Hansen’s ‘Hail Mary’

Yesterday the Hansen Group threw up a ‘Hail Mary’ by sending a letter to the Seattle City Council on a possible redevelopment plan of their own for KeyArena. As I’ve said in KeyArena_SoDoGroupprevious posts, the three main challenges for SoDo is the lack of money, no NHL partner, and political support inside and outside city hall. His potential plan for KeyArena is interesting, but does nothing to address those challenges.

The proposal

The proposal would subdivide KeyArena into 3 separate venues: a 500-seat theater, 3000-seat covered amphitheater and 6200-seat indoor concert venue. If there wasn’t already a viable redevelopment plan to accommodate NHL and NBA team, i.e. OVG’s proposal, I think this would be an interesting proposal. The Hansen Group would not start this Amp_KeyArena_Hansenproject until after a SoDo arena would be completed. Based on the information posted on Hansen’s website, the SoDo arena would still not begin until an NBA or NHL team is procured. Based on a Steve Ballmer interview last spring, he estimates the NBA in Seattle is closer to 10 years away than 5. You add it all up and we would be looking at about 2027 for SoDo to be open at which time I would not expect the NHL to wait for Seattle. The Hansen Group has mentioned they would be willing to work with an NHL partner, but their track record so far tells a different story. Each of the known prospective NHL Seattle partners, Don Levin, Ray Bartozek, and Victor Coleman, have been unable to reach terms with the Hansen Group. By adding this KeyArena component, he just increased the cost of business for any prospective partners.

What does Hansen have to lose?

In short, nothing. Worst case for Hansen is that the situation remains status quo and the city rejects/ignores his proposal and continues to go down the path with an NHL/NBA arena in Seattle Center with OVG. Best case for him is that the city rejects the OVG NHL/NBA solution and gives Hansen 5 more years to wait for the NBA to either expand or relocate a team to Seattle. He will also need to acquire a whale of an NBA partner and if he can’t strike a deal with the economic proposal of both SoDo and KeyArena, he can go back to the City to request a more appealing deal to lure the NBA. By that time, the NHL will have probably expanded to 32 teams somewhere else.

SoDo is Dead

I know there are a lot of folks that wanted to see the SoDo site be the location of Seattle’s arena to host NHL and NBA teams, but the door seems to have been closed indefinitely as the City of Seattle shared that they will not be re-voting on the Occidental Street Vacation that the Hansen would need to build their arena in SoDo.SeattleArena

I have said SoDo is dead before and nothing has really changed my mind since I originally posted in May of 2016. That post was before KeyArena was brought up as an option. It was clear to me that the current City Council decided that SoDo is not where they wanted another sports facility to be built. Since that post, nothing has materially changed. Hansen offered to forego his $130M in public financing for the street vacation, but that was much ado about nothing. It didn’t go over well, but I chalked this up as “no news” news. The financing has always been tied to Hansen procuring an NBA team and since the NBA has made it clear that they were not expanding before the MOU was set to expire, the financing was a non-issue.

The reasons for the unwillingness for the city to revisit the street vacation could be any combination of the following reasons:

  1. No money. When Ballmer left the group that eliminated Hansen’s majority owner/partner. Hansen could have addressed this, but, for whatever reason, hasn’t added any investors to his group. Now it is relatively impossible to replace a significant partner, like Ballmer, with over a billion in net worth. As far as I can tell, the City doesn’t grant street vacation on speculation that a company, organization or individual can attract more investors. The city expects to see all the financing in order before a street is vacated.
  2. No NHL partner. It’s no secret that the NHL is ready to expand before the NBA. Many sources have made that clear. Over a year ago, Hansen’s partner, Wally Walker confirmed that the Hansen group has continued to talk to prospective NHL owners but in 6+ years, they have not been able to bring any of them on board.
  3. Politics. Yep, flat out politics. It is easy to blame the Port of Seattle, since they were the most vocal opponent over the last 5 years. The Mariners & Seahawks were also quiet opponents of the SoDo arena plans. Those are 3 powerful groups that are difficult to overcome.
  4. Relationship with the NBA. For years there have been rumors & reports that Hansen’s relationship with the NBA has some challenges. The city has acknowledged that they have been in communication with both the NBA and NHL during the KeyArena RFP process to make sure it is viable. If this relationship issue did exist, it is certainly conceivable that the NBA would have confirmed it to the City of Seattle during these conversations.
  5. KeyArena has become viable. At the time of the Occidental Street Vacation vote, KeyArena was not really talked about as a viable option to host the NBA and NHL. outsideSince then, the City issued an RFP and got two responses to redevelop KeyArena from two power houses in the industry that have deep ties to the NBA and NHL, AEG and OVG. Both RFP responses confirmed that KeyArena could be redeveloped into a building to support NHL and NBA. The city confirmed that the Mayor’s Office were in communication with both leagues on the viability of the proposals.

