N/S Most Valuable NFL Franchises (Saints Now At $4.1 Billion) (1 Viewer)

3rd lowest Operating Income. 9th lowest Revenue. Higher Salaries I guess or Mrs Benson is not afraid to spend money. Interesting 🤔
 
3rd lowest Operating Income. 9th lowest Revenue. Higher Salaries I guess or Mrs Benson is not afraid to spend money. Interesting 🤔
Operating Margin is also a telling measure. The Saints keep 12 cents out of every dollar of revenue. Only two teams make less. Not much cushion.
 
I don’t see a hill of beans difference between the bottom 20. I’m sure there a minor fluctuations year to year in the rankings. Between the TV revenue share and the salary cap, there’s only so much to manage.
 
I don’t see a hill of beans difference between the bottom 20. I’m sure there a minor fluctuations year to year in the rankings. Between the TV revenue share and the salary cap, there’s only so much to manage.
I really do find it super that the Saints are within 500 million of the Steelers valuation.
 
Operating Margin is also a telling measure. The Saints keep 12 cents out of every dollar of revenue. Only two teams make less. Not much cushion.
which is an excellent demonstration of the old cliche that owning an NFL team is just a rich man's tax write-off. We don't know what the underlying metrics represent, but based on the way the table is presented, the metrics appear to represent actual cash transactions (unaffected by tax considerations)...."above the line" figures.

The figures represented look a lot like real estate metrics such as GIM (gross income multiplier), NIM (net income multiplier), cap rate (1/x NIM), operating expense ratio, etc... When viewed from that perspective, the sweet spot is a "positive cash flow" situation which becomes a HUGE negative when accounting considerations factor in amortization, depreciation, and mortgage interest deductions (debt appears minimal except for the Giants, Jets, & Falcons franchises). No doubt the amortization and depreciation deductions (paper deductions) are HUGE for billion dollar assets. It probably doesn't matter if your franchise is considered an "active" or "passive" investment (based on level of owner participation in management).....it's pretty obvious an NFL franchise generates SIGNIFICANT "after tax loss", which can be offset against similar income generators (active vs passive). They are HUGE tax shelters, and are no doubt more valuable to the owners as a tax shelter than as an ongoing viable turnkey business that generates revenue. Folks aren't buying these franchises for their revenue generating capability; they're buying them for their passive/active loss generating capability.

Purchasing an "average value" $4B franchise will involve significant commercial real estate, FF&E, and other intangibles. All are depreciable to the IRS. Last I checked, commercial real estate was depreciable over a 39-year term (not including land, which can't be depreciated); however, "site improvements" (thinking of water/sewer/utility infrastructure, blacktop, parking structures, etc...) depreciate over 15-year terms. FF&E depr depends on the FF&E, but 5-years is a good rule of thumb. That $4B acquisition will be "allocated" to underlying components according to "contributory value", and every franchise will vary depending on asset(s) acquired. But for the sake of illustration, let's say the overwhelming majority of allocated value is the commercial real estate and that the AVERAGE depreciable life span is 30 years (based on prorata value contributions of each contribution). The AVERAGE depreciation resultant from a $4B purchase of an NFL franchise will approximate $129M per year!!! This depreciation "loss" comes off the bottom of the net operating revenue. Again, rough & dirty SWAG....I'm projecting an approximately $100M "loss" ATCF (after tax cash flow). This "loss" can be used to offset active/passive income earned by other businesses/investments of the franchise owner. In other words, using the rough & dirty scenario I just outlined, the $100M "loss" generated by the NFL franchise is used to offset $100M in earnings of some other business/investment. That's $100M in income earned somewhere else that is subject to ZERO tax consequence.

And that, my fellow Whodats, is why it's good to own an NFL franchise. It isn't because you LOVE football, or because you want your team to hoist a Lombardi....it's because you like/want/need to save an additional +/- $40M/year in tax consequences. To steal a line from Mel Brooks and modify to our discussion here..."It's good to be the owner!"
 
which is an excellent demonstration of the old cliche that owning an NFL team is just a rich man's tax write-off. We don't know what the underlying metrics represent, but based on the way the table is presented, the metrics appear to represent actual cash transactions (unaffected by tax considerations)...."above the line" figures.

The figures represented look a lot like real estate metrics such as GIM (gross income multiplier), NIM (net income multiplier), cap rate (1/x NIM), operating expense ratio, etc... When viewed from that perspective, the sweet spot is a "positive cash flow" situation which becomes a HUGE negative when accounting considerations factor in amortization, depreciation, and mortgage interest deductions (debt appears minimal except for the Giants, Jets, & Falcons franchises). No doubt the amortization and depreciation deductions (paper deductions) are HUGE for billion dollar assets. It probably doesn't matter if your franchise is considered an "active" or "passive" investment (based on level of owner participation in management).....it's pretty obvious an NFL franchise generates SIGNIFICANT "after tax loss", which can be offset against similar income generators (active vs passive). They are HUGE tax shelters, and are no doubt more valuable to the owners as a tax shelter than as an ongoing viable turnkey business that generates revenue. Folks aren't buying these franchises for their revenue generating capability; they're buying them for their passive/active loss generating capability.

