The Real (Estate) Stakes
James Mirtle (and a reader who is an accountant) takes a run at some Coyote numbers and concludes:
I’ve been doing some very basic math in my head over the past week or so when it comes to the Coyotes rink, Jobing.com Arena, and just how big of a bath the City of Glendale would take if the NHL team left town.
And for the life of me, I can’t see how that situation is worse than accepting the sort of concessions Jerry Reinsdorf is asking for.
I can’t dispute the math, but I doubt very much if the city is willing to settle anything even though it might appear to be cheaper to let the team go. One of the problems with our coverage of this story is that we are focussed on the hockey and the fate of the Coyotes. I think the answers to a lot of our questions are buried in the murky swamps of the real estate deal.
Glendale is fighting tooth and nail to save a multi-billion development plan, a plan that has the city out on a limb worth several hundreds of millions of dollars. This insanity – I can’t think of any other way to describe their “investment” decision – could all come crashing down around their ears if the Coyotes move. I assume that’s why the city is even considering more subsidies. They are not merely weighing the revenues they get from the Coyotes in this decision. From their perspective they are setting the extra tax revenue they receive from the entire Westgate development against the payments they have to make on the several hundred million the city borrowed to pour into the Glendale Sports and Entertainment district.
From the Coyotes point of view, subsidy is a harsh word. One problem – one of many – is they are stuck with an impossible lease. The contract to manage the arena is usually an asset that brings millions to a hockey team. In this case, it costs the Coyotes millions. According to Moyes, the lease amounts to a subsidy of the real eatate development.
Having the hockey team subsidize real estate was not a ridiculous proposition when the team was owned by Ellman and the boys making the money on Westgate. Then Moyes turned up, a chump they found to cover the team losses until he was owed so much he owned the team. Once that happened, Ellman was laughing because the lease helped him while Moyes was going broke. I figure the plan was to bleed Moyes dry and when he finally packed it in, Bettman would bring in Reinsdorf. New deals would quietly be struck to shuffle the cash around to cover Coyote losses and keep the castles in the sand real estate scam going for a while longer.
It all blew up on them when Balsillie stepped in to throw Moyes a lifeline and from there it has spiralled out of control. A real estate deal worth billions has already taken a severe kick over the past couple of years in a deadly market. They sure as hell can’t sell retailers store space around an empty arena. What happens to Westgate if the Coyotes move? What happens to the city if Westgate fails? Those are the real stakes here and those stakes make the hockey team small potatoes.
In the end, the judge will decide whether he sides with the clowns who concocted this cockamamie scheme and screwed over Moyes in the process, or whether he protects the victim even though doing so may bankrupt his city.
Stay tuned.
I guess what I’m wondering is ‘is there a point at which this doesn’t make sense for the city?’
There has to be, even including all of the ancillary benefits. Could they not pursue another anchor tenant from elsewhere?
I guess what I’m wondering is ‘is there a point at which this doesn’t make sense for the city?’
It did not make sense for the city from the very beginning. What kind of government risks hundreds of millions on a real estate play? To me – a guy some have accused of being a socialist – it was absolutely insane from the beginning. I think governments should decide what services should be delivered for the public good and then tax the citizens to pay for them. I don’t think governments should be looking for returns on risky real estate investments. I think it is very ironic that the idea of public health insurance is an outrageous idea to many Americans while this is a role for government that is okay.
At what point does the city say “Time to cut the losses and take our lumps” is your question and I think the answer to that is in the murky swamp. That’s a place where making sense for the city is not really on the agenda.
What makes sense to the decision makers, the clowns who created the mess and who are still in control? To let the Coyotes go and then make a clean breast of the reality? Those decision makers will be ruined politically if this does not work out. And it could be worse for them. There is at least the appearance of cronyism and the smell of corruption in the air. If the appearance is a reality everybody involved will be ruined politically. There will be a big investigation. Would anyone be surprised if everything about this deal wasn’t exactly squeaky clean? If indictments followed a complete collapse in Glendale?
As long as there is a sliver of a chance this fiasco can still work out, they will grasp at straws in my view. If that straw involves throwing good money after bad, well it isn’t their money, is it?
Tom, As a US citizen and a complete non liberal, I do not agree with the President or his party on their version of public health care and health care reform but that doesn’t mean that I think any government has any business subsidizing any private business or person. I think the Andy Grabia crowd from BOA have it right that the owners should build their own houses(hockey rinks) or stay out of the business. I for one hope the judge throws the city under the bus and prosecutes the mayor and his hench men to the full extent of the law.