Footballphds.com Real NFL and NCAA Spin from LA

24Aug/119

NFL IN LA: GOING BEHIND THE LEIWEKE-FABIANI RHETORIC

Leiweke and FabianiBy Jaboner Jackson 8 am | Over the weekend, AEG CEO Tim Leiweke responded to public comments that the San Diego Chargers’ Special Counsel, Mark Fabiani, made to ESPN’s Arash Markazi a few days prior.  Fabiani, who has been leading the Chargers’ search for a new stadium in San Diego since 2002, said to Marzaki that the “downtown L.A. project is years away.”  Fabiani had cited five possible impediments to Farmers Field, including: 1). AEG still needed a final agreement with Los Angeles, 2). an Environmental Impact Review (EIR) had not been conducted , 3). AEG needed to deal with litigation regarding the EIR, 4). relocation fees needed to be agreed upon with the NFL, and 5). a team needed to be secured.

To these comments by Fabiani, Leiweke, who has never been one to bite his tongue, said, “I think the problem with the Chargers is, [Fabiani] can sit here and talk about all the things we need to go through, but the last time I checked, they've been doing it for 10 years and they're nowhere.  And the difference between us and them is we've got a guy willing to write a check for a billion.  They've got zero financing, zero entitlements, zero design, zero deal with the city, and zero property that ultimately is not contaminated.  Good luck."

In regard to the five points Fabiani raised, the only true sticking point at this time remains the fifth one.  AEG has still not secured an NFL team.  But the other points are done deals.

Fabiani’s first point was that AEG still needs a final agreement with Los Angeles.  It’s true that AEG still needs a Disposition and Development Agreement (DDA) but it is not the first step in the process of breaking ground on Farmers Field but rather the final step.  It will happen when the other aspects get completed.

Fabiani’s second point was that an EIR needed to be conducted.  The EIR is underway and in typical political fashion, will be rubberstamped through.  It’s worthwhile to note that the City Council unanimously approved last month’s Memorandum of Understanding.  Even the skeptical Bill Rosendahl voted his approval.  As we always say, city politics is the second oldest profession.  AEG and the City of Los Angeles have been bedfellows for over a decade now.

Fabiani’s third point was that AEG needed to deal with litigation regarding the EIR.  This is true only to a degree.  The State Legislature can still grant exemption to Farmers Field, much the same way they did to the Majestic Realty project in the City of Industry.  And in fact, we expect this to happen, especially since AEG has been working on this element in earnest since 2010.  At worst, we expect that litigation will be decided through a special arbitrator rather than through the court system.

Fabiani’s fourth point was that relocation fees needed to be agreed upon.  The MOU signed by the City of Los Angeles and AEG regarding Farmers Field referenced a possible $500 million relocation fee but the reality of the situation is that the relocation fee will be nominal.  The NFL wants to bring a team to Los Angeles in time for its next round of television contract negotiations in 2013.  Having one (or maybe even two) teams in the nation’s second largest media market will help the NFL double the value of its next network contracts.  Even Jerry Jones, owner of the Dallas Cowboys and part of the NFL Stadium Committee, has publically voiced his support for a return of the NFL to Los Angeles.  Jones isn’t thinking about Angelenos but his own pocketbook.  Furthermore, we have reviewed Relocation Fees on this site previously.  It’s worth stating again the relocation fee for the Rams to move to St. Louis was $29 million, the relocation fee for the Oilers to move to Tennessee was $20 million, and the relocation fee for the Raiders to move back to Oakland was $0.  No relocation fee has ever approached $500 million and it will not for Farmers Field either.  More likely, it will be no more than one-tenth of that.

All this brings us to Fabiani’s fifth point, which is that a team needs to be secured for Farmers Field.  We have been told that as of three weeks ago, the Chargers were the favorite to relocate to Farmers Field.  However, discussions between AEG and the Spanos family have broken down over the valuation of the Chargers.  AEG has a valuation of $900 million on the Chargers in San Diego but they have a valuation of $1.2 billion on the Chargers in Los Angeles.  This increased valuation has been one of AEG’s main selling points to the Chargers—with nothing more than a move, the Chargers can increase their value by 33%.  But this valuation in Los Angeles has also been a source of discord in the negotiations.  AEG is seeking a 30% equity stake in the Chargers.  AEG would like to base its equity stake on a valuation of $900 million.  Meanwhile, the Chargers would like to base the valuation on $1.2 billion.  Accordingly, the two sides are currently $90 million apart in their negotiations.  (See table below.)

