Oak View Group Raises $100 Million to Pursue “Huge Bets”

Oak View Group

Private equity firm Silver Lake Partners has invested $100 million for an undisclosed minority stake in Oak View Group (OVG), the entertainment and sports facilities company founded by Irving Azoff/Tim Leiweke. Oak View Group, which develops venues and provides consulting services, raised the capital to pursue “huge bets” outside of sports (i.e. music venue in Austin) and to expand internationally (see: Europe, Asia). Currently 27 stadiums and arenas use OVG for booking, sponsorship or security services; though Leiweke envisions adding 6-8 more before the end of 2018. The company acknowledges it’s “going through a massive growth spurt”, but insists it’s with good reason; the NFL, NBA and NHL are “at their healthiest levels ever” and concerts have become increasingly profitable.

Howie Long-Short: Rumors indicate that Silver Lake Partners and Jim Dolan, the Chairman of MSG, are working on a plan that would enable Dolan to eventually buy Madison Square Garden (and perhaps the Knicks and/or Rangers). As the story goes, Silver Lake Partners learned of the investment opportunity in OVG from Jim Dolan, “indicating Silver Lake has been speaking to Dolan.” While I’m not sure how Josh Kosman at the NY Post made the leap between the parties “speaking” and Silver Lake helping Dolan take MSG private, the connection between the two is apparent. Silver Lake Partners has taken an activist position in MSG (6.3%), while Dolan/MSG backs OVG.

Fan Marino: Oak View Group won the rights to redevelop Seattle’s Key Arena (they’re fully financing the deal, no public funding), to house the city’s new NHL franchise (while not yet announced, relocation or expansion is inevitable). Seattle may not be known as a hockey town, but within a 36-hour period in early May, 33,000 people issued deposits ($500 or $1,000) for the rights to purchase season tickets to an unnamed franchise that does not yet exist. As for the team name, OVG filed trademarks on these 13 ideas; Cougars, Eagles, Emeralds, Evergreens, Firebirds, Kraken, Rainiers, Renegades, Sea Lions, Seals, Sockeyes, Totems and Whales. If the goal is to sell merchandise, Kraken must be the choice.

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MSG Building Glass Sphere Arenas, Market Cap Below Forbes’ Valuations of Knicks/Rangers

madison-square-garden-inc-logo

Madison Square Garden Company (MSG) (in a joint venture with Sands Corporation (LVS), who is contributing $75 million to project) has released renderings of a 360-foot-tall (500-foot-wide) glass sphere (MUST SEE), set to be built behind the Venetian and Palazzo resorts and expected to open in late 2020. The arena, connected to the resorts via a pedestrian bridge, will seat 18,000 and hold concerts, residencies, boxing/MMA and other entertainment events (like mass gaming). MSG is expected to announce plans for the construction of a 2nd sphere in London, noteworthy as the booking and marketing of London’s O2 Arena is controlled by AEG live; a direct competitor of Azoff-MSG. The two companies have a history of preventing acts from performing at the other’s venues.

Howie Long-Short: Forbes released their ’18 NBA team valuations. For the first time, every team was valued at more than $1 billion; with team values increasing by an average of 22% YOY. Over the last 5 years, team values have grown 300%. The potential for international growth (revenue growing in high-teens) has NBA teams selling at a higher multiple (8x revenue), than NFL teams (6x revenue). MSG’s NY Knicks are the NBA’s most valued franchise, worth an estimated $3.6 billion (+9% YOY, on $426 million in revenue). Forbes has the Rangers valued at $1.5 billion (+20%, on $246 million in revenue). MSG’s current market cap is $4.93 billion. If Forbes’ valuations are accurate (they tend to be low), the market is assigning literally negative value to MSG Arena (tax assessment in ’17 was $1.2 billion, not including air rights), the Forum, the Liberty, Counter Logic Gaming and a controlling stake in Tao Group.

