’s getting on the arena, it can probably afford to overpay for one vs. some other cities. Still, it’s not a sure thing yet, and whether they’re successful will determine whether Québecois at least get a new Nordiques for their troubles, or whether this expensive new arena project just leaves Québec as a cold Kansas City.

Quebec’s new arena to leave taxpayers at least $250m in hole, with no guarantee of NHL team

The city of Quebec announced yesterday that construction of a new $400 million hockey arena will begin in September, and be complete in time for the 2015 season. The announcement was a long time coming: It was more than a year ago that Mayor Regis Labeaume announced the arena would be built, and six months since he declared that communications company Quebecor would pay to operate the arena.

While it was originally announced that the public cost — split evenly between the city and province — would be repaid by arena revenues, “repaid” has turned out to be a slippery concept. The final agreement calls for the following:

  • Quebecor will pay $2.5 million a year for operating rights to the arena, plus an additional $2 million a year if it lands an NHL team. In exchange, it will get all revenues from events at the building.
  • Quebecor will pay $33 million in cash for naming rights to the building, plus an additional $30.5 million in an NHL team is present. (It’s not entirely clear what happens if a hockey team arrives halfway through the lease.)

So add it up, and the public will be putting up $400 million for the arena (or about $25 million a year) and getting back between $70 million and $130 million in present value (roughly $5 to $10 million a year) from Quebecor. Plus, maybe it’ll get a hockey team, if Quebecor decides it’s worth giving up an extra $5 million a year in rent and naming rights money in order to lure an NHL franchise — something that arena operator AEG hasn’t deemed worth it for Kansas City’s Sprint Center, and they don’t even have to pay added millions if they get a team. It’s possible, of course, that Quebecor thinks that the added value of having its name on an NHL arena instead of just a concert venue would make it worthwhile, but still, you have to worry about the disincentive it creates to actually bring in a team, especially considering that most NHL franchises are going to be looking at paying little to no rent, and sharing little to no arena revenues with the arena manager.

And even in the best case scenario, we’re looking at Quebec taxpayers taking more than a $250 million loss on the deal. For that kind of money, the nouveau-Nordiques had better win boatloads of Stanley Cups.

Quebec mayor, Quebecor reach NHL arena agreement

Seven months after announcing plans for a $400 million hockey arena to be paid for entirely with public money — but with plans for the public to get some of its money back via arena revenues — Quebec City Mayor Regis Labeaume and Pierre Karl Peladeau, president of the communications giant Quebecor, announced yesterday that they’d reached a deal for Quebecor to operate the facility. According to reports over the weekend, the contract would look something like this:

  • Quebecor would get full control of the arena through 2040, with an option to extend its rights until 2045.
  • Quebecor would get to sell naming rights to the building, and presumably keep other arena revenues as well.
  • The company would pay the province $63.5 million up front, plus $4.5 million a year in rent, if it lands an NHL team to play in the arena. Without a team, it would pay $33 million up front, and $2.5 million a year in rent.

Without seeing more details — the agreement is apparently close to 200 pages long, and I haven’t been able to find it online — on the face of it this sounds a lot like AEG’s lease to manage Kansas City’s Sprint Center: The city hands over all arena revenues to a professional manager in exchange for fixed rent payments. And while it looks like Quebecor will be paying a fair bit more than AEG for that privilege, the amount of money headed Quebec City’s way is still a pittance compared to its costs: Even if you ignore the $200 million that the province is putting in for construction costs, $63.5 million in a lump sum plus $4.5 million in rent is still going to leave the city losing several million dollars a year on its own $200 million construction debt.

And that’s if Quebecor even bothers to bring in an NHL team — making their rent higher if one is present certainly isn’t a good way of incentivizing their new arena managers to bid high to lure, say, the New York Islanders.

The Quebec city council is scheduled to vote today on the arena deal, and is expected to approve it. Hopefully at least the council meeting will shed a little more light on what exactly they’re agreeing to.

Quebec considers bill to block arena lawsuits

Add Quebec to the list of cities that could face legal challenges to their arena deals on the grounds that they did an end run around proper public process. Former city official Denis de Bellevale and another city residents filed suit last week charging that the city’s $400 million arena plan is illegal because media giant Quebecor was given the rights to manage the building without an open bidding process.

[De Bellevale] said the deal amounted to cash pay-out to Quebecor of $40-million a year for the next 20 years.

“The futility and the absurdity of this financial package is enough to scandalize even the most hardened capitalist,” Mr. de Bellevale told the committee.

That committee, by the way, was one holding a National Assembly hearing (the National Assembly being, logically enough, the government of the province of Quebec — o, you wacky Canada!) on Thursday on a bill that would explicitly block the lawsuit by declaring the Quebecor contract as “deemed not to contravene” provincial law. Mario Bedard, who’s leading a drive to raise $40 million for the arena via seat pre-sales, testified that getting the provincial government to change its laws for the project was necessary because, as the Montreal Gazette described it:

Bedard said Seattle, Houston and Las Vegas also want NHL teams and that the failure to adopt Bill 204 would cast doubt over Peladeau’s bid, hurting Quebec City’s chances.

That’s right: Seattle doesn’t even have an NHL-ready arena or any serious thoughts of building one, but it’s already being waved as a threat to steal Quebec’s as-yet-nonexistent team. I mean, if you’re going to go that route, why not say that Quebec has to change its laws to avoid losing an NHL team to Chattanooga or Walla Walla? At least they’re more fun to spell.