Is this realistic?

kennadog

kennadog

Dog On It!
#2
#2
Well, its certainly worth exploring, but could be a tough sell in this economy and with the Kings not exactly winning games or fans at the moment. The numbers aren't clear. Apparently this would only provide part of the financing. 2,000 x $100,000 is $200,000,000.

If you really are interested in being a long term-season ticket holder, this could be a deal. At some point the seats you buy are going to be cheaper than most if not all of the seats around you. That's why there is the one comment in the article about this not working too well in pro sports, because of the constraints it puts on owner's annual income.

Its great for the upfront costs to pay for the arena, but then it has ever diminishing return to the owners over the 30 years.

And I'm not so sure you could get 2,000 people to pay that much for a seat(s) in the Sacramento region. I would also think the risk of loan deliquency could be high if payments are annualized, although then they could sell tickets at what might, then, be a higher price. Even if they can't raise all the money needed, they might be able to sell enough to have good leverage for the remaining funds that have to come from another lending source.

I'm glad to hear they're thinking about it anything, though. That has what has been lacking from Mayor Johnson's support, so far. No idea how to back upthe support with the needed dollars.
 
Trueblood

Trueblood

Bench
#3
#3
Yeah, that's $200 million that would usually go into the owner's pockets. By using that money to finance the arena defeats the purpose of having a new arena in the first place.

I can see how this works in college though. Arenas are cheaper to build and the institution gets revenue through tuition.
 
hrdboild

hrdboild

Moloch in whom I dream Angels!
Staff member
#6
#6
I don't see how this helps either. Sure you get the money up front for the arena, but isn't the point of having the arena so you can sell seats for the games? That's where the bulk of the team revenue comes from. The more seats you pre-sell to finance the arena, the smaller your annual revenue is going to be. I suppose you'll still be collecting on concessions and parking, but I think if the end goal is to run a profitable operation than you wouldn't want to handicap yourself by eliminating some of your highest priced seats off the bat. It's essentially a creative type of loan where you're borrowing against your own future earnings. It could help in a limited capacity, but I don't think this is the answer. Remember the Maloofs were ready to nix a railyards arena plan over a few thousand parking spaces.
 
VF21

VF21

Super Moderator Emeritus
SME
#7
#7
Pre-selling some 2,000 seats wouldn't necessarily have a negative impact on actual game sales. It's a creative suggestion - and at this point I wouldn't want to dismiss anything.
 
kupman

kupman

Starter
#8
#8
hrdboild said:
I don't see how this helps either. Sure you get the money up front for the arena, but isn't the point of having the arena so you can sell seats for the games? That's where the bulk of the team revenue comes from. The more seats you pre-sell to finance the arena, the smaller your annual revenue is going to be. I suppose you'll still be collecting on concessions and parking, but I think if the end goal is to run a profitable operation than you wouldn't want to handicap yourself by eliminating some of your highest priced seats off the bat. It's essentially a creative type of loan where you're borrowing against your own future earnings. It could help in a limited capacity, but I don't think this is the answer. Remember the Maloofs were ready to nix a railyards arena plan over a few thousand parking spaces.
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I thought the same thing. But, then I also thought "hey, the people that put this company together seem to know more about arena financing than I do." lol
 
Emma

Emma

Starter
#9
#9
$100,000 over the course of 30 years, with an interest rate of 0.5% (to address profitability concerns?), and $10,000 paid up front, amounts to a payment of $270 per month (I think.) It would be like having really good season tickets guaranteed for 30 years for the price of $3240 per year. That's the price of season tickets above the baselines currently (the King's highest plan reaches nearly $20,000 for a year.) You could probably find 2,000 takers for that.

Oh, and 10,000 x 2000 = $20,000,000 up front. Is this an option, or do we need 200 million up front?
 
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Trueblood

Trueblood

Bench
#10
#10
kupman said:
I thought the same thing. But, then I also thought "hey, the people that put this company together seem to know more about arena financing than I do." lol
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The problem is that they specialize in financing college arenas. This is going to be a much tougher sell with the Maloofs.
 
Ryle

Ryle

Starter
#11
#11
I checked their website and couldn't find any indication as to whether this has been done before and if so where was it done? They say it is being done or will be done for Cal's stadium(what a dump that place is) but I don't see it any place else.