Purchasing an "average value" $4B franchise will involve significant commercial real estate, FF&E, and other intangibles. All are depreciable to the IRS. Last I checked, commercial real estate was depreciable over a 39-year term (not including land, which can't be depreciated); however, "site improvements" (thinking of water/sewer/utility infrastructure, blacktop, parking structures, etc...) depreciate over 15-year terms. FF&E depr depends on the FF&E, but 5-years is a good rule of thumb. That $4B acquisition will be "allocated" to underlying components according to "contributory value", and every franchise will vary depending on asset(s) acquired. But for the sake of illustration, let's say the overwhelming majority of allocated value is the commercial real estate and that the AVERAGE depreciable life span is 30 years (based on prorata value contributions of each contribution). The AVERAGE depreciation resultant from a $4B purchase of an NFL franchise will approximate $129M per year!!! This depreciation "loss" comes off the bottom of the net operating revenue. Again, rough & dirty SWAG....I'm projecting an approximately $100M "loss" ATCF (after tax cash flow). This "loss" can be used to offset active/passive income earned by other businesses/investments of the franchise owner. In other words, using the rough & dirty scenario I just outlined, the $100M "loss" generated by the NFL franchise is used to offset $100M in earnings of some other business/investment. That's $100M in income earned somewhere else that is subject to ZERO tax consequence.

And that, my fellow Whodats, is why it's good to own an NFL franchise. It isn't because you LOVE football, or because you want your team to hoist a Lombardi....it's because you like/want/need to save an additional +/- $40M/year in tax consequences. To steal a line from Mel Brooks and modify to our discussion here..."It's good to be the owner!"
You are assuming a lot of real estate in that $4 billion valuation though. The valuation appears to be based on a multiple of revenue. Valuation is not the equivalent to asset value (and it not what most of these franchises were purchased for). The tweet does not disclose the actual asset value. You are assuming that the overwhelming majority is commercial real estate, but for most franchises, I would not think that is the case. Most franchises do not own the stadiums and some do not own the training facilities (as they may be state or county owned). There are likely pretty significant leasehold improvements. I think some of the write offs you are calculating may be over estimated. Remember, the Saints were purchased for $75 million (nice return, huh?), so the difference between the basis and sales value will be recognized as taxable whenever ownership is transferred.
 
You are assuming a lot of real estate in that $4 billion valuation though. The valuation appears to be based on a multiple of revenue. Valuation is not the equivalent to asset value (and it not what most of these franchises were purchased for). The tweet does not disclose the actual asset value. You are assuming that the overwhelming majority is commercial real estate, but for most franchises, I would not think that is the case. Most franchises do not own the stadiums and some do not own the training facilities (as they may be state or county owned). There are likely pretty significant leasehold improvements. I think some of the write offs you are calculating may be over estimated. Remember, the Saints were purchased for $75 million (nice return, huh?), so the difference between the basis and sales value will be recognized as taxable whenever ownership is transferred.
All true statements. But I used the commercial real estate depreciation as the SLOWEST depreciation rate. If the majority is FF&E and/or intangibles, the depreciation actually INCREASES beyond what I illustrated, making it an even better tax shelter.

And you can depreciate capital investments any time they're incurred, not just at the time of initial acquisition. Your comments about the Saints being purchased for $75M back in the 80s are fair, but it's all relative. I'm simply illustrating the concept in TODAY dollars. $75M was a LOT back in the early 80s....probably equivalent to $4B today (not in terms of inflation, but in terms of relative value against other franchises). The Broncos and the Commanders have both recently transferred. Both in excess of the "typical" $4B valuation. I stand by my analysis as a point of illustration. They are HUGE tax shelters.
 
I remember when Benson bought the team for 70 million. I guess that is a good ROI....
 
Those would be floor prices I bet….what ever team is for sale will skyrocket up that chart.
 
All true statements. But I used the commercial real estate depreciation as the SLOWEST depreciation rate. If the majority is FF&E and/or intangibles, the depreciation actually INCREASES beyond what I illustrated, making it an even better tax shelter.

And you can depreciate capital investments any time they're incurred, not just at the time of initial acquisition. Your comments about the Saints being purchased for $75M back in the 80s are fair, but it's all relative. I'm simply illustrating the concept in TODAY dollars. $75M was a LOT back in the early 80s....probably equivalent to $4B today (not in terms of inflation, but in terms of relative value against other franchises). The Broncos and the Commanders have both recently transferred. Both in excess of the "typical" $4B valuation. I stand by my analysis as a point of illustration. They are HUGE tax shelters.
Maybe/maybe not. You seem to be assuming the entire $4 billion is deductible when that just is not the case. Most teams do not own the real estate assets you are referring to. A valuation of the team is not a deductible asset or expense. It is just a bit simplistic to make that assumption.
 
