One league-owned NHL team leaves, another enters? No sooner had the league finally divested itself of the Phoenix Coyotes than it looks like it’s going to have to take over running another cash-strapped franchise:
The New Jersey Devils are likely to be taken over by the National Hockey League around the time the season begins next month when teams begin cutting payroll checks unless a buyer for the team quickly steps up, according to multiple sources…
The Devils have $230 million of debt and team owner Jeff Vanderbeek missed the first payment on a recently restructured bank loan. The team’s annual debt payment is around $15 million a year and in the past the Devils have already used prepayments of future revenue streams to pay bills. Andrew Barroway was poised to buy the hockey team and operating rights to the Prudential Center, but withdrew his offer within the past two weeks after getting a closer look at the team’s books.
That’s Michael Ozanian writing in Forbes yesterday, after which NHL commissioner Gary Bettman immediately retorted that it was lies, nothing but lies:
“I haven’t seen the Forbes report, but if the suggestion is we’re going to take over the Devils, which is what I’ve heard the report says, it’s not accurate,” NHL commissioner Gary Bettman said today following a Yankee Stadium news conference to promote the two outdoor games to be played there – Devils vs. Rangers on Sunday, Jan. 26 (12:30 p.m.) and Islanders vs. Rangers on Wednesday, Jan. 29 (7:30 p.m.) Although Forbes reported that a group headed by attorney Andrew Barroway had dropped out of the bidding, two sources insisted that group was still heavily involved and trying to buy the team. That group has already invested more than $30 million in the Devils in beginning the process of buying at least a controlling share of the team from current owner Jeff Vanderbeek.
So, you know, who the hell knows?
The interesting thing here is that the Devils just got a new arena, the Prudential Center in Newark, that was supposed to solve all of their money problems. But apparently Vanderbeek’s money problems — he made his fortune as an executive at Lehman Brothers, which turned out not to be the most secure career path — have landed him in so much debt that he can’t even make money off a brand-new building that taxpayers fronted most of the money for. Writes Ozanian:
Non-NHL events are down at the Prudential Center, also hurting Vanderbeek’s financial situation. One reason: arena operators prepay a portion of the money they are going to pay acts, like rock bands and the circus, and sources say the Devils do not have the cash to book events. During the first quarter of 2013 the Prudential Center was not among the world’s top 50 busiest arenas. The prior year it was ranked 11th-busiest. In the mid-year ranking the Pru is ranked 33rd.
Having cash flow is important, but it’s also worth noting that in 2012, the Prudential Center didn’t have to compete with Brooklyn’s Barclays Center, which is now the nation’s busiest arena. Even in a metro area like New York City’s, there’s a point at which the arena business becomes a zero-sum game, and you have to wonder if Newark has now been leapfrogged by Brooklyn as concert acts’ preferred second stop in the tristate area after Madison Square Garden. Which makes it all the weirder that the owners of MSG and the Barclays Center are fighting over the right to revamp Nassau Coliseum, but maybe they figure better to take over a superfluous arena yourself than let it go to the competition.
Time for Bett(man) to dust off the old “…I have complete confidence in – fill in the name – at this time…”
This is the same guy who allowed the John Spano, Howard Milstein/Steven Gluckstern fiascos to happen on Long Island.
More like the kiss of death…
Don’t forget MSG has also been closed the last few summers; no doubt that also was a big help for Prudential, which means it likely will be worse from here on out because there will be a renovated MSG and a new Barclays to fight with over events all year.
I’m more shocked the team is ugly in the books when they haven’t paid rent for years. I mean, how bad financially could they be if they are withholding rent and still could scare a potential owner off? There’s gotta be something we don’t know about that’s making things worse. I mean, I remember the story (I believe posted here, but don’t quote me on that) saying the city of Seattle added debt that had nothing to do with the Kingdome to the Kingdome so people wouldn’t know about it, which is why it’s debt hasnt been paid off, even though it actually paid off it’s true debt years ago. Is it possible he did that to the team with his business problems, and any new owner would have to take that debt over?
Anyway, to mention the other topic in this piece, it should be stated the reason why they are fighting over Nassau is they assume they can cheaply buy and renovate it, and make it a venue that is profitable thanks to how damn cheap it is and the fact there always will be people willing to use it/people willing to go to it. It’s similar to how Dolan has bought and renovated the LA Forum (aka the Great Western Forum): he feels there is enough people in LA and that the other venue(s) are so busy that people would gladly hold events there instead, and fans would have no problem traveling there because its just outside of LA (albeit in Inglewood, which we all should know has always been up to no good)
In fact, here is the LA Times article on it (it was the cover story that day, I should have sent it here but I didn’t think about it): http://www.latimes.com/entertainment/music/posts/la-et-ms-forum-renovation-20130730-dto,0,7822933.htmlstory
@Ryan, thank you for being insightful and informative. (I did not know MSG had been closing down after the Knicks/Rangers annual chokefests.)
And a Dr. Dre reference to boot! You da man!
Plus with Ilya Kovalchuk going back to Russia, that’s another $80 million off the books.
Thanks for the link Ryan.
I drove by the Formerly Fabulous Forum about 18 months ago. As you note, the area around it is not very good… particularly the further east you go.
The forum looked lost and unloved. I hadn’t heard that MSG had purchased it from the church who had been using it, so thanks for that.
Some interesting spin from Dolan on how and why it can work as a concert only venue. The problem is it’s still in Inglewood, and AEG is a pretty tough competitor in the arena/concert game with a building right down town. It will be interesting to see how it plays out… but I do wonder if second tier acts (perhaps lots of them) aren’t going to be the mainstay at the Forum. It’s difficult to imagine major acts bypassing LA Live & Staples for the forum, don’t you think?
