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Joyce Clark Unfiltered

For "the rest of the story"

Bettman

NHL Commissioner
Gary Bettman

Daly

NHL Deputy Commissioner
Bill Daly

On May 24 media sources announced that the NHL has chosen a bride-to-be owner of the Phoenix Coyotes – Renaissance Sports and Entertainment led by George Gosbee and Anthony LeBlanc. It was also widely reported that Commissioner Bettman and Deputy Commissioner Daly along with Gosbee/LeBlanc will do a “walk around” with the Mayor and City Council on Tuesday morning, May 28th. The term “walk around” is a slang expression. It means that meeting all seven of the council at one time would violate the Open Meeting Law unless they were making a presentation at a public council workshop or meeting. To avoid violation of the Open Meeting Law these gentlemen will meet in groups of no more than 3 councilmembers (4 councilmembers would trigger a violation).

Craig Morgan is accurate in his May 24th article for Fox Sports Arizona entitled Sources: Gosbee/LeBlanc group has agreement to purchase Coyotes when he says, “ Bettman, Daly and RSE will meet with Glendale Mayor Jerry Weiers and then will hold two separate meetings, each to be attended by three councilmembers.” Here is the link: http://www.foxsportsarizona.com/nhl/phoenix-coyotes/story/Sources-GosbeeLeBlanc-group-has-agreemen?blockID=905273&feedID=3702 .

Paul Giblin’s piece for the Arizona Republic of May 24th entitled NHL may lay out Coyotes ownership deal Tuesday, mayor says reports the same saying, “Bettman, Daly and RSE will meet with Glendale Mayor Jerry Weiers and then will hold two separate meetings, each to be attended by three councilmembers.” Here is the link: http://www.azcentral.com/community/glendale/articles/20130524nhl-expected-lay-out-coyotes-ownership-deal-tuesday-mayor-says.html .

So far, so good. They both report the very same fact. From here on in, read carefully, very carefully. Morgan, in his article says, “If RSE is not able to reach an agreement with Glendale, sources (my bold) have said that John Kaites’ group is still a possibility to purchase the team, as would be Greg Jamison’s group if it could gather the necessary investors. But multiple sources (my bold) have said that the NHL is no longer interested in dealing with Darin Pastor, whose bid was recently rejected by the league.” These sources with no attribution are dealing in speculation. Could be fact. Could be fiction.  Giblin, in his article, says, “Sherwood said he believes (my bold) any potential owners will want to be paid substantially more than $6 million a year, which is the figure that’s been earmarked in numerous proposed city budgets for the arena management fee.” One person’s belief, especially in this instance, is not fact when there are 6 other councilmembers who may, or may not share that belief.

board-gosbee

George Gosbee

Leblanc

Anthony LeBlanc

What have we learned that we did not already know?  Bettman, Daly, Gosbee and LeBlanc will meet the Glendale city council on Tuesday, May 28th. It appears that RSE will become the NHL’s choice as owner. That is an assumption until the NHL makes a formal announcement. Public release of the facts of the deal are essential. Questions need answers, such as:  Is there an opt-out or relocation clause? What is the time period for either? What is the ratio of equity to debt? Councilmember Sherwood stated publicly that we will hear the deal parameters at the council workshop on Tuesday, June 4, 2013.

There is another fact that is being ignored and perhaps it will be ignored permanently as the city has the discretion to ignore all or part of the Beacon RFP– and that is the Beacon Sports/City of Glendale RFP requirements on page 5:

Minimum Requirements/Qualifications for Managers.

In order to have its response evaluated, a Manager (or if an affiliate, its parent company) must demonstrate at least one of the following requirements:

i. Is a nationally or regionally recognized facility management company which manages publicly or privately-owned public assembly and/or sports and entertainment facilities;

ii. During the past three years, has successfully managed at least one NHL or National Basketball Association (“NBA”)/all-purpose arenas with a seating capacity of at least 10,000 persons; or;

iii. The Manager must have current experience in operating such a facility on behalf of a public entity, such as the City of Glendale;

The Renaissance Sports and Entertainment group was organized only recently for the express purpose of attempting to purchase the Coyotes. They have no demonstrable experience as a fledgling group in managing any sports or entertainment facilities, much less an NHL or NBA all-purpose arena.

Coalition 1 photo

Glendale City Council
CM Alvarez absent

I applaud Bettman and Daly having finally made a decision in terms of ownership but what were they thinking? The NHL must be ready to use its muscle with a “take it or leave it” strategy. Do they seriously think a MAJORITY of this council will accept as an arena manager a newly formed group with no track record in managing an arena? And do they think a MAJORITY of this council will expend more than the $6M budgeted in the soon-to-be-approved city’s Fiscal Year 2013-14 Budget? Councilmember Sherwood says he has a plan but will it turn out to be an acceptable one? Not unless this council is suddenly willing to listen to the likes of Ken Jones, Arthur Thruston and Andrew/Darcy Marwick berating them for subsidizing a sports team during the Public Comment period at every council meeting –forever.