KeyArena or Bust

The demise of SoDo leaves only one option for an NHL/NBA arena, a revamped KeyArena. NBA aside and focusing on the NHL, with the addition of Vegas this year, the NHL is set at 31 teams with 15 teams in the west and 16 in the east. This would imply 1 additional opening for an expansion franchise. The league will not wait for Seattle forever, especially with interest starting to percolate in Houston and Kansas City, both of which could plug and play fairly easily in the western conference and already have existing arenas. With no other options in the Seattle area, it looks like KeyArena is our only hope to see the NHL here anytime soon. There are certainly other scenarios that could play out, but it feels like our window of opportunity is now, otherwise we might be waiting a long time for an NHL team.

inside-Hockey

NHL To Seattle 2016 News in Review

From a league level, we entered the beginning of 2016 with some outstanding questions on the two NHL expansion applications from Quebec and Las Vegas. Meanwhile, locally we were still waiting on the outcome of the final street vacation on the SoDo arena.
January 14th Rumors start to circulate that the falling Canadian Dollar could adversely impact Quebec City’s NHL Expansion bid. In hindsight, this is early foreshadowing that would slowly gain steam as the league got closer to the final expansion announcement.
January 25th Slowly but surely, the final stages of the SoDo Arena street vacation vote start to materialize.
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January 27th Gary Bettman references Seattle as an intriguing NHL market. At this point, the ship had sailed on expansion for this round but encouraging to know that Bettman still acknowledges Seattle as a solid market for an NHL franchise.
February 13th  Reports come out that the KeyArena could be remodeled to accommodate both NHL and NBA. Seattle times begins to push this as a better option than SoDo.
February 22nd In a response to the Seattle Times editorial, council member Tim Burgess sharply response and criticizes the Seattle Times for inaccurate reporting.
March 15th The city council conducts a public hearing on the Sodo Arena Occidental Street Vacation.
March 16th In a small blurb of Elliote Friedmans weekly column, it is revealed that Chris Hansen remains in contact with the NHL. This isn’t a game changer but important to know that communication lines remain open.
April 6th City of Seattle Transportation committee hears final presentation on Occidental Ave street vacation for the SoDo Arena. SeattleArena
April 20th Occidental Ave street vacation vote scheduled for Seattle City Council on May 2nd.
May 2nd The Occidental street vacation fails in full City Council meeting by a vote of 4 to 5. The street vacation would have been the last hurdle to have a shovel ready SoDo arena.
May 4th Theories start to circulate that the failed street vacation might break the implied monopoly the Hansen group had on arena options in the area.
May 23rd After the fallout of the denied Occidental street vacation, I claim the SoDo arena dead. (I hope I am wrong. Even though there has been plenty of activity in SoDo over the second half of 2016, it is still not clear how this street gets approved.)
vegas
June 22nd NHL awards the 31st franchise in league history to the Las Vegas for play to begin in the 2017-18 Season. Quebec City is not awarded a franchise. Under the circumstance this could be the best possible outcome for Seattle (or any other city looking to land an NHL team someday).
August 4th Communications between the Port of Seattle (staunch opponent of arena) and the Seattle Times Editor Frank Blethen reveal that the Times was working on a $290,000 PR campaign story for the Port at the same time the Seattle Times launched an editorial campaign against the SoDo Arena. If you ever wanted to know why the Seattle Times was so against the SoDo Arena, now you know.
September 22nd News reveals the Hansen group continues to accumulate land in Sodo. A strong signal that they have not given up on a SoDo arena.
October 25th Hansen group offers the City of Seattle a 100% private financing arena with more infrastructure invested in the SoDo area. (I still think this is much ado about nothing since without an NBA team the group would not get any financing anyway.)
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October 27th Seattle Times reveals that the City of Seattle will open up a Request for Proposal for a (major) renovation of KeyArena that could accommodate a potential NBA or NHL team.
October 28th A small blurb in a wrap up article of the week reveals that Victor Coleman is still interested in bringing the NHL to Seattle area.
November 14th In an announcement that will certainly help the PR efforts in SoDo, Seahawks Quarterback Russell Wilson announces that he has joined the Hansen Group to bring the NBA and NHL to Seattle.
November 15th Bettman confirms that the NHL is not looking at Seattle without an arena. A statement that surprised absolutely no one.
November 18th News reveals that current Carolina Hurricanes owner, Peter Karmanos wants to sell the Canes, even if it means relocation. As expected, this report is quickly denied by the league and Hurricanes management. If this ever were to come to fruition, the probable landing spot would be Quebec City. This would maintain a 15 teams in the west and 16 teams in the east.
December 15th The Oak View Group, headed up by industry vet Tim Leiweke, do a PR tour with local media outlets that reveal their intent on the KeyArena RFP process. The group mentions that they are in communications with both the NBA and NHL on their plans. They also reveal that they will not be owners of either an NBA or NHL franchise at KeyArena.

