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17Nov/1114

FINANCING A NEW SAN DIEGO CHARGERS STADIUM IN EAST VILLAGE, PART 3

New Chargers Stadium downtown East Village Part 3By Jaboner Jackson 8 a.m. | Part 3 of 3 | Last week, footballphds.com began our three-part series investigating the financial issues surrounding the construction of a new East Village stadium for the San Diego Chargers.  In Part 1, we examined the Chargers' push for shared stadium and convention center space in East Village and the City of San Diego's lackluster response.  In Part 2, we looked at the cold, hard numbers of financing a public-private stadium.  And today, we conduct our feasibility analysis and detail why a shared stadium and convention center space is the best financial option for both the City of San Diego and San Diego Chargers.

Stadium Revenues For Combination Facility

 

In order to effectively determine the feasibility of a new combination facility, we must examine profitability.  Accordingly, we forecast revenues for a new stadium as follows:

 

Table 1: Annual Stadium Revenues for Combination Facility

Rent from Chargers

$4 million

Rent from New Convention Center Business

$7 million

Shared Stadium Revenues

$46 million

Other Convention Center Revenues (concessions, parking, ancillary services)

$18 million

Stadium Admission Surcharges

$4 million

TOTAL

$79 million

 

Revenue Assumptions

 

We have averaged our projections for the first five years to reach the abovementioned numbers.


Rent from the Chargers would have to be negotiated but we base the $4 million annual figure on similar situations with other NFL stadiums and teams.  We do not believe the Chargers will receive a lease with only a nominal rent.

 

We anticipate a standard tenant-landlord relationship between the City of San Diego and the Chargers mirroring the arrangements of most stadiums and teams.  Accordingly, revenues from ticket sales, luxury suites, and team related advertising and sponsorships would go exclusively to the Chargers.  For this reason, these revenues have not been included in the stadium revenue.

 

Shared stadium revenues from naming rights, stadium-related advertising and sponsorships, concessions, and parking would be split between the stadium (City of San Diego) and the Chargers.  The actual split would have to be negotiated between the City and Chargers but we estimated this split to be 60% stadium and 40% Chargers.  For concerts and non-Chargers related events, the stadium would capture the revenue and the Chargers would not.

 

Other convention center revenues from convention center business, such as concessions and parking, would be exclusive to the stadium.  The Chargers would not share in this revenue. 

 

We have estimated stadium admission surcharges at 3% of total ticket fees.  These revenues would be exclusive to the stadium.  The Chargers would not share in this revenue.

 

We have excluded revenues that would come from the City of San Diego since these revenues are fungible. 

 

Stadium Expenses For Combination Facility


We have forecast expenses for the combination facility as follows:

 

Table 2: Annual Stadium Expenses for Combination Facility

Stadium Operations (Chargers games, concerts, non-convention center events, event-day expenses)

$30 million

Convention Operations (salaries, general expenses, utilities, repairs and maintenance, insurance, marketing, miscellaneous)

$12 million

Property Taxes

$8 million

TOTAL

$50 million

 

Expense Assumptions


Since we anticipate a landlord-tenant relationship between the City of San Diego and Chargers, stadium operations expenses related to Chargers games will largely be the responsibility of the stadium (City of San Diego).  These expenses include salary, utilities, and repairs and maintenance. 

 

Convention operations expenses include salary, general expenses, utilities, repairs and maintenance, insurance, marketing, and miscellaneous.  Convention operations expenses will be significantly defrayed by stadium operations.

Debt Servicing

 

In order to construct a new stadium, we projected in Part 2 of Financing a New San Diego Chargers Stadium that the City of San Diego would have to finance $480 million of a planned $800 million stadium.  Debt payment on this amount would be $25 million annually.

 

Pro Forma Cash Flow For Combination Facility

 

Based on our projected Stadium Revenues, Stadium Expenses, and Debt Servicing, the combination facility would have a positive cash flow on average of $4 million annually for the first five years of operation. 