Fan Marino: Back in November, MSG announced it would be selling its WNBA franchise to a buyer who would immediately take over control of the team’s operations. Apparently, plans have since changed, James Dolan has stated that despite “numerous interested parties” the company would continue to operate the team. The Liberty plan to move most of their games from Madison Square Garden to the 5,000-seat Westchester Arena (pending county approval), home to the Knick’s G-League affiliate. The move would save the franchise dollars, as the cost associated with holding events at the Garden are significantly higher.

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Sands Corp., MSG Building 2nd Las Vegas Arena, Concessions Sales Up 53% at Falcons New Stadium

Sands-Corp 200x200

Las Vegas Sands Corp. (LVS) has announced that their joint venture with the Madison Square Garden Company (MSG) to build an 18,500-seat arena in Las Vegas, is on track begin this summer. The new venue, to be built behind the Venetian and Palazzo properties (on Sands Ave. between Koval Ln. & Manhattan St.), is scheduled to be completed by the summer of 2020. The venue will reside less than 2 miles from T-Mobile Arena; a newly built 17,500-seat arena that opened in 2016 and the current home to the Golden Knights (NHL).

Howie Long-Short: Sands Corp. owns both the Venetian and Palazzo properties, so the location is logical. It seems excessive, but as Sands Corp. CEO Robert Goldstein explained, “the growth is returning around Las Vegas. The Golden Knights have done extraordinarily well, football is coming; why not?” Many would reason because there is no potential pro sports tenant to place in the building, but Las Vegas is unique in that shows (as opposed to teams) can anchor venues; so, despite the Oak View Group’s participation in this project, no promise exists to bring an NBA team to Sin City.

Fan Marino: Speaking of new sporting venues, the Atlanta Falcons offered the cheapest concession prices in the league ($2 hot dogs, water and pretzels) at Mercedes-Benz Stadium this past season and saw sales (not revenue, as reported elsewhere) increase 53% YOY. Fans came earlier, stayed longer and bought more (16% more per fan) to help offset the reduced markup. While the team didn’t generate as much from concessions as it did the year prior, the Falcons were at the top of the league in fan satisfaction for food and beverages. That’s enough for team owner Arthur Blank, who said “we believe that the direction we’ve taken, given all the other positive benefits, is the bigger revenue play.” No one leaves a sporting event feeling good that they paid $11 for a pretzel and a bottle of water; here’s to hoping the new arena in Vegas (and others around the country) follow Blank’s lead and begin to provide fans a better gameday experience.

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WSJ: Just 7 Ways to Publicly Invest in Sports, JWS: Not the Case

wsj-wallstreetjournal

The WSJ published a recent story asserting there are few ways to directly invest in sports, a notion we dispute. The article deemed just 7 publicly traded equities to be sports-related and based their conclusion, that fans are better off watching and playing sports than investing in them, on the performance of 2 exchange traded funds; one of which (FANZ) has beat the S&P since its July ’17 inception, which would seem to counter to their argument. The article cites Matt Hougan, the CEO of Inside ETFs, and his belief that most of the economic value within sports (ownership and player contracts) “comes in private transactions”, to support the author’s thesis; but fails to pay consideration to the revenue streams that support those contracts (and generate ownership profits). It’s worth noting that JohnWallStreet follows over 100 sports-related equities.

Howie Long-Short: Sports teams generate revenue from 4 sources; broadcast rights, ticket sales, sponsorships and merchandising. Several publicly traded equities use a similar business model; Churchill Downs (CHDN), International Speedway (ISCA), Dover Motorsports (DVD) and Speedway Motorsports (TRK), and thus should also be included on the list. Others, like Acushnet Holdings Corp. (GOLF) and Callaway Golf Company (ELY), are undeniably directly tied to sports; and no one would claim your basket was unfocused if companies like Nike (NKE), Lululemon (LULU) and Fitbit (FIT) were to be included. Oh, and don’t forget Activision Blizzard’s (ATVI) new esports league (Overwatch); their inaugural season starts today.