The FEIS and what’s next

Seattle Mayor Ed Murray

Seattle Mayor Ed Murray

As scheduled, the Final Environmental Impact Statement on the Seattle Arena was released Thursday morning and as expected, the results were favorable.

This news is being picked up everywhere but the most thorough article came locally from Chris Daniels and Geoff Baker.

Chris Daniel’s Article here.

Geoff Baker’s article is here.

The Puget Sound Business Journal also had a good summary piece on the economics.

Here are some highlighted tweets of the coverage:

Sonics Arena Statement

Within a couple hours of the FEIS being released, the SonicsArena camp released a statement. There was an entire HockeyView_SonicLevel3paragraph on an NHL first scenario.

We also wanted to take the opportunity to reiterate that we remain 100% supportive of the NHL returning to Seattle and playing in the Arena — and are completely open to the prospect of that occurring prior to the NBA. In light of recent speculation, we would just like to clarify that we have sought to be as accommodating as possible in our negotiations with potential NHL partners, with our only major requirements being that such a deal does not jeopardize the process or put the City, County, Taxpayers or us in a worse financial position.

This is consistent with the Hansen camp’s position from the very beginning. In an interview late 2012 with King 5, Hansen said that an NHL first scenario would be possible in the right scenario. At the time, NBA expansion or relocation looked like more of a possibility which made the scenario less likely. Comments from Victor Coleman last week have muddied the waters a bit so it is great to see the Hansen group affirm their position.

Port of Seattle Opposition

Consistent with the ports messaging throughout this entire process. They released this statement on their opposition to the Arena and the EIS findings. In my three plus years of following this project, the Port has never provided any data on the impacts of the Arena to their business and have never appeared to be collaborative in this project. We should expect more and more of this type of PR from the port.

What is next?

Now that the Final EIS hurdle has been cleared, a couple things will start to play out. For an NHL first scenario, a prospective NHL owner will need to strike a deal with the Hansen group. Once that happens, the Hansen group will need to take a proposal to the Mayor to change the current MOU to be an NHL first scenario. This will more than likely need to happen in PopulationAugust so that the Mayor can bring it to the city council for vote in September.

In the meantime, the NHL has two key Board of Governors meetings, one before the NHL Draft in June and another in September. As reported last week, it appears they will “vote” on expansion in September. Since the news did not come from the league, it is up to us to define “vote”. Most people interpret this “vote” as to start the application process and not necessarily, awarding the franchise.