 

Table 3: Pro Forma Cash Flow for Combination Facility

Stadium Revenues

$79 million

(MINUS) Stadium Expenses

($50 million)

(MINUS) Debt Service

($25 million)

Annual Cash Flow

$4 million

 

This positive cash flow stems only from the combination facility and does not include any additional cash flow that could be realized from not having to perform deferred maintenance on Qualcomm Stadium or from a possible redevelopment of the Qualcomm site, both issues of which we covered in Part 2 of this series. 

 

Concerns

 

Our primary concern regarding a combination stadium and convention center facility would be the need for a retractable roof, which we believe is not possible in an $800 million stadium.  A retractable roof would likely add at least $400 million to the construction cost.  Architecture firm Populous, whom the Chargers have retained for the initial designs on the combination facility, has not yet publically released their solution for this situation.

 

Conclusion

 

Our analysis demonstrates that so long as Populous can design a cost-effective way to have covered space within the stadium for convention center purposes, a shared facility is the most feasible financial solution to building a new home for the San Diego Chargers.

References:

Financing A New Chargers Stadium, Part 1 (11/2011)

Financing a New Chargers Stadium, Part 2 (11/2011)

FOOTBALLPHDS’ Definitive NFL Stadium Guide, Version 1.5 (08/2011)

San Diego Chargers Stadium Update (07/2011)

Qualcomm Stadium and Public Ownership (05/2011)

Financing a Stadium in LA, Odds and Ends (10/2011)

Financing a Football Stadium in Los Angeles, Part 1 (10/2011)

Financing a Football Stadium in Los Angeles, Part 2 (10/2011)

Financing a Football Stadium in Los Angeles, Part 3 (10/2011)

Populous and Gensler (08/2011)

 

jaboner@footballphds.com

twitter.com/footballphds

 

Comments (14) Trackbacks (0)
  1. The mayor already said that they aren’t thinking about a shared stadium. He said they are two separate projects, a stadium and an expansion to the convention center. So you have to look at both things separately like the mayor is doing. Our real question here in San Diego is how bad and how much money do we want to spend to keep NFL here? My answer is that we the taxpayers should spend NOTHING.

  2. True incentive for the convention center will be much more than just $4 million. You have to look at other benefits. These would be taxes, hotels, surrounding business etc. Real impact could be 100s of millions a year.

    • you are pulling numbers out of your ass…the city already has an existing convention center with a steady flow of business…please explain what incremental convention business would be gained by building a stadium as a non contiguous facility expansion.

  3. Non-adjacent spaces haven’t worked anywhere. If the city pushes this down our throats they’re cutting off an important thing for this city…the convention biz. Why would Comic Con want to have their convention in a football stadium? You have to look at money lost by not doing the expansion. This would be a disaster no matter what numbers you spew.

  4. If I were a Chargers fan I could care less about all this and I’d do whatever kept my team around.

    • Sadly, NFL owners exploit those sentiments to scam a new stadium from taxpayers.
      Those cheesy, phony NFL commercials showing a bunch of happy fans driving to the stadium, tailgating, hanging out with kids, make me sick.

      • It would be funny if no new stadiums in Minnesota, San Diego , Santa Clara, LA get built. If no new ones anywhere, the NFL can’t keep using relocation as a threat. Then NFL would have to build them on its own!

        • Santa Clara is already happening. Minnesota has the citizens that actually support it’s city and LA (of course) has people that want to do things with their city. Unlike San Diego, who’s citizens just whine and bitch.

      • NFL is a made for TV sport. Games are getting too expensive for the average blue collar fan to attend especially when tickets are $100 each, parking is $50 and food is another $75. I can watch it all in HD on NFL Season Pass with my beautiful wife for $250/year.

      • You obviously hate sports, teams and any sort of comraderrie. I ALWAYS have a great time at all the Charger games I go to. And Us San Diegans who love to represent our city in front of our nationwide viewers for a billion dollar industry rep it hard. You wouldn’t know anything about it tho. NAYSAYER. KEEP THE CHARGERS IN SAN DIEGO.

        • For once, I gotta agree with a Chargers fan. Keep the Chargers in SD. That’s where they belong, that’s where they have history. Bring the Raiders back to LA. That’s where the Raiders belong.

  5. Never gonna fly. City doesn’t want it.


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