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Coyotes financial history

Posted by Joyce Clark on April 12, 2013
Posted in City of Glendale  | Tagged With: , , , , , | 3 Comments

ellman

Steve Ellman

Through a Request for Information processed by the City of Glendale, I obtained information about arena management company finances over the years. I do not have a complete picture but I do have information that relates to 2006 to 2007, during the time when Jerry Moyes was the majority owner of the team and arena manager, and 2010 to 2013, the time that the NHL has been owner of the team and arena manager. From the time the arena opened in 2003 to 2006, Steve Ellman was majority owner of the team and the arena manager. Records for his period of management are as elusive as the man himself. When the national economy went south the two men responsible for bringing the team to Glendale left it, holding the bag. Is it karma that Steve Ellman declared bankruptcy regarding Westgate and Jerry Moyes declared bankruptcy regarding the team?

moyes

Jerry Moyes

In 2006 to 2008 the arena was managed by the Arena Management Group, LLC (AMG), a Delaware Limited Liability Company. The managing member and 100% owner of AMG was Coyotes Holdings, LLC (CH) and Jerry Moyes was the majority owner of record. Moyes was originally a minority partner in Steve Ellman’s ownership group, which bought the Coyotes from Richard Burke in 2001. On September 26, 2006, Ellman sold controlling interest in the Coyotes, Arizona  Sting, and the lease to Jobing.com Arena to Moyes. Independent Auditor’s Reports by BDO Seidman, LLP., an accountancy and consultancy firm, were produced that covered the period of 2006 and 2007, just prior to Moyes’ bankruptcy filing.

The auditor’s report shows the following :

                                                                                             2006                                   2007

Revenues                                                                     $7,142,000                    $6,499,000

Expenses:

Event                                                                               $5,616,000                    $4,413,000

General and Administrative                                    $ 7,303,000                    $ 9,052,000

Total expenses                                                          $12,919,000                  $13,465,000

Net Loss                                                                       ($5,777,000)                ($6,966,000)

 

Balance as of June 30, 2005                     Member’s Deficit ($9,641,000)

Net Loss                                                                                                             ($5,777,000)

Balance as of June 30, 2006                     Member’s Deficit ($15,418,000)

Net Loss                                                                                                              ($6,966,000)

Balance as of June 30, 2007                     Member’s Deficit ($22,384,000)

The managing member(s) had plowed over $22M to cover the losses incurred in 2006 and 2007. The general and administrative expenses appear to be disproportionately high during this period.

Bettman

Gary Bettman

In 2008, Moyes told Gary Bettman that he would stop funding the club and so, the figures for 2008 were not included in this request. The NHL was willing to provide funding on an emergency basis if Moyes would turn over his voting control. Their divisiveness became public in May 2009 when the League nearly sold the Coyotes to Jerry Reinsdorf. Moyes would have received very little, if anything, from the sale. Moyes immediately put the Coyotes into bankruptcy protection and announced a plan to sell the club to Jim Basillie. Moyes also filed a lawsuit against the NHL, alleging the league was an “illegal cartel.” Bettman, in return, argued that the league had been blindsided and that Moyes did not have the authority to put the club into bankruptcy protection. Financial records for 2009, during this period of turmoil were not provided from the city.

In the 3 years in which the Arena Newco, LLC., (NHL) has been managing the arena, and according to the documents that they submitted to the city, the costs and revenues have been pretty consistent. Revenues average in the $6M to $7M range and expenses average about $12.5M. The Net Operating Loss average is about $5.5M.

If you look the Moyes figures and the NHL figures they are pretty close to one another. I think it is safe to assume that the costs of operating the arena with the team as an anchor tenant will be in the $12M to $13M range. Revenues have consistently been in the $6M to$7M range with an annual operating loss of about $5M to $6M. Keep in mind these figures do not create any Return on Investment for any of the 4 groups and their investors vying to acquire the team. If the city council rejects all of these potential buyers it is safe to assume that they will be looking an annual expenditures of about $8M to cover the construction debt payment and another $12M to operate the arena. Undoubtedly that $20M annual expenditure will be offset by sales taxes collected on revenue but they should not expect revenue to be comparable to the current $6M to $7M range.

There is another issue to be considered and that is , Capital Repairs. There is a Capital Replacement and Renewal Account from which to pay these items. How hefty is it? None of the documents are clear. But it is known that apparently the roof is leaking and may require as much as $2M to fix.

