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Jane and Lloyd Pettit, who donated the $53 million, 20,000-seat Bradley Center to the city of Milwaukee, operate a minor league team there. They decided not to pursue an NHL expansion club, based on the advice of Michael Megna of American Appraisal Associates, a Milwaukee consulting firm that valuates sports franchises. "Without a national TV contract, the NHL can't justify a price greater than $32.5 million," says Megna.
Last December five bidders made offers for the two 1992-93 expansion slots. Three of the bidders asked for a restructuring of the harsh terms—the $50 million is payable in three installments, before the team plays its first game—and they were all turned down in favor of the Tampa and Ottawa bidders, who agreed unflinchingly to pay money they apparently didn't have.
Says Peter Karmanos, whose suburban Detroit software firm, Compuware Corp., bid for a team for St. Petersburg, Fla.: "When I asked [NHL president John] Ziegler how he justified a price that was 65 percent more than the NBA charged its last four expansion teams, he shouted that it was none of our business. We should either pay or forget it.
"We offered them $29 million up front and proposed to split the profits with them [other NHL owners] over the next seven years. The other two groups [from Miami and from Hamilton, Ont.] who made offers came up with similar parameters. We were the only three that had the money, too. It was like a comic book.
"The NHL owners are perpetuating a sham. The basketball people have worked hard to build their game and the value of their franchises. Ziegler isn't anywhere near the businessman that the NBA front-office people are."
After hearing presentations from the bidders, the owners took only three hours to make their decision. "I couldn't believe how fast everybody wanted to vote," says one owner. "It was like somebody flashed the green and there was a feeding frenzy. We had all these criteria to avoid the mistakes we made in the past, and then we got impatient."
The installment timetable for the $50 million fee—$5 million down, $22.5 million last June and $22.5 million this December—has caused both successful bidders to scramble to meet the deadlines. Ottawa, which recently won zoning clearance for the construction of a new arena, put its June payment in an escrow account, and the NHL is confident it will make the final payment. But the Tampa deal continues to be shaky, in no small part because of the owners' haste in approving it.
"Esposito showed us [financial] documents that were written in Japanese," says the same owner. "We loved the market and the arena deal, but [the financing] had too many holes."
Esposito secured the franchise on the pledge from four Japanese companies to provide 50% of the entry fee in partnership with him. Shortly before the June installment was due, the Japanese investors withheld payment upon learning that Esposito had reached an agreement to sell a majority share of the team to a group based in Ireland. The deal with the Irish firm fell through, and George Steinbrenner, who has been banned from running the New York Yankees because of associations with a gambler, was recruited to help clean up Esposito's mess. "He has been brought in as a small investor and a Tampa resident to mediate the problem," says Ziegler, who would not comment on the appropriateness of allowing Steinbrenner to become an NHL owner. (Esposito, apparently, will remain as president and general manager).
Ziegler defends his league's procedures, saying that without preliminary approval, a potential franchise could not hope to attract investors, secure commitments for arena financing or collect deposits on season tickets. "These are conditional, not final, franchises," he says. Ziegler insists that if either of the franchises appears to have taken on a dangerous amount of debt, it will not gain admittance to the league. In other words, owners who have shown no restraint to this point would turn down more than $4 million each just before the checks are about to be placed in their hands. Right.