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Forbes: Islanders slight value rise (still below price paid for the team) and operating loss drive new arena bid

Shadowing the uncertain future of the New York Islanders in Brooklyn (see my article in The Bridge) is an uncomfortable fact: the Islanders aren't earning the profits they want, nor is that profit justifying the seemingly large price paid for the team in 2014 by new owners Jon Ledecky and Scott Malkin.

That surely influences the team's effort to build a new hockey-centric arena at Belmont Park, but, as I suggest, it also raises a risk, since the net revenues from operating the arena also have to pay off construction.

Forbes yesterday issued its annual (2017) assessment of National Hockey League team values, with the team (Mike Ozanian, Kurt Badenhausen, Christina Settimi) observing that team values rose "15% over last year to an average of $594 million, the biggest increase in three years," thanks to deals with a streaming service and generally higher revenue and profits, plus a boost in the Canadian dollar.

The New York Rangers are worth $1.5 billion, up 20%, while the New Jersey Devils are 21st in the league, worth $400 million, up 25%. The Islanders? Well, they're 22nd, worth $395 million, up 3%, according to Forbes, which notes the push for Belmont. (The Islanders' chances rose after a third bidder dropped out.)

That $395 million, notes Newsday, "remains far off from the valuation of roughly $485 million used in the 2014 deal that gave the group of Scott Malkin, Jon Ledecky and Dewey Shay a controlling interest from Charles Wang, who retains a 15 percent minority share."

Moreover, the Islanders, as noted by Forbes, lost $8.7 million last year, but earned $2.7 million the previous season, their first at the Barclays Center. The arena, in an unusual arrangement, keeps Islanders revenue up from tickets, advertising, and more in exchange for guaranteeing the team an announced $55 million, but that turned out to be $39.8 million after expenses were deducted.

Last year, the Islanders didn't make the playoffs, which brings revenue to both, and attendance was down. If regular-season revenue exceeds that $55 million guarantee, the Islanders get 70% of the revenues, as well. So if Barclays operator succeed in bringing in more fans (not the trend this season) and the team makes the playoffs (likely), the Islanders might make a profit.

Values 2016

In 2016, Forbes cited increased valuations fueled by a salary cap, a Canadian media deal, and an expansion fee. The Islanders were valued at $385 million, up 18%. Even then, 11/30/16, Forbes was predicting tension with Barclays, suggesting the team would move out or negotiate a better lease deal.

Values 2015

In its 2015 roundup, Forbes cited modest increases in value, in part because of the falling Canadian dollar. Forbes also noted:
Hockey is by far the most tribal of the major North American sports. During the 21014-15 season, over 80% of the NHL's revenue was generated from local (non-shared) sources, like tickets, luxury seating, advertising and television. With a sport where the regular season is often a break-even proposition, team values are driven by the playoffs and cable television deals.
The Islanders were valued at $325 million, a boost from $300 million, on anticipation of their move to Brooklyn, and after losing $14 million at the antiquated Nassau Coliseum.

Values 2014

In 2014, NHL team values, Forbes reported, "fueled by a new Canadian media deal with Rogers Communications that began with the 2014-15 season," though it again noted the "tribal" nature of the NHL, with other leagues having "much bigger equally shared national media and sponsorship deals."

Forbest noted that investors had been willing to pay far more for teams "due to the anticipated increase in revenue from the Rogers media deal, the tremendous amount of wealth created by the stock market boom and rock-bottom interest rates." They cited the deal for the New Jersey Devils and the ability for teams to get cheap financing from a deal negotiated by the league.

"Maybe all these factors will make the Islanders worth $485 million two years from now due to $50 million in guaranteed revenue from the Barclay's Center?" Forbes asked. "On the other hand, maybe there is a bit of a bubble from all of the liquidity sloshing around..." If so, then Forbes's more conservative valuations might be accurate.

Forbes then valued the Islanders at $300 million, which was a significant bump from the previous year, $195 million, but well below the price paid.

On 11/17/14, Forbes reported, Charles Wang Actually Got $485 Million For The New York Islanders, suggesting that "Wang finally struck gold," though noting it was "not yet clear how much of the money the new owners have paid and when payments are due."

Values 2013

In the 2013 roundup, Forbes valued the Islanders at $195 million.