SBJ/April 3-9, 2017/Franchises

NASCAR charters sell in low seven-figure area

Furniture Row Racing’s purchase of a charter from Premium Motorsports allowed it to expand to include the No. 77 car driven by Erik Jones.
Photo by: GETTY IMAGES
NASCAR charters that have sold so far have generally fetched an average of $2 million to $3 million each, according to industry sources.

NASCAR introduced the charter system in early 2016 as a way to build enterprise value for teams, reward owners and make teams in the sanctioning body’s top series more stable. This was done by guaranteeing chartered cars more defined revenue streams and entry into races.

The charters that changed hands during this offseason — the first full offseason under the new system — largely came from smaller and lower-performing teams in the Monster Energy NASCAR Cup Series, meaning the charters are worth less than those of the top teams. That’s because the system rewards teams monetarily for better historical performance, meaning better finishes on track earn teams more league funds from sources such as media rights.

The charters are tied to individual cars versus a team itself. Eight transactions came during the offseason, with four being outright sales and four being leases. Of the four sales, the average cash sale price generally came in around $2 million to $3 million, according to industry sources. That includes Tommy Baldwin Racing selling its charter to Leavine Family Racing for $3.5 million, and BK Racing selling one of its charters to Front Row Motorsports for around $2 million, according to several sources.

The prices of the other two sales — one from Premium Motorsports to Furniture Row Racing and the other from the now-defunct HScott Motorsports to Premium Motorsports — remained unclear as of last week but also were believed to be in the low seven figures. NASCAR officials have declined to publicly discuss charter values.

In addition to on-track performance of the cars involved, the average selling prices of charters this past offseason were affected by some of the sales being packaged with wider deals between the parties involved, including equipment or debt assumption, according to sources familiar with the matter. The charters themselves don’t involve hard assets such as a team’s real estate, intellectual property, technology and equipment.

“The primary value for us has been in the infrastructure – how the charter system has provided stability and real value in the conduct of the sport.”

MARSHALL CARLSON
PRESIDENT, HENDRICK MOTORSPORTS
Because the charter system is set up to give greater financial disbursement to cars that perform better, a team with the most valuable charter could earn up to around $8 million more per charter than the lowest-rung charter, according to one NASCAR official who spoke on background. Therefore, while charters from NASCAR’s top teams have yet to be traded on the market, the sanctioning body believes top charters would trade for high seven figures into the low to mid-teens, the NASCAR official said.

“The whole point of charters was to help facilitate the best racing possible; to do that we needed a framework that could provide more stability to our race teams,” according to the NASCAR official. “We absolutely believe the charter system has done it, and as proof of it for us, I think you’re seeing deeper strength of competition throughout the field.”

Many industry executives remain reticent to discuss charter prices, given the sensitive nature of the matter. But Ron Devine, owner of BK Racing, said he’s been pleased with the results of the system so far.

“It gets back to enterprise and you have something you never had in the past, so that’s a positive thing” Devine said. “I think you’ll see them continue to trade, and eventually they’ll trade outside the garage.”

Rob Kauffman, co-owner of Chip Ganassi Racing, also thinks the system is going well.

“Now there’s value that didn’t otherwise exist, and the contractual economics have been an improvement in the system,” Kauffman said. “There’s still other things to do so for sure, but it was a great step forward and now we’re trying to make other steps forward.”

Kauffman formerly owned Michael Waltrip Racing. In February 2016, just after the charter system was implemented, Kauffman took the two charters he received from closing MWR and sold one to Stewart-Haas Racing and one to Joe Gibbs Racing. Kauffman only said publicly that the charters sold for seven figures.

Marshall Carlson, president of Hendrick Motorsports, also gave his support to the charter system.

“We’re not in the market to buy or sell right now, so the primary value for us has been in the infrastructure — how the charter system has provided stability and real value in the conduct of the sport and improving the collaboration across the industry so that ultimately we’re going to be able to produce a better product and do that more efficiently and improve the sport in that manner,” Carlson said.

Executives throughout the sport acknowledge that the system is not a silver bullet to all of the sport’s ails, in large part because it does not address the high costs of running a race team or teams’ heavy reliance on sponsorship revenue. And those executives said that so far the charters have generated little outside interest from potential suitors and investors. But Steve Newmark, president of Roush Fenway Racing, said from his view, the system “has fulfilled expectations.”

“It was never intended to solve sponsorship issues; it was designed to address stability and create residual value,” Newmark said. “Although it is early, it seems that the system is working as intended.”

Andrew Murstein, majority owner of Richard Petty Motorsports, said he is looking at bringing in a minority partner at a rate that would value his team’s sole charter at more than $2 million to $3 million.

“I am not sure what the standalone value of a charter should be or has been,” Murstein wrote an email. “(But) there is clearly a high value for the goodwill, name and history of RPM that goes well beyond the value of the charter.”


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