The bottom line is that the Tampa Bay Lightning—under legal and financial assault—may not be saleable. One buyer, with the cash to do the deal, has left the table. Other suitors remain—sort of—but their financing is thin and they aren’t talking the astronomical prices sought by the Lightning’s mysterious shogun, Takashi Okubo.
Why should you care? If you live in Hillsborough County, you’re on the hook for a lot of money to pay for the Lightning’s Ice Palace. The current annual public ante is about $4.5 million from the city and county. That is offset somewhat by parking revenues and ticket surcharges. But, many more tax dollars could be needed if a buyer isn’t found and if Okubo decides to collect his hockey pucks and leave town.
Here’s why you should be fretting. Last week, The Tampa Tribune ran an article that said a deal had collapsed to sell the Lightning to the Maloof family, a New Mexico clan that has built a fortune on beer distributorships and Nevada gambling. The article, although relating a message with tremendous and potentially calamitous implications for Tampa, was tucked away on the sports page where many readers probably missed it. The Trib blamed the deal’s collapse on the Maloofs, who were said to change contract details frequently. The price of the now-kaput sale was pegged at $160 million.
Don’t believe it. The worst that can be said of the Maloofs is that they’re prudent. The offer from the family was more like $147.5 million, according to sources with good knowledge of the Maloof’s and the team’s affairs. The $12.5 million difference probably was the dealbreaker—but it’s far more complicated than that.
First, if the Maloofs were changing details, says a source familiar with the Lightning’s finances, "it’s because every time they (the Maloofs) opened a door, they found a nest of problems."
The big problem is: What is the team really worth? $160 million? $147.5 million? Or, as the authoritative Financial World reported in June, $64 million. And why is there such a big disparity among the numbers?
Moreover, why does Financial World rank the Lightning 109th in value among 113 pro baseball, football, basketball and hockey franchises. And, what motivated the magazine to slap a "high risk" evaluation on the team—concluding that the Lightning "may not be able to sustain historical growth in value, or generate sufficient operating income to complete with other teams" in the National Hockey League?
The answer, at least in part, is the Ice Palace. The value of the franchise, sans arena, is probably about what Financial World estimated. The rest of the teams ostensible value has to do with cash spun off by the arena.
A sports venue—especially one where most of the debt is paid by the taxpayers and virtually all of the profits are pocketed by a team—adds considerably to the net worth of a team. The one caveat is that the arena or stadium must be profitable. And the Ice Palace is melting down into a financial puddle.
Oh, you say. That’s hard to believe. Why, we read on July 5 an article in the Trib that said, "The Ice Palace is the busy place planners said it would be." Didn’t that article tell us about the 100 events and 1.3 million people that have passed through the Ice Palace during its first nine months?
Yes, the Trib told us all sorts of things about the Palace, gave us all variety of numbers. Except for one little tidbit. The newspaper never told us about that nagging little detail called profits.
Or is it losses?
A lawyer who represents the Lightning’s Japanese owners told me the arena is losing money. And, Mayor Dick Greco mused last week: "Do you think it (the arena) is making money? I don’t see how it could be." In short, the arena’s finances aren’t a mystery.
Why is the Ice Palace flooded with red ink? The Lightning’s owners—a secretive Japanese outfit headed by Okubo and accused in one federal lawsuit of being "gangsters"—have borrowed every dime and yen they can against arena revenues (real and, in all likelihood, imagined). One lender—another Japanese company that once was a Lightning partner—in June sued the team for $1 million, claiming that the Lightning, rather than paying its debt, was "evasive." Japanese companies don’t generally challenge each other in American courts over such debts—that it should happen is a portent of very bad things to come. A question to ponder: Why did the Lightning have to go to what amounts to a lender of last resort?
Another bad augur: No major company will risk putting its name on the building. ATT was close to deal, but wouldn’t sign up for more than three years, indicating a lack of faith in either the team, Tampa or the long-term viability of hockey in the South—or some combination of the three. Publix and other companies also have balked buy "naming rights." Such a deal is worth $1 million a year, more or less, to the team, and the Lightning undoubtedly have already borrowed against such anticipated revenue.
The arena is generally said to have cost $154 million. Actually, the concrete, steel and glass—the hard costs—were much less. Taxpayers are footing about 60 percent of the total debt, and our money covers most of the hard costs. Most of the remaining 40 percent of the "construction" money went to "soft costs," which in large part meant the money was shipped to Japan.
Other groups are eyeing the Lightning—as much for the real estate the team controls as anything else. A player with one group, TransWorld Diversified Services, confirmed interest but said an offer would be much less than the stratospheric amounts in the Maloof deal.
The dilemma is that the Japanese have borrowed so much, the team and money-losing arena aren’t worth what’s owed. One possible endgame is for the Japanese to file for bankruptcy on its subsidiary that controls the arena. Despite no legal requirement for taxpayers to cover the roughly $60 million of the arena debt for which the Lightning is responsible, there would be pressure to do so in order to "save" the franchise for Tampa. Another alternative is for the National Hockey League to force a sale under threat of seizing the franchise from the Japanese. That would neatly cover things up.