I remember when Benson bought the team for 70 million. I guess that is a good ROI....
$70 million in 1985 going to $3 billion today, if you don't count the cash flows in and out during that period, equates to an 11% annual return. Very good for sure. But this also shows the power of compounding over long periods of time.
 
Maybe/maybe not. You seem to be assuming the entire $4 billion is deductible when that just is not the case. Most teams do not own the real estate assets you are referring to. A valuation of the team is not a deductible asset or expense. It is just a bit simplistic to make that assumption.
I don't know where we're mis-communicating here, but of course the VALUATION isn't deductible, anymore than an updated appraisal of your home changes your acquired "basis". But I was very clear that the Broncos and Commanders recently transferred for in excess of $4B. Panthers were pretty recent too, but can't remember the price. Those were $4B+ acquisitions and they absolutely included depreciable assets, according to IRS guidelines. And non-realty assets are depreciable over a shorter time frame, resulting in LARGER depreciation deductions than I illustrated. Since we don't KNOW the allocations of those acquisitions, it's entirely possible you are correct, and there are less 39-year assets (real estate) and more 5-year and 15-year assets. But like I illustrated, that would result in HIGHER depreciation deductions, not lower.

I'm not sure what you're disagreeing with? Is your point that actual allocations and actual depreciation would be different? I've already conceded that you are right....i just presented a rough & dirty mathematical exercise to demonstrate that NFL owners don't purchase franchises based on their cash flow; they purchase the tax shelter. NOTHING MORE!

If you look at those valuations and the "valuation to revenue" column, that is an "income multiplier" similar to real estate valuations; and that income multiplier can be inverted (1/x) for a capitalization rate; which is a cash-on-cash rate of return for a cash purchase, with NO DISTORTION for effects of leverage. The indicated capitalization rates around 7.x equate to approximate returns of 5%, cash on cash. I am POSITIVE that billionaires could park their $4B somewhere else, in a different asset, and earn better than +/- 5% rates of return. So why do these financially savvy billionaires do it? It's the TAX BENEFITS. You wanna argue what the tax benefit is or isn't? How about this....you are correct....but I will stand by my statement that these billionaire acquisitions of NFL franchises are not "investment-driven" purchases, they are "tax driven" purchases. If you read anything else OTHER than that into my statement(s), then you're missing the point. I don't know how to be any more clear than that. My bad...
 
I don't know where we're mis-communicating here, but of course the VALUATION isn't deductible, anymore than an updated appraisal of your home changes your acquired "basis". But I was very clear that the Broncos and Commanders recently transferred for in excess of $4B. Panthers were pretty recent too, but can't remember the price. Those were $4B+ acquisitions and they absolutely included depreciable assets, according to IRS guidelines. And non-realty assets are depreciable over a shorter time frame, resulting in LARGER depreciation deductions than I illustrated. Since we don't KNOW the allocations of those acquisitions, it's entirely possible you are correct, and there are less 39-year assets (real estate) and more 5-year and 15-year assets. But like I illustrated, that would result in HIGHER depreciation deductions, not lower.

I'm not sure what you're disagreeing with? Is your point that actual allocations and actual depreciation would be different? I've already conceded that you are right....i just presented a rough & dirty mathematical exercise to demonstrate that NFL owners don't purchase franchises based on their cash flow; they purchase the tax shelter. NOTHING MORE!

If you look at those valuations and the "valuation to revenue" column, that is an "income multiplier" similar to real estate valuations; and that income multiplier can be inverted (1/x) for a capitalization rate; which is a cash-on-cash rate of return for a cash purchase, with NO DISTORTION for effects of leverage. The indicated capitalization rates around 7.x equate to approximate returns of 5%, cash on cash. I am POSITIVE that billionaires could park their $4B somewhere else, in a different asset, and earn better than +/- 5% rates of return. So why do these financially savvy billionaires do it? It's the TAX BENEFITS. You wanna argue what the tax benefit is or isn't? How about this....you are correct....but I will stand by my statement that these billionaire acquisitions of NFL franchises are not "investment-driven" purchases, they are "tax driven" purchases. If you read anything else OTHER than that into my statement(s), then you're missing the point. I don't know how to be any more clear than that. My bad...
I think they are both investment and tax driven (as well as luxury items/notoriety that the extremely wealthy can afford). Many have enough wealth that the franchise are their "toy" and the investment is more than +/- 5%. I think someone above calculated the Saints annual return at double digits on valuation alone.
 

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