Fan Marino: The story names the New York Knicks, New York Rangers (MSG), Atlanta Braves (BATRK), Manchester United (MANU) and Borussia Dortmund (BORUF) as the teams you can purchase equity in. The Toronto Blue Jays, Toronto Maple Leafs (RCI), Juventus F.C. (JVTSF), A.S. Roma (ASRAF) and SS Lazio (BIT: SSL) are also all publicly traded.

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PBR Kicks Off Silver Anniversary Season Tonight

PBR

Professional Bull Riding (PBR) and VF Corp/Wrangler (VFC), partners for a quarter century, will open the NYSE this morning. Launched in 1992 by 20 rodeo cowboys (each put up $1 million) looking to establish an organization that would oversee bull riding as an individual sport; PBR has made it possible for bull riders to earn a living. Going in to the start of the 25th anniversary season, 34 riders have made over $1 million in career earnings. The silver anniversary season kicks off (no pun intended) tonight at Madison Square Garden (MSG).

Howie Long-Short: Since being acquired by Endeavor in ’15, PBR has increased event attendance 11% (annual audience of 3 million) and television ratings on CBS by 12% (average of 1.3 million viewers/event). Endeavor is privately held, but VF Corp/Wrangler (VFC) is publicly traded. The company, which owns a couple dozen brands including The North Face, Majestic Athletic and Vans (revenue +26% in Q3 ‘17), has seen its share price increase 41% over the last 12 months; with the growth driven by its highly productive DTC business (+17% in Q3 ’17).

Fan Marino: Wondering how PBR scores bull rides? Rules require riders to ride for 8 seconds with one hand in the bull rope and one in the air to earn a score. If the rider makes the 8 second buzzer, he receives a score. If he does not make the 8 second buzzer then he receives no score for that attempt. After each 8 second ride or attempt, PBR judges award scores (up to 100) both to the bulls (up to 50, based on difficulty) and the riders (up to 50, based on control); the combined number becomes the official ride score. The rider with the most points at the event’s conclusion is the winner; the rider who accumulates the most points throughout the season is the PBR World Champion — winning the coveted gold buckle and million-dollar bonus.

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NY Sports Fans No Longer Need Cable, MSG Now Available on DIRECTV NOW

DIRECTV NOW has added MSG Networks (MSG, MSG+) to its programming lineup, becoming the 2nd live TV streaming service to make the RSNs available nationwide. While news of the distribution deal broke back in September, the channels just became available to subscribers through the networks’ live streaming and video on demand platform, “MSG GO”. It should be noted that DIRECTV NOW subscribers within the greater New York metro area (and all of NY State), have access to all MSGN content (i.e. no blackouts).

Howie Long-ShortMSGN, spun off from MSG back in 2015, reported Q1 ’18 revenue grew 3% YOY (to $157 million). It’s not surprising to see the company simply plugging along, as 90% of MSGN revenue comes from affiliate fees; fees negotiated to span extended periods of time. Earlier this month, the company announced plans for a $150 million share buyback plan. DIRECTV NOW is an AT&T (T) subsidiary.

Fan Marino: The addition of MSG Networks (MSGN) gives DIRECTV NOW subscribers access to Knicks, Rangers, Islanders, Devils, Sabres, Liberty (WNBA) and Red Bulls (MLS) games. The OTT service also carries the YES network, home of the Yankees and Nets. NY sports fans (except for Mets fans) no longer need cable. Of course, once ESPN renegotiates the contracts for the 22 RSNs it acquired from FOXA and adds MLB games to ESPN+; Mets fans can join in on the cord cutting fun.

