Subtlety lost on Oilers' Katz in Seattle | Hockey | CBC Sports

Hockey Night in CanadaSubtlety lost on Oilers' Katz in Seattle

Posted: Tuesday, September 25, 2012 | 09:25 AM

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Whispers abound that Edmonton Oilers owner Daryl Katz, right, is exploring the possibility of relocating the team in Seattle. (Bruce Bennett/Getty Images) Whispers abound that Edmonton Oilers owner Daryl Katz, right, is exploring the possibility of relocating the team in Seattle. (Bruce Bennett/Getty Images)

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Edmonton Oilers owner Daryl Katz took a sledgehammer to the local arena debate by exploring options in Seattle. But the problem is, the only person he hit was himself.

We should call September "The Month When Subtlety Died." The NFL set a new record for stubbornness by turning its first three weeks over to replacement officials, culminating in mammoth embarrassment Monday night with the Green Bay-Seattle finish.

The NHL and NHL Players' Association remain dangerously close to going off the rails, with the moderates on both sides worried there is no room for them right now. And now Edmonton Oilers owner Daryl Katz has taken a sledgehammer to the local arena debate.

Only problem is, the only person Katz hit was himself.

Apparently, his NFL road trip with pals Kevin Lowe and Wayne Gretzky was pre-planned. But it was awfully convenient for news to leak that they'd stopped to meet with Chris Hansen, who now has city approval to build a new NBA/NHL-ready arena.

Clearly, Katz is frustrated with negotiations in the Alberta capital. And when you're frustrated, it is imperative to have someone around you who can slap you in the face and say: "I know you're mad. But what you're about to do is really dumb and I'm not going to let it happen."

The Oilers are not going to Seattle. If you don't believe me, maybe you should listen to Don Levin, the guy who actually wants to bring the NHL to The Emerald City.

"I can tell you there are not teams for sale that are available to move," Levin told's Craig Custance last week.

"My understanding is that the Phoenix deal, [Greg Jamison] has come up with the money. The answer to the Islanders moving is never. They're not moving out of that market. No chance that's going to happen."

So let me get this straight.

The Phoenix Coyotes and New York Islanders aren't available. But the Oilers are? To go from Edmonton, a hockey-crazed market, to Seattle, where you would be the second tenant in a building they wouldn't own?

And it is all about the arena.

On Twitter, I called Katz's Rexall Place lease one of the worst in the NHL. A lot of you called me on that one and the mistake is mine for not providing proper context in a medium of 140-character bursts.

Katz's lease runs through 2014. He pays a loonie per year in rent and an operating cost of approximately $1.2 million, according to various sources. In exchange, he gets all the revenues from Oilers games (with the exception of parking, that's a 50/50 share) and doesn't have to pay any area costs.

No less an authority than Andrew Zimbalist, the Smith College professor who's made a living deconstructing these deals, calls it a favourable one for Katz.

To many of us who don't own giant pharmaceutical chains, that should be good enough. But in the world of cut-throat businessmen, it isn't. Katz is a long way from maximizing his revenue. He doesn't get the revenues from third-party events, as Zimbalist calls them, and, since he doesn't own and operate Rexall, can't protect 35 per cent of his luxury-suite revenue from hockey-related revenue (HRR).

Last week, I was having a conversation with someone who knows the business workings of NHL extremely well and asked him, "How many teams in the league really lose money?"

"Are we including the arenas in this equation?" he replied.

Go online and google "Broward County" and, within seconds, you can download a 2010 report by the county's auditor reviewing the Operating Agreement of the Broward County Civic Arena -- better known as the BB&T Center, where the Florida Panthers play.

There aren't many similarities between the two situations. Each building has one anchor tenant and hockey drives the bus much farther in Alberta than in South Florida. Plus, the Panthers have another huge hurdle -- the competing American Airlines Arena in Miami, home of the NBA champion Heat.

Despite that, the Panthers do a very good job. The audit explains how the NHL team's ownership also owns the arena's operating company, which signed a 30-year lease with Broward to manage the arena through 2028. Then, the paper outlines how that company made $89.9 million of net income on revenues of $316 million from 1999-2008.

According to the operating agreement, the Panthers were supposed to get all of that, with any "distributions in excess of net income" given back to the county. Well, the auditor found the team actually received more than $98 million, so he recommended Broward ask for $8.4 million in return. (Panthers president & COO Michael Yormark isn't always the smartest tweeter. But as another exec says, "That guy knows how to run an arena.")

It's a small window into the team's business. But it shows how profitable a building can be, especially considering the Panthers missed the playoffs from 2001-11 and have never been a financial powerhouse. So when I say he has a bad arena deal by NHL standards, I mean that there are plenty of other owners with a better ability to maximize their revenues than him. And in ownership circles, that's hugely important.


Now let's count the reasons for which few of you will have any sympathy:

1. You're already annoyed about the lockout and this is the last thing you want to hear.

2. Canadians don't really have a long history of allowing sports owners sweetheart deals on arenas.

3. Katz was to pay the arena's operating fees and $192.5 million over 35 years to cover construction costs in exchange for the profits from all arena events for 11 months of a calendar 12, plus naming rights estimated at approximately $1 million per year, plus city advertising worth another $2 million per year.
4. The deal is in jeopardy because Katz argues he was promised another $6 million per year to offset the costs, which city councillors say is not true. Asked to meet in a public session, Katz refused, although he has granted interviews to The Edmonton Journal, The Edmonton Sun and CHED Radio.

5. Did we mention Katz is threatening to move the team from a powerful hockey market to an unknown quantity and would be second banana in the arena? We're seriously being blackmailed with this scenario?

What makes Katz look worse in all of this is that Hansen, the man he met with Monday, made several concessions to get his deal done. Among other things, he agreed to fork over more cash for "transportation improvements," guarantee debt payments and give the city the option of selling him the arena for $200 million after 30 years.


Apparently, Katz believes he's not fully trusted in Edmonton because he doesn't live there year-round (his primary residence is in Vancouver) and therefore doesn't get the benefit of the doubt or the credit for stabilizing Oilers ownership. I don't live there, so I can't judge that.

But even if you support Katz on this issue (hey, if you can get it, go for it), you can't reasonably think this will soothe any hard feelings. He has stirred up a hornet's nest and mobilized anger against him with three weeks remaining until Edmonton Mayor Stephen Mandel's drop-dead date.

If Katz feels so unappreciated by both the general public and by city council, his best option would have been to say privately to Mandel: "Look, if this doesn't get done, I'm going to sell." It would not have had to be a threat, just an honest discussion of how he felt going forward.

That way, Mandel could have quietly appraised the situation and assessed Katz's value instead of being riled by a toy gun to the temple. Instead, old northern Alberta wounds were ripped open (see Les Alexander, 1998).

Bet this deal gets done. But that the scars don't heal quickly.

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