Forbes Values Flames at $245M

Kent Wilson
November 28 2012 03:10PM

 

 

The latest Forbes valuations of the various NHL teams was released today. Coming in at #12 was the Calgary Flames at $245M - a 11% bump over their previous evaluation by Forbes a year ago.

Before we get into the details, it's important to note that all of the Forbes numbers are estimates based on what they can find through publically available means. The Flames are a private company and therefore not compelled to open up their books to external entities. Call the Forbes valuation, at best, "an educated" guess.

That caveat applied, it's interesting to see the club's valuation climb despite a third straight year of no playoffs and one of the most expensive rosters in the league. Calgary nevertheless finished with an operating income of $11M according to Forbes, aided no doubt by one of the highest average ticket prices in the league and consistent sell-outs. the Flames gate receipts for 2011-12 reportedly topped $61M. 

Valuation Sources

The Forbes page on the Flames includes this interesting little infographic -

which shows the various sources of revenue/value for the organization. In the context of the Darryl Katz/Edmonton arena battle up north (and potential pending battle here in Calgary), the "stadium" chunk is noteworthy. It's unclear whether the valuation of $78M is a net present value or other accounting trickery, but the fact it represents nearly 32% of the $245M total shows why sports teams and owners are so keen to pursue public subsidies and/or favorable lease deals with new public arenas: a good facility with limited liabilities and strong revenue potential can goose your franchise's value to a significant degree. 

The "sport" segment is the value attributable to the revenue shared by all the team sin the league while the "market" and "brand" segments are the values of, well...the Calgary market/fanbase and the power of the Flames brand respectively.

Again, it's hard to know just how much faith to put into these numbers since we can't be certain just how accuratly public information reflects the Flames true income and expenses. As Jonathan Willis showed in this investigation, NHL teams can often operate as a smaller business within larger conglomerate where the vagueries of accounting can obscure the reality of an organization's true profits and losses. 

Even if this Forbes valuation is only approximately on target, it shows how strong of a market Calgary is despite its relatively small size. The Flames have made it past the first round once since winning the cup in 1989, have had only a handful of marquee stars since their juggernaut team dissolved in the mid-'90s and have been, uh, curiously managed from an on-ice perspective recently...but still remain a strong draw with consistent corporate and grassroots support.

Of course, Calgary isn't quite the Toronto Maple Leafs, who can apparently print money even if the team is managed by a lobotomized monkey (this is not a comment on Burke in particular, only that Male Leafs demand seems inelastic, rendering success or failure moot), but absent the Canadian dollar bottoming out again or Oil finally being usurped as the world's go-to energy source, the Flames look fairly sturdy and stable business-wise.

Now, imagine what would happen if the club started winning something once in awhile...

The final bit of interesting trivia I found via Forbes was the fact that the Flames donate about $1M per year to charity as a part of their lease agreement with the Saddledome Foundation. Right now, that money goes to the the Calgary Parks Foundation, CODA (Calgary Olympic Development Association) and Hockey Canada.

It will be interesting to see what happens to that agreement when the Saddledome lease expires in 2014. 

Forbes Numbers Around the Nation

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Former Nations Overlord. Current Fn contributor and curmudgeon For questions, complaints, criticisms, etc contact Kent @ kent.wilson@gmail. Follow him on Twitter here.
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#1 Domebeers.com
November 28 2012, 03:32PM
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Like you noted, these need to be taking with pounds of salt, as the books aren't open.

For example, the $78 for the 'Dome is pie in the sky stuff, if you ask me.

If the Flames have the Dome sitting on their balance sheet at $78 million then I need to be put in contact with their FMV appraiser asap, because I have some fraud I'd like to commit as well.

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#3 Domebeers.com
November 28 2012, 05:35PM
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where did you get that little chart from? I'm dumb and only found the slideshow on forbes... I wanna see if the 'brand' value has gone up from last eval.

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#5 Robert Cleave
November 28 2012, 06:07PM
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Kent Wilson wrote:

Yeah Forbes doesn't note how they come up with the $78M number. Is it the annual gross revenue the Flames see from the building (including concerts and such)? I don't know.

Since the club doesn't own the building, I suspect it's what Forbes assesses as the market value of the club's management contract for the Dome that they have with the city.

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#6 SydScout
November 29 2012, 05:54PM
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Not being sure how Forbes value stadia, one would hope they'd do it on a profitability measure and exclude any social benefit or value. Most assets are valued using their location and utility. Basically how well they are utilized depending on what land they occupy. Given the high cost of all tickets to the dome (not just hockey), then adding associated revenue from merchandise, parking etc this valuation doesn't look too bad. The limitation on this comment is 1. I don't currently reside in yyc hence can't fully know pricing and 2. am yet to compare the dome value to what would be similar stadia (by location, city and revenue). Edmonton wouldn't be a bad start, Vancouver terrible due to their utility factor (insane real estate valuation)

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#7 SydScout
November 29 2012, 05:57PM
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Bugger. Forgot to add an important part if any real asset's valuation, particularly in stadiums - naming rights. Obviously more relevant for TO, Chicago and NYC

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