DIRECTV NOW Just Added MSG & MSG+

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Islanders Win Belmont Park Bid, To Remain in NY

The New York Islanders proposal to construct a new 18,000-seat arena (plus a hotel, retail village and 10,000 ft. “innovation center”) on a site adjacent to the Belmont Park racetrack in Elmont, has been accepted with a formal announcement coming later today. After years of trying to get a new stadium built on Long Island, the team left for Brooklyn following the 2014 season; but fans unhappy with the commute and poor ice quality in a venue designed for basketball had the team looking for another home. County officials are urging the team to play in the renovated Nassau Coliseum until the new arena is ready; but the arena seats just 13,900, lacks public transportation and isn’t viewed by the league “as a suitable option for the Islanders.” The team has stated it will play next season’s games at the Barclays Center as contractually obligated.

Howie Long-Short: Sterling Development Partners (real estate firm, run by the Wilpon family) and Oak View Group (arena development company, recently awarded Key Arena renovation project) are the team’s development partners. You can play the project through Madison Square Garden Company (MSG). Azoff MSG entertainment, a joint venture between Irving Azoff’s management firm and MSGhas invested in the OVG. OVG clients include the Prudential Center (Devils), Madison Square Garden, Quicken Loans Arena (Cavs) and The Wells Fargo Center (Flyers, 76ers).

Fan Marino: Had Empire State Development selected the competing NYC FC bid, the Islanders would have relocated. Co-owner John Ledecky acknowledged there was no “Plan B”. The clarity will also help the team in negotiations with star John Tavares, who is eligible to sign an extension come July 1. This was truly best case scenario for Islanders fans.

Islanders set to move to arena next to Belmont Park

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Seattle City Council Approves Key Arena Renovation, NHL Team Likely For ’20-‘21

The Seattle City Council has approved a $600 million renovation of Key Arena to attract an NHL team (and possibly an NBA team back) to the emerald city. The plan is to have the renovation completed by October 2020, in time for the start of the ‘20-‘21 NHL season. The NHL is expected to decide in July if it will be relocating an existing team to the market or if it will award the city an expansion franchise; the league would like to balance out its conferences (currently 31 teams) and has arena issues in both Calgary and Arizona that need to be addressed.

Howie Long-Short: The approved deal is between the city and Tim Leiweke’s Oak View Group (OVG); an advisory, development and investment company for the sports and live entertainment industries. The Oak View Group is fully financing the $600 million deal (i.e. no public funding) and will contribute an additional $40 million to mitigate traffic and parking problems around the arena; with another $20 million going to local charities. You can’t invest directly in the Oak View Group, but you can play the Key Arena project through them. Azoff MSG entertainment, a joint venture between Irving Azoff’s management firm and the Madison Square Garden Co. (MSG), has invested in the OVG.

Fan Marino: I’m confident that Seattle is going to land an NHL franchise, but if they don’t, it wouldn’t be the first time OVG built an arena without delivering the promised tenant. The group built the Sprint Center in Kansas City, promising to land a winter sports franchise within 2 years. The planned relocation (Pittsburgh Penguins) fell through and no local ownership group (with interest in purchasing an NHL or NBA team) has emerged since. That won’t be an issue in Seattle. A prospective ownership group already exists, including; investment banker David Bonderman and movie producer Jerry Bruckheimer.

NHL? NBA? A look at what could happen now that Seattle approved KeyArena renovation

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MSG CEO Steps Down Without Warning or Explanation, Company To Sell WNBA Franchise

Madison Square Garden Company (MSG) CEO David O’Connor has stepped down without warning or public explanation, effective immediately. The announcement’s timing is surprising, with the stock is up 30% YTD and the company having just announced Q1 ’18 revenue rose 35% YOY. Rumors are circling that that O’Connor was ousted after losing a power struggle to Azoff MSG Entertainment Chairman Irving Azoff. Executive Chairman James Dolan is set to take over as Madison Square Garden CEO. In an unrelated story, MSG has announced that it is selling its WNBA franchise, the New York Liberty. The company is said to be seeking a buyer that will immediately take over control of the team’s operations.