Anyone know who has built a stadium using this type of financing?
 
kupman

kupman

Starter
#12
#12
Trueblood said:
The problem is that they specialize in financing college arenas. This is going to be a much tougher sell with the Maloofs.
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I would not agree with your premise. It appears that they are equally targeting college and professional venues. I cannot find any specific names of projects that are underway or have been created. It does appear that much of their focus has been overseas, namely futbol stadiums in Europe and Brazil. I think they even opened a branch office in London for this purpose.

This model is clearly in its infancy so time will only tell how it works. All I was saying is that these guys know much more about financing than me (and probably any else on this board). Plus, I am sure that they did not write their business plan on the back of the envelope. Any questions or dilemmas I may present have probably been dealt with at a much higher level than I am able to present with my feeble knowledge of how to pay for mega-projects.
 
Trueblood

Trueblood

Bench
#13
#13
kupman said:
I would not agree with your premise. It appears that they are equally targeting college and professional venues. I cannot find any specific names of projects that are underway or have been created. It does appear that much of their focus has been overseas, namely futbol stadiums in Europe and Brazil. I think they even opened a branch office in London for this purpose.

This model is clearly in its infancy so time will only tell how it works. All I was saying is that these guys know much more about financing than me (and probably any else on this board). Plus, I am sure that they did not write their business plan on the back of the envelope. Any questions or dilemmas I may present have probably been dealt with at a much higher level than I am able to present with my feeble knowledge of how to pay for mega-projects.
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Even if the model turns out to be legit, are there enough people in this market to up the ante? $100,000 is a ton for one person to shell out for the Kings, let alone 2,000.
 
kupman

kupman

Starter
#14
#14
Trueblood said:
Even if the model turns out to be legit, are there enough people in this market to up the ante? $100,000 is a ton for one person to shell out for the Kings, let alone 2,000.
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I think it would surprise many people how many wealthy Kings fans would be able and willing to shell out 200K - 250K to buy a nice seat at the new arena that would be good for 20-30 years. If you have the money in hand it is a nice purchase that will save money in the long run.

Second, this does not have to be "a person." A business, firm, medical group etc. could purchase seats to be used and shared by employees or used to treat clients. Again, if the business has the money in hand it is a great buy and will save money over the long haul as opposed to re-upping each season.

Last, as season ticket prices escalate over the years I am guessing that these owned seats will increase in value. What costs 200K this year may be worth 300K in 10 years.

If you had the money, wouldn't you love to see the Kings play in person for 10 years and make 100K in the process?
 
kennadog

kennadog

Dog On It!
#15
#15
kupman said:
I think it would surprise many people how many wealthy Kings fans would be able and willing to shell out 200K - 250K to buy a nice seat at the new arena that would be good for 20-30 years. If you have the money in hand it is a nice purchase that will save money in the long run.

Second, this does not have to be "a person." A business, firm, medical group etc. could purchase seats to be used and shared by employees or used to treat clients. Again, if the business has the money in hand it is a great buy and will save money over the long haul as opposed to re-upping each season.

Last, as season ticket prices escalate over the years I am guessing that these owned seats will increase in value. What costs 200K this year may be worth 300K in 10 years.

If you had the money, wouldn't you love to see the Kings play in person for 10 years and make 100K in the process?
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And this is why the article refers to restraints on revenue for the owners. Besides the fact that you lose annual revenue by the amount you ask for up front, you have 2,000 seats that you can't raise the price on for 30 years. And they will gain value overtime, just by the normal drop in value of a current dollar over time.

I guess, if I was MSE, I might have a clause that prevented ticket holders who wanted to sell those tickets from selliing to anybody besides back to MSE. That way MSE could buy back the tickets as attrition occurred, and then resell them at a higher price. The problem with that is they would be buying then back at a higher price than the originally sold them, too. Unless you set up something at time of initial sale. Something like you have to sell back to MSE only and at no more than the original price, plus some indexed interest rate for remaining tickets.
 
pdxKingsFan

pdxKingsFan

So Ordinary That It's Truly Quite Extraordinary
Staff member
#16
#16
The big problem I see with this is that what happens in 20 years when they decide the arena sucks again and you still have 10+ years on your seat mortgage?

I don't think the idea is horribly far-fetced since I used to have access to some pretty prime tickets that as I understand were tied to Arco's financing. The only thing is that it was one set of 4 seats, arguably the best in the house and not a few thousand.
 
kennadog

kennadog

Dog On It!
#17
#17
Well, I hoped they learned from the current Arco Arena experience and don't go for cheap over durable and able to be refurbished, upgraded, unlike the current Arco.

They built a configuration and especially a foundation that could not support any expansion. Add the cheapness of materials and design and it became clear the current Arco was not salvageable.