Meanwhile, the Tukwila arena proposal moves forward and should be considered a major competitor to the SoDo Arena regardless if there is movement on the NHL first scenario in Sodo.

As I tell most people, this is a rollercoaster, try not to get too high or too low on any news. So let’s celebrate the victory but do not assume this thing is a done deal. Lots and lots of work still remain.

Seattle Mayor Murray chimes in

Quick post this morning. I thought it was important to share this statement from Seattle Mayor Ed Murray. Great to see such a commitment from the Mayor’s office. It is going to get really noisy over the next couple months as I expect to hear from Chris Hansen and/or Victor Coleman over the next couple weeks as the Final EIS (Environmental Impact Statement) is published on or before May 7th.

If you have the time, I would recommend listening to yesterday’s Sin Bin with guest Chris Daniels and Brian Robinson.

Mayor

(Sorry for the screen shot vs. embedded tweet. I was having issues with the picture of the actual statement being displayed correctly).

Breaking down the 3 arena options

In case you missed it, Gary Bettman mentioned Tukwila and Bellevue as potential sites for an NHL arena in the Seattle Area on a radio interview in Vancouver. Stick tap goes to Paul Rogers, from SonicsRising.com, for covering the news ahead of our more traditional media outlets. Geoff Baker from the Seattle Times then published this article with a lot more detail on the specific locations. As much as I love the SoDo location, it is great to see that Seattle’s dreams of landing an NHL team are not tied to any one plan. I breakdown the 3 locations by population, income, and driving distance.

Population

Puget Sound Population Map3

Seattle has ~ 6 times the population base of Bellevue. It is worth pointing out that Seattle’s area (142 Sq Miles) is much larger than Bellevue’s (36 Sq Miles). For this reason, to get a fair comparison you could include Kirkland, Redmond, and Sammamish. If you combine those populations, the Bellevue area has ~325K compared to Seattle’s ~650K. The closest comparable NHL market could be Minneapolis-St. Paul. The city of Tukwila is much, much smaller, but based on the location of the reported site, it is literally on the southern border of the Seattle city limits.

Side note: I received over 15 times more responses from people living in Seattle vs people living in Bellevue when I launched my original survey.

Income

We have already established that the NHL fans have the highest income levels of the big 4 Professional Sports Leagues. For income comparisons, I used IRS adjustable income reporting data from 2012 by zip code that I then consolidated into city. I filtered on how many IRS tax returns had an adjustable income of over 75K by city. This is not to say that the only people going to NHL games will be individuals/households that make over 75K a year but a large amount of Season Ticket holders will come from this income bracket.

Puget Sound IRS returns Map

Similar to the population levels, Seattle has a significant amount of households with tax return Adjustable Income over $75K when comparing to Bellevue. However, when you add Bellevue, Kirkland, Redmond, Sammamish, Issaquah and Newcastle, the number is much closer than the population number: Seattle has ~117,000 households to Eastside collective around ~100,000 households.

Distance

Seattle arena map

From a distance perspective, Bellevue and SoDo are somewhat of a wash. Yes, traffic won’t be great regardless of the route, but 10 Miles seems like a reasonable distance to travel to a game for either side of the lake. Certainly, there are more people working in downtown Seattle during the week, but there are obviously quite a few companies located on the Eastside, as well (Microsoft, T-Mobile, Costco, etc…). From downtown Seattle, Tukwila seems like a reasonable distance, even closer than Bellevue.

In a perfect world, a potential owner could obtain some data from a few NHL teams that show the distance traveled from season ticket holders & single game ticket purchases to analyze the viability of the three locations. If I had my pick, I would analyze San Jose, Colorado & Minnesota ticket sales by zip code.

Side note: 35% of respondents to one of my surveys over the summer, sited “Inconvenient Location” as the reason why they did not watch more WHL hockey game.

