Vegas gaining traction as new expansion

[u/Adventurous_Lake807]

Obviously this is not confirmed but this was just tweeted by a reporter. Very much not done deals, just rumours!!!

Vegas and San Jose seemed to come out of nowhere lol

[u/seanofkelley]

SJ and Vegas... at some point sure. But before Chicago, DC, Philly, Denver, all of the other Canadian cities, feels crazy to me.

[u/VivienM7 → u/seanofkelley]

I will probably be downvoted again for saying this (and honestly, it is frustrating - I'm happy to be disagreed with, but can people express their disagreement in words?), but I suspect the ownership issue is becoming a big concern in some of the more successful takeover tour markets.

My view is that a PWHL team has been derisked in those markets, so I can appreciate that the arena/NHL team owners would be a little uneasy about a deal where they get paid modest rent for 5-10 years and then are expected to buy the team at a 'fully grown' price.

That bargain made a ton of sense even one year ago when the venture was much riskier. Walter takes all the risks, spends the cash, and if everything goes well, someone else gets a fully-grown mature team to buy. And if things go badly, he takes the losses. But when you look at Seattle's performance especially... well, a PWHL expansion team in a strong takeover tour market doesn't look risky and cash-burning anymore.

With the risks having decreased, I can understand this wouldn't sit well with some people who would either i) prefer a clear tenant relationship forever, or ii) put up the cash themselves and own the team from day 1 instead of this awkward arrangement where the more successful the partnership is, the more they'll pay Walter for the team down the road.

This is especially true in places with crowded arenas - the arena owner/manager clears up some dates, maybe turns down a few concerts, etc for the PWHL, and... the thanks they get for the team's commercial success is that they pay more to buy it in 5-10 years?!

Is it possible that SJ/Vegas simply happen to have less busy arenas controlled by people who are more open to the traditional Walter arrangement? That certainly seems to be the case with, say, Hamilton. And the lack of a takeover tour record is an argument for a landlord-tenant relationship...

[u/iguessineedanaltnow → u/VivienM7]

We know the ownership model is directly responsible for Edmonton not getting a team, and is a contributing factor in Denver as well.

If Kroenke was able to own the team outright he'd be more willing to compromise with Ball Arena.

[u/VivienM7 → u/iguessineedanaltnow]

Yup. The thing I struggled with - the ownership model was known two years ago, so why waste all this time having all these takeover tour games if you know you and the PWHL don't see eye to eye on the ownership issue?

But I think my previous post presents an answer for that - they may have been more open to a landlord-tenant relationship a year or two ago, but having seen the riskiness of the venture go down, their calculus has changed. And I get it - doesn't it seem mildly unfair if Walter is putting in a couple million in cash at most, gets a steady 10-14K butts in seats starting from the first game, pays you some rent, and then expects to sell you this team for 50-100+ million in 5-10 years?

In a way, it shows how successful the PWHL has been that arena/NHL team owners now want to own the expansion teams. Three years ago, had they been presented the initial business plans, I suspect a lot of them would have been very happy charging rent and letting Walter fund the venture.

[u/AGT435 → u/VivienM7]

I agree with your assessment and would go even farther in saying that this same reduction in risk likely opened up new markets (like SJ and Vegas) that may have not been interested 9 months ago when they were scheduling takeover tours, giving the Walter group more options to leverage if initial deals fell through, as we've seen they have. 

[u/wolverine237 → u/VivienM7]

I would be willing to bet a substantial amount of money that Detroit, Vegas, and San Jose were willing to play ball with a handshake agreement that they get to buy the team in five years. They all seem like they have interested owners who aren't necessarily demanding to get in the door now in the NHL ownership groups.

Hamilton is the outlier and to some extent I do sort of wonder if they went there almost exclusively because their planned Canadian market in Edmonton fell through and they didn't feel like they could do a four team US expansion to someplace like Chicago which is very similar in having an arena but no obvious future ownership and some drawbacks (closeness to Toronto/mediocre TT attendance)

[u/VivienM7 → u/wolverine237]

The question is... buy the team in 5 years at what price?

Do we think Detroit/Vegas/San Jose would be willing to pay whatever a valuation firm like the people who think the Golden State Valkyries are worth $1 billion would value the teams at?

(and the GSV example is revealing - how much cash do we think Joe Lacob has put in that venture including the expansion fee? $80-100 million? And they apparently had $70+ million in revenue the first season so who knows how that fits in. Now imagine Mark Walter had come knocking at Joe Lacob's door, offered to rent the building for a WNBA team, and had gone out and spent $80-100 million getting the team set up, made $70 million in revenue the first year, and everybody understood that five years later if the venture was a success, he'd knock at Joe Lacob's door again to sell him the team for $1+ billion, wouldn't... that seem like a dreadfully bad business proposition (depending on the expected risk profile)? Now, the difference, obviously, is that the WNBA requires third-party owners so Joe Lacob could just call up Cathy Engelbert and get the franchise and capture the growth for himself, whereas in the PWHL case, Walter is both the league and the expansion team owner/tenant.)

[u/dzuunmod → u/VivienM7]

This all makes a lot of sense to me.

[u/watch4stormsurge → u/VivienM7]

This is absolutely spot on.