Revenues have been low for a variety of reasons. In 2003, the team was sited in a new geographical location and it took time for fans to adjust their mindset to make the drive to Glendale. Moyes and the NHL have not had a particularly strong track record in booking other events into the arena. In fact, this year saw the least number of non-hockey events booked than in any previous year. Of course, the first lockout and the most recent lockout did not help. Add to this the fact that the team has not had an owner since 2009 and we have had a referendum attempt to get rid of the team and an election to void the sales tax increase. Throw into all of this mix, a national economy that took a nose dive. This team and this location have never had a fighting chance to realize its full potential.

My hat is off to all of the potential buying groups for believing that they have solutions to all of these issues and can turn the profitability picture around. No matter who succeeds they will have a lot of work to do to rebuild revenues as well as the fan base and confidence in this team. Can it be done? I believe… and I believe the answer is “yes.”

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Just for fun…

Posted by Joyce Clark on April 7, 2013
Posted in City of Glendale  | Tagged With: , , | No Comments yet, please leave one

Rumors abound about the Coyotes’ ownership saga. Sightings of potential owners now occur regularly at every home game. Thank goodness, according to the research done by one of our Coyotes’ “thug gang,” Greg Dunaway, average attendance is up by at least 7%. When you go to a game, it looks like a full house to me. That surely warms the heart of any potential owner of the team.

At the last game I had my trusty binoculars in tow (usually I forget to bring them or am too lazy to carry them). I spotted John Kaites in Mike Nealy’s suite and George Gosbee chatting in the lower level. I didn’t see LeBlanc, Hulsizer or Jamison. That doesn’t mean they weren’t there. I simply did not spot them. I also saw Councilmember Sherwood in his new Coyotes jersey with his name and number 13 on the back. He visited Nealy’s suite for a generous helping of snacks and goodies and then swiftly disappeared.

Just for fun I have once again added what is fast becoming the Coyotes’ Wheel of Fortune. If you could spin it wherever Wheel of fortune 4the pointer landed would be as good a guess as any as to who the new owner will be. There was an old radio show when I was a kid called “The shadow knows.” In this case, it’s not the shadow, it’s Commissioner Bettman who knows the winner of this contest.

ouija boardOnce the new owner is announced and brought to Glendale for the final act, you can then use this trusty Ouija board to find the answer to the question of: Will a majority of the Glendale City Council award the lease management contract? Right now, a Ouija board will give you a comparable answer to any of the speculators.  Have fun!

 

 

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Leblanc

Anthony LeBlanc

board-gosbee

George Gosbee

For the past few days there has been a flurry of media reportage on a new player in the ongoing Coyotes ownership saga. According to the media Anthony LeBlanc, a previously failed would-be owner of the Coyotes, has landed a “whale.” That, I have learned, is a term used to describe someone with oodles of money. That does describe George Gosbee, a very rich Canadian indeed.  You don’t become a very rich Canadian by being dumb. Mr. Gosbee’s background is finance and not hockey. Although it certainly is possible that he is a hockey aficionado. Mr. LeBlanc must have pitched a smokin’ return on investment (ROI) to Mr. Gosbee, et al. We can only guess as to the money making strategy proposed by LeBlanc to line up his investors but it must be a doosey!

Jamison

Greg Jamison

We know that Greg Jamison is still in the hunt and has been working quietly to reassemble an investment group. It’s no secret that I have championed the possibility of his ownership of the team because I know what he stands for and that is a long-term commitment to the team and Glendale. If he fails this time as well, I will welcome any ownership group that makes the same commitment and honors it.

Image2

Darin Pastor

Now, like wild flowers springing up from the desert floor, another possible investment group led by Darin Pastor has surfaced and issued a March 29 Press Release announcing the formation of “an exploratory committee of seasoned investment bankers and other related sports entertainment advisers”  to purchase the Coyotes. This group, as well as all of the others, has proudly proclaimed their intent to remain in Glendale.

reinsdorf

Jerry Reinsdorf

There is also the possibly of Jerry Reinsdorf, with his Beacon Sports connections, lurking about like a Great White Shark, waiting to strike.

I think I’m beginning to see a pattern emerge. Color me paranoid or suspicious. That’s OK. Just take a moment to think about the current situation. We know of a minimum of three groups seeking to purchase the Coyotes. In the scenarios of previous years, the city waited UNTIL the NHL had given its initial blessing to any of the would-be owners and THEN began negotiations on a final arena management contract. If any of those negotiations had proven successful the new owners would have then finalized a sale with the NHL.