 

 

TOTAL VALUATION

AEG's 30%

Valuation of Chargers in SD

 $900M

 $270M

Valuation of Chargers in LA

 $1,200M

 $360M

DIFFERENCE

 $ 400M

 $90M

 

Even Leiweke’s comments must be taken with a grain of salt.  When Leiweke said that he “had a guy [Philip Anschutz] willing to write a check for a billion” he was speaking out of braggadocio rather than truth.  AEG is aiming to put in approximately $300 million of its own money into Farmers Field and financing the rest of the cost for tax purposes.  Even though Fabiani is correct in stating that capital markets have been shaky recently, the truth is that the New Meadowlands Stadium (now known as the MetLife Meadowlands Stadium) had over fifty financing sources who were willing to lend the project money.  Financing for municipalities is shaky but not for blue chip deals.  Farmers Field is a blue chip deal.  AEG already has the schematics for financing in place for multiple constructions loans with various financial institutions at rates as low as 6.5%.

Ultimately, the public comments by both Leiweke and Fabiani represent both frustration and negotiation tactics.  Despite their posturing, there remains a good possibility that Leiweke and Fabiani will be shaking hands as partners at a joint press conference at the conclusion of the 2011 NFL season, which is the earliest date AEG will announce a tenant for Farmers Field.

UPDATED AT 5PM.  Thanks to Matthew T. Hall of the San Diego Union Tribune for pointing out my typo in the chart.  It's been corrected now to reflect a $900 million valuation.

References:

Next NFL Television Contracts Expected To Double In Value

Ten Key Points About MOU For Farmers Field

Los Angeles Approves MOU

DDAs and MOUs

Relocation Fees Versus Expansion

 

jaboner@footballphds.com

Comments (9) Trackbacks (0)
  1. Not in 2011 for these reasons.

    The Spanos family owns 100% of the team. 100% of the 900 million value in San Diego is greater than the 70% of 1.2 billion (=840 mil) in Los Angeles. Dean Spanos would be taking a pay cut to move to LA, something he won’t do if he can squeeze a new stadium out of San Diego. The Chargers have been loyal to San Diego in their search for a new stadium for 10 years, they will hold out extra year to get a sweet new stadium in downtown. Now all this is dependent on the city of San Diego making the 2012 ballot. If the city can secure that by early next year, the Chargers will hold out at least one more season to see how the voters vote. Fabiani is right, the city of San Diego has the edge for now, but it better get its act together now or the Spanos and Leiweke will be shaking hands early next year.

  2. Can Al move the team back for $0.00? We need the Nation back in LA

  3. Leiweke also seems to be putting the cart before the horse just like Fabiani seems clueless as to how to get a stadium done. The truth is that there is only ONE shovel ready project, and that is the Grand Stadium at City of Industry. They need a team and they are ready to go. If SD wanted to bolt (pardon the pun), they could’ve done that with the Grand Crossing project.

    Having said that, it is clear that Farmers is much further along than the DT San Diego stadium. By leaps and bounds.

    Relocation fees have to be determined by 24 teams of the 32. Why wouldn’t the teams want a team in L.A. if there is revenue sharing?

  4. This is all very exhausting at times to consider the NFL coming to Los Angeles. With the advent of NFL ticket and of course illegal watching of games over the internet, why is this even needed? AEG should build a football stadium for monster truck racing instead.

  5. Did I miss the Memo today for every one to hold a football in their pictures? Leiweke is holding a football and so is Lane Kiffin in the picture.

  6. Dude stop with the charts and start with the pics of hot chicks.

  7. Chargers to me are first follows by the Rams and Raiders second with the Vikings being a darkhorse. Unless Ralph Wilson bites the dust before the end of the season.

  8. Tim Leiweke does negotiate through the media, so those comments are not surprising-a few years ago, when the Clippers lease at Staples Center was being renewed, Leiweke told the LA Times the arena would be better off financially without the Clippers. Obviously the Clips re-upped their lease.

  9. It appears as if Leiwke is bracing for the November 2012 ballot for the Chargers. If the stadium doesn’t make it San Diego at that point then Chargers to LA. But I think AEG is willing to wait a bit. Leiweke said as much this weekend too. Said he can wait until 2017 instead of 2016 to open.


Leave a comment

Current day month ye@r *

Trackbacks are disabled.