I’m just glad it’s going to be used and should return some money to the city. It used to be a great building for sports and concerts.
Paul: Bettman used very close to the exact same language he employed when denying that the Phx Coyotes were in trouble in 2009 and further denying that the league had been advancing the team money from future earnings to pay current bills. “The losses are nothing like $40m per year”, he said. Yet they were. In fact, even under the league’s careful management/ownership of the club, they lost an average of $35m per year.
I think the real issue with Vanderbeek is that he has taken on too much debt, as Neil notes. He also had a partner who was supposed to share the load… but he decided he would rather pay Vanderbeek to take his shares off his hands (which Bettman vetoed, as I recall) than do so. If he can survive, Vanderbeek may be helped by the new CBA. I understand New Jersey will be eligible for full revenue sharing in the new agreement – something that wasn’t possible for NJ or NYI under the old one for “market size” reasons.
John, I think MSG’s idea with the Forum is that Staples Center’s schedule is jammed to capacity, what with three pro teams plus concerts. As Barclays Center positioned itself to get the spillover from MSG, now MSG is hoping the Forum can take advantage of acts that can’t get dates at Staples.
What other big concert venues are there in L.A.? The Hollywood Bowl, anything else?
Los Angeles Memorial Coliseum.
I didn’t mean that big. Sub-Springsteen-sized.
There are a number of arenas in and around LA, Neil (Long Beach Arena, LA Memorial Sports Arena, Pauley Pavilion, Galen Center), but the first 2 are older than the Forum and haven’t received renovation in many years, while Pauley and Galen are likely considered too small by big artists for concerts (considering both would only have around 10,000 people max for concerts, while most major sports arenas have 15,000+; and obviously we didn’t get into dealing with the colleges for the events, the likely alcohol restrictions, etc). That’s why all the major artists try to play at Staples and the Hollywood Bowl, but the fact Staples was too often busy and the Bowl can’t be used half the year was too much a problem, which is why 6 years ago bands began to play at the Forum again. Iron Maiden, Metallica and Prince are among the artists who have done shows at the Forum the last few years, with all occurring in the winter/early spring, when it’s impossible to get into the Staples Center and the weather makes it impossible to do shows at the Bowl. A renovated LA Forum has a decent shot to get more artists, especially during October-April. However, we won’t be able to see what happens for a while. I mean, we could see all the artists flock to the Forum so they don’t have to deal with Staples lack of availability anymore, and we could see no one head there because of the renovations still making it nowhere near as nice as Staples, and it being in Inglewood.
Neil, there are a few others, but they are mainly college facilities as Ryan notes, and may not be suitable for some kinds of acts (speaking of which… am I to understand, Ryan, that Iron Maiden and Metallica played at the GW Forum while the church owned it? Oh dear… what a cruel business commercial property ownership can be…)
Do you think Atlantic Yards is getting the spillover from MSG? Or has the total business actually increased because there are now greater options as far as scheduling and amenities? It would be interesting to know if MSG has “less scheduling pressure” with the arena open in Brooklyn, or if there are actually just more travelling acts playing in general, or longer runs etc.
I agree that the arena in Brooklyn has hurt the ‘non hockey’ events business in Newark (as has the sale and relocation of the Nets, which I expect the arena operator in Newark was probably counting on having as a tenant at some point?). Do you think that there is still room (as far as business goes, not physical space) for another arena in NY?
… a bit off the wall, but it occurs to me that if this was a “San Jose A’s” style thread, people would be claiming the MSG purchase of the Forum is conclusive proof that the Rangers are moving to LA….
Just sayin’
I don’t think there’s any doubt that Barclays is both getting MSG spillover and cannibalizing from Newark et al. As just one example, when Neil Young played here last fall, he played one night at MSG and one at Barclays (plus one in Bridgeport); a few years ago that would have been one at MSG and one at Prudential, and before that one at MSG and one at Byrne/Continental/Izod/whatever it’s called in the Meadowlands.
With four arenas here (counting Nassau as well) pre-Barclays, I can’t imagine any acts ever skipped NYC-area dates before just because MSG was booked. But they had to go out to the burbs to do it, which now they no longer have to do. Which is why I don’t really get what anyone wants with Nassau at this point, unless there’s come kind of synergy/economy of scale thing going on that I’m not seeing.
Interesting.
I haven’t really been following Ratner’s latest search for a bloodmeal, but I wonder if it’s a case of his company simply looking to capitalize on the desperation (real or perceived) of the Nassau county execs?
You know, more of the Glendale type thing… “you should be worried that your building will be empty and do nothing but cost you $3-4m a year… so guarantee me $8-10m a year in subsidy and I assure you that won’t happen”? As far as I know, there hasn’t been any talk of operating subsidies yet… but we know how this usually goes.
I can see some benefit to controlling an arena out in Hempstead if the deal is right. I mean, the traffic problems ‘work both ways’, don’t they? People couldn’t easily get from the city out there to watch the Islanders (and their wacky owner must rate as some sort of satirical comedy I would think… he’s at least as unpredictable as the cast of “One Flew Over…”), so I would assume that people from out there find it about as difficult to get in to the city to see events.
Perhaps Ratner/MSG feels like there is enough demand out there to make a smaller arena business (sans moneypit professional hockey franchise) work.
Of course, the kids in the sandbox angle works too. Many years ago I worked in the oil industry… the company I worked for used to have two main focus points of it’s exploration program. One: We look for new oil reserves. Two: We drill wherever our competitors are drilling just in case they find anything (even if it’s not a profitable well to produce) because, well, we can’ just let them have whatever it is they might be looking for in the unlikely event they may find it…