Howie Long-Short: If you value the Knicks at the same 10.8x multiple the Clippers sold for, based on ’16-’17 revenues, the Knicks are worth $4.06 billion. In ’16, Forbes valued the Rangers at $1.25 billion. The total current market cap of the company is $5.28B.  Wall Street isn’t giving MSG any credit for the Arena (tax assessment valued it at $1.25 billion), the Liberty, an AHL team, Counter Logic Gaming or their entertainment portfolio. While it won’t be much, proceeds from the Liberty sale should be all profit for MSG shareholders.

Fan Marino: Dolan’s inability to win isn’t limited to the Knicks and Rangers, as the Liberty failed to win a championship in their 21 years under his watch. This past season, despite finishing with the regular season with the best record in the Eastern Conference, the team lost in the first round of the WNBA playoffs. Of course, you can’t mention the Liberty without mentioning that Dolan hired Isiah Thomas to be the Team President after paying out $11.6 million in a sexual harassment lawsuit, on Thomas’ behalf, during his time in the Knicks front office.

Madison Square Garden CEO Steps Down Abruptly

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Mike Golic Talks About Some Personal Finance Decisions

ESPN’s (DIS) long-running morning drive radio show Mike & Mike, is coming to an end; with the last show scheduled for Friday. Beginning Monday November 27th, Mike Golic will be joined in studio by new co-Host Trey Wingo. Golic & Wingo will air weekdays from 6-10a EST, with simulcast on ESPN2 (moving to ESPNU in January). JohnWallStreet had the opportunity to catch up with the guys to discuss finance, the NFL and their new show. In part 1 of a 3-part series, Mike Golic talks about some of the personal finance decisions he’s made.

JWS: Who handled your finances during your time in the NFL?

Golic: When I got into the league at 21 years old, my brother (Bob) was with IMG out of Cleveland; so, I went with them as well. I made the decision without even thinking about it. I hired them as my agent and they did everything. All my bills went to them. I was a business major, so it wasn’t like I was inept; but I said this is what you guys do, you offer this, I’m going to take it. You guys take care of my money to the point of paying my rent and bills.  

JWS: Did you think that you would make enough money playing football to carry you through the balance of your life?

Golic: No, I was in the league for 3 years before I made $100,000. This was before free agency, so even if I had been an all-pro player, the monster deals weren’t out there. I knew I could make some money.  In my 9 years, my salaries equaled up to a little more than $2 million. Certainly, nice money, but it wasn’t going to take care of me for the rest of my life.

JWS: Did you overspend during your playing career?  

Golic: I got drafted by the Houston Oilers and broke my ankle in training camp, so I was on injured reserve my whole rookie season. I went out a lot and when I went out a lot, I would buy drinks a lot; for a lot of people. 3 months in to the season, my agent and financial advisor called; he said, just because your credit card has a limit every month, does not mean you hit it.  That was my ding-ding moment. I’m not seeing anything because everything was going to them. I was only making $62,000 and I was just kind of spending it. I learned the lesson of man, know what is going on.

JWS: When did you decide to be more pro-active with paying your own bills?

Golic: When I got married and Chris (wife), who has an accounting degree, said we’re not doing this anymore. I’m going take care of the bills. The money is now going to run through us and I’m going to keep an eye on it.

Howie Long-Short: Mike earned $62,000 as an NFL rookie. Today’s NFL rookie minimum is $465,000. Had Mike played in today’s era, simply earning the league minimum in each of his 9 seasons, he would have made over $8.335 million in his playing career; more than 4x his actual on-field career earnings total.

Fan Marino: Fun Fact: One of the first investments made on Mike’s behalf was the purchase of shares in the Boston Celtics. The NBA franchise was traded on the NYSE until its 2002 sale. Currently the Knicks (MSG) and Raptors (RCI) are the only publicly traded NBA franchises. Howie seems to think MSG is undervalued.

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