On the other hand, The Palace of Auburn Hills was built the same year as Arco, but at twice the cost. It could be remodeled, refurbished, expanded and they have done that at least once. Its still a very viable arena.

I don't blame the original owners. After purchasing the team, they had to finance arena construction with private loans, which is pretty amazing. They couldn't afford much. And they still were on the verge of bankruptcy (why the city loaned them $70 million) and eventually had to sell a large chunk of the ownership to the Maloofs. We were lucky the Maloofs bought the team and said they do not want to move the team and have kept that promise.
 
pdxKingsFan

pdxKingsFan

So Ordinary That It's Truly Quite Extraordinary
Staff member
#18
#18
kennadog said:
Well, I hoped they learned from the current Arco Arena experience and don't go for cheap over durable and able to be refurbished, upgraded, unlike the current Arco.
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One can hope, but I think there are one or two cities that have gone through two arenas in the time we've had Arco. Seems like they always want bigger and better, though the Maloofs seem pretty reasonable in that regard.
 
kennadog

kennadog

Dog On It!
#19
#19
pdxKingsFan said:
One can hope, but I think there are one or two cities that have gone through two arenas in the time we've had Arco. Seems like they always want bigger and better, though the Maloofs seem pretty reasonable in that regard.
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They actually don't want to make the new arena seat much more than the current Arco. They do want some more and better suites, of course. It's the other areas of the arena that are really the issue. Kitchen, concourse (need an upper as well as lower), vendor areas, "marshalling" area where shows get everything ready ahead of time to be moved in and out, loading bays (not enough), new ice-making equipment, better alignment of seating to arena area, etc. Those things are why many events are skipping Arco more and more. The arena just can't handle their need to move a lot of stuff in and out quickly, so it cuts into their profits too much. I guess the visitor's locker room is hands down the worst in the league, by a long way.
 
pdxKingsFan

pdxKingsFan

So Ordinary That It's Truly Quite Extraordinary
Staff member
#20
#20
Right, when I said bigger and better, I was meaning more profit centers, and maybe show pieces like that silly big screen Jerry Jones built (or in our case a big giant gold 6). The non-suite seating is really an afterthought.
 
kupman

kupman

Starter
#21
#21
kennadog said:
And this is why the article refers to restraints on revenue for the owners. Besides the fact that you lose annual revenue by the amount you ask for up front, you have 2,000 seats that you can't raise the price on for 30 years. And they will gain value overtime, just by the normal drop in value of a current dollar over time.

I guess, if I was MSE, I might have a clause that prevented ticket holders who wanted to sell those tickets from selliing to anybody besides back to MSE. That way MSE could buy back the tickets as attrition occurred, and then resell them at a higher price. The problem with that is they would be buying then back at a higher price than the originally sold them, too. Unless you set up something at time of initial sale. Something like you have to sell back to MSE only and at no more than the original price, plus some indexed interest rate for remaining tickets.
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However, you have placed a butt in each of those seats every night for the next 30 years and you have done it with up front money. Somewhere in the neighborhood 400 million. They can use all of that to pay off majority of the balance and have a brand spanking new arena that they now own and control 100% and they control it 100% of the time. Yeah, they lose some prime seats, but now they cash in on all the new luxury suites during b-ball games, great concerts etc. They will sale more concessions with better food and easier access. The Maloofs clearly now how to cater to customers to make a dollar.

I guess that bottom line is that they will own it all and control it all which they clearly want.
 
KingsFan54

KingsFan54

Bench
#24
#24
Trueblood said:
Yeah, that's $200 million that would usually go into the owner's pockets. By using that money to finance the arena defeats the purpose of having a new arena in the first place.

I can see how this works in college though. Arenas are cheaper to build and the institution gets revenue through tuition.
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How does raising $200,000.00 for a new arena defent the purpose of building a new arean? Can you explain that to me? The purpose of having a new arena is to #1 have pro sports in Sacramento, #2 Have a venue where you can go with your family to watch a concert, Ice show, tractor pull, motor cross, etc... I'm really confused by your statement. :eek:
 
kennadog

kennadog

Dog On It!
#25
#25
Well, a big reason for a new arena, is to create more revenue stream to be able to keep goping and be competitive. Arco is just about economically obsolete.

If people put money in up front to build an arena, then it will reduce the potential annual income stream. You may build the arena, but you might cripple its yearly income stream too much to be feasible in the long run. However many seats you sell up front you no longer have any yearly revenue from those seats.
 
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