Here are a few distances for other NBA/NHL arenas:

Canadian Tire Center, home of the Ottawa Senators:

  • 16.6 Miles from downtown Ottawa

St. Paul MN, home of the Minnesota Wild:

  • 12.4 Miles from Minneapolis

The Palace at Auburn Hills, home of the Detroit Pistons:

  • 33 Miles from Detroit

Glendale AZ, home of the Arizona Coyotes:

  • 10 Miles from Phoenix
  • 21 Miles from Scottsdale
  • 27 Miles from Mesa

Sunrise FL, home of the Florida Panthers

  • Sunrise, FL is 31.2 Miles from Miami

 

On an unrelated note and a shameless plug, I am trying to get 100 people to donate $10 to the RMHC of Seattle just so I can donate $1500. Please consider donating

Potential Gate Revenues in KeyArena

Let me first say that I’ve always felt analyzing Arena Revenues on the success of a franchise is just part of the financial picture & can be shortsighted. Arena Revs are important and it is largely reported that NHL relies on their Arena Gate revenue much more than other professional sports leagues. My point about the Gate Revenues is that it takes time and generations to develop a fan base that creates excess demand to allow for owners to increase prices. So when you hear of crazy cheap prices and promotions in other cities, this should be considered a good thing and part of the process in developing a fan base. Besides, isn’t cheap tickets a good thing to make hockey more accessible to people of all income levels?

Additionally, the NHL should be doing things to diversify their dependence on Gate Revenues. My analysis of the Forbes NHL Valuations from last year showed that 50% of Canadian Team revenues comes from Gate Revenue where most of the other teams are somewhere closer to 33%. With roughly 50% of NHL franchises selling out every game this year, higher prices and therefore higher gate revenues are surely coming. The unfortunate thing here is that teams don’t have much of a choice but to raise the prices because they will be sold on the secondary market for higher prices should they try to keep prices low.

Ok…thank you for letting me get that out of my system

Seattle revenues at KeyArena

I’ve seen a lot of banter over the last few days on the limited capacity in the KeyArena and the impacts to Arena Gate Revenue. There is a lot of concern that because of the small arena, it isn’t suitable for the NHL, even temporarily.

So I decided to look at the price points of the various I apologize for stating the obvious here but there are two elements to Arena Revenue: attendance and ticket prices. Again with the obvious, in order to make up for lost capacity, one can raise the price of tickets. With the added scarcity of tickets this shouldn’t be too hard to do.

I looked at the average attendance per game in 2013 and the average ticket price per team to get at a “projected gate revenue per game” for each team. For the most part, you can assume that the lower the ticket price, the lower the attendance. The loan exception is Tampa Bay who has the 2nd lowest average ticket price but the 8th highest average attendance per game. Ottawa is another anomaly with the 6th lowest ticket price per game but the 6th highest average attendance per game. Even with that high attendance, they rank the 6th and 7th lowest in gate revenue per game. Here is a graph of what the Seattle NHL Team would need to charge to raise the equivalent in Gate Revenues for each team.

Ticket Prices

Note there are two figures that are being compared against the team averages. One price point at 11,000 people and one at 13,000. The 11K figure is popularly reported but Chris Daniels for Channel 5 in Seattle had done some investigating and noted that the figure is around 13K. Important to note that this assumes that all games sell out in KeyArena, regardless of capacity. I don’t recall how some other markets did when playing in a temp facility but it might be a little naïve to think that they could sell out every game.

Here are my findings:

  • Assuming a sellout of 13K, the Seattle NHL Franchise would need to charge an average of $43.18 to bring in the same gate revenues that Phoenix is brining in at $40 per ticket. 43.18 would be the 6th cheapest ticket in the league.
  • Conversely they would need to charge $186.33/seat to bring in what the Toronto MapleLeafs bring in at the gate per night. (I know not realistic but kind of fun to look at.)
  • If the Seattle team charged the league average of $61 per seat they would make more than 6 teams do today at the gate.
  • At $50 a seat, they would be charging the 12th lowest ticket price in the league and still generate more than 4 other teams.

Those are just some fun stats and thoughts to look when it relates to gate revenue. There are things like variable pricing per game where the team could charge a premium: Vancouver, Pittsburgh, Boston, Detroit, & Chicago draw extremely well on the road.

Let me know if you have other scenarios and I will run them against my model.