By Jaboner Jackson 8 a.m. | Yesterday, the NFL announced two crucial aspects for constructing Brand Spanking New Stadiums. The first aspect was the NFL's signing of new long-term television contracts with its current broadcast partners of CBS, FOX, and NBC. The second element was the NFL's approval of stadium loan financing, which we have discussed extensively on this site and have referred to as "son of G3 financing." Under today's NFL resolution, this stadium financing will now be known as G4 financing.
In May, we reviewed current NFL television contracts, which were worth $3.1 billion a year from CBS, FOX, ESPN, and NFL Network, with an additional $700 million a year brought in by DirecTV for NFL Sunday Ticket. ESPN re-upped their contract this fall, leaving CBS, FOX, and NBC as the next group of networks to renew. These new contracts will go into effect after the 2013 NFL season and will run until the 2022 season. In total, new contracts are estimated to bring in $7 billion annually, which will be in excess of a 60% increase from current figures.
"Son of G3 Financing" Becomes G4 Financing
G3 financing was the NFL's old stadium financing program. It had been established in 1999 under NFL Resolution G-3 to help teams finance the construction of new stadiums and was subsequently extended in 2003. But monies under the G3 program had become depleted with the last wave of new stadium construction that included MetLife (New Meadowlands) Stadium and Cowboys Stadium. Previously, G3 funds had been capped at $150 million per team.
Under the newest Collective Bargaining Agreement (CBA) signed this year between the NFL Owners and NFL Players Association, a provision for revenue credits was included in the CBA that amounted to stadium credits of 1.5% of total league revenue. Yesterday, the NFL owners approved more specific language in NFL Resolution G-4 that could bring the total amount available per team for new stadium construction to $200 million. Specifics of G4 financing from the NFL include:
1. Up to $200 million for new stadium construction;
2. Up to $250 million for stadium renovation;
3. Repayment of G4 financing by the team over 15 years through revenues related to premium seating;
4. G4 loans to teams will be determined on a case-by-case basis by the NFL;
5. G4 loans are available to only public-private stadium projects.
Effects of G4 Financing
The first stadium that will likely draw upon G4 financing will be Santa Clara Stadium, which will be the future home of the San Francisco 49ers. Although we do not believe that G4 financing will curb the City of Santa Clara's debt burden, G4 financing will help cover cost overruns, particularly since cost overruns will be the responsibility of the San Francisco 49ers.
The Minnesota Vikings will likely be the second team to tap G4 financing for either a planned stadium in Ramsey County or Minneapolis, once the legislature and Vikings reach an agreement on site location and financing details.
Meanwhile, neither Farmers Field nor Los Angeles Stadium is immediately affected by G4 financing, since neither stadium has significant financing issues. Rather, Farmers Field and Los Angeles Stadium are focused on obtaining anchor tenants for their competing projects. Both stadium projects will have sufficient financial backing even without a full $200 million G4 commitment.
And applicable to all new stadiums, G4 financing cements premium seating and Personal Seat Licenses (PSLs) as the preferred way to effectively finance new stadiums, since both elements are used to repay stadium loans. Stadiums that are not planning on utilizing PSLs, such as the planned East Village Stadium for the San Diego Chargers, will have a much harder time coming to fruition.
Over the next week, I will update both Farmers Field and Los Angeles Stadium, particularly as it relates to AEG's recent missteps with Farmers Field and Majestic Realty's opportunity to seize NFL in LA momentum. I will also update the Santa Clara and San Diego stadium situations like only the FOOTBALLPHDS can. It aims to be a busy week before Christmas, Wonderful Readers.
G3 Financing (07/2011)
PSLs and Luxury Box Suites (07/2011)
Financing Santa Clara Stadium, Part 1 (12/2011)
Financing Santa Clara Stadium, Part 2 (12/2011)
Forbes: New TV Contracts (12/2011)
Matt T. Hall Tumblr: Resolution G-4 (12/2011)
Photo: New Meadowlands under construction in 2008 from NY Times, Joe Lapointe