Bettman

Gary Bettman

This time it is different. It appears that the NHL will finalize a sale of the team FIRST and THEN the new owners will begin negotiations with the City for a lease management agreement. It certainly puts the ball in this new council’s court. From everything we have seen and heard to date, this is a council that wants a cheap arena management contract. They have simply not indicated a willingness to offer a deal similar to the one that Greg Jamison had. Yet Anthony LeBlanc has said publicly that any deal with the city must be very similar to the previous deal on the table with Greg Jamison.

So there may be an impasse and the new team owners and the city may not be able to craft a deal satisfactory to both sides.  If that occurs, we will have new team owners that can relocate the team and a city willing to let the team go and settle for an arena manager of the Phoenix Monarch Group variety.

question 2Under those circumstances, as a possible owner of the team, anyone would be more than willing to publicly state an intent to keep the team in Glendale long-term. It’s a good PR move and wins the hearts and minds of many. Then upon failure to come to terms with Glendale, saying with a straight face and convincingly claiming it was the city’s fault. The critical question that all should be asking, is not who will buy the team for I am convinced the team will be sold and soon. How soon? Who knows? Once again, we heard the magical phrase of “two weeks.” The critical question is, will Glendale come to terms similar to previous deals and finally acknowledge that the team as an anchor tenant at Jobing.com is indeed important to Westgate’s future? That’s the real sixty four thousand dollar (or $6M or $10M) question.

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       There has been a lot of chatter lately among hockey fans that keeping the team for 5 years is better than losing the team now. For rabid hockey fans such a thought should be anathema.  Why?
A little review of history first. In future blogs at “Joyce Clark Unfiltered” a more complete history will be offered.  In 2001 the City entered into a series of agreements with Coyotes Center Development

Steve Ellman LLC (Mr. Steve Ellman). The City’s clear intent was to build an arena to host the Phoenix Coyotes Hockey team which had been purchased by Mr. Ellman. There was no management fee in this agreement. In 2005 Mr. Ellman sold the team to Mr. Jerry Moyes. There was still no management fee as Mr. Moyes bought the team under the existing agreements with the City of Glendale.

In Spring-Summer 2009 Mr. Moyes wanted the agreements renegotiated with the City to include a management fee of approximately $12 million a year or he would dmoyeseclare bankruptBalsilliecy. The City declined and Mr. Moyes declared bankruptcy. He tried to convince the City to support the sale of the team to Mr. Jim Balsillie of RIM with relocation of the team to Canada and to accept nominal annual payments from him. The City refused and consequently in May of 2010 the NHL bought the team out of bankruptcy. For the first time the City would be required to pay a management fee and in the case of the NHL, that figure was $25M a year.
In April and June of 2010 the City entered into Memoranda of Understandings with theLeblanc Reinsdorf Group and Anthony LeBlanc of Ice Edge. Neither of these potential deals could

reinsdorfbe negotiated to all parties’ satisfaction.  Each of these parties was seeking an arena management fee in the $17 million range and each wanted an “opt out” clause of 5 years.

matthew-hulsizer

In February to June 2011, the City was ready to finalize a deal with Mr. Matthew Hulsizer of Coyotes Newco LLC. This deal also contained an “opt out” clause of 5 years. This new deal would have required the City to purchase parking rights from Coyotes Newco at a cost of approximately $100 M. It failed only in part due to the Goldwater Institute’s assertion that the City would be in violation of the state gift clause.

Jamison

In the fall of 2011 through January 31, 2013, the City entered into an MOU and serious negotiations with Mr. Greg Jamison of Hockey Partners LLC. It was a deal that was good for Glendale, the NHL and the team. It kept the team in Glendale for 20 years, the annual management fee was $12M, there was an option to buy the arena and it contained penalty and incentive provisions.  It failed because Mr. Jamison could not meet the City deadline for completion.I will offer more about this situation in a future blog at “Joyce Clark Unfiltered.” Lately there has been talk of “mystery buyers” with “deep pockets” from Gallacher to LeBlanc. 

Bettman

 


Ever since the arena was built I have talked to team owners of various sports. Universally the consensus has been that it takes a minimum of 10 years to build a solid fan base. Their general opinion has been that if anyone offered less than the 10 years then that entity is not serious about staying.
Coyotes fans should  not be willing to settle for a deal that only keeps the team in Arizona for 5 years knowing that it is not a good deal for the team, the NHL or the City of Glendale. How can a fan emotionally invest in a team knowing that it is destined to leave? Fans should be supportive of a deal that keeps the Coyotes here long-term. After all, in the last 18 months the emotional, physical and financial fan investment in this team has been greater than that of any fan in the NHL. It’s time for surety through permanence for everyone.
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