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17Feb/1219

NFL IN LA: CVC’S PROPOSAL TO ST. LOUIS RAMS FOR EDWARD JONES DOME

Edward Jones Dome NFL in LA Rams CVC ProposalBy Jaboner Jackson 8 a.m. |  On February 1, the St. Louis Convention and Visitors Commission (CVC) issued a stadium renovation plan to the St. Louis Rams for Edward Jones Dome.  These stadium improvements were proposed in accordance with lease terms that mandate that Edward Jones Dome be a "First Tier" stadium by the 2015 NFL season.  In January, footballphds.com explored the timeline for renovating Edward Jones Dome.  Today, we explore CVC's renovation proposal and the reasons why the Rams' lease agreement with EJD continues to make the Rams a secondary player for relocating to Los Angeles rather than a primary one. 

 

"First Tier" Stadium

 

In 1989, the St. Louis Regional Convention Sports Complex Authority was established to finance, construct, and operate Edward Jones Dome.  The stadium project was a joint project between the State of Missouri, City of St. Louis, and County of St. Louis.  In 1991, the Authority entered into an agreement with the CVC to operate Edward Jones Dome.  When the CVC secured the Los Angeles Rams for Edward Jones Dome in the early 1990's, both parties agreed to language in the lease that ensured the Rams perpetually would play in a modern stadium. 

 

The rise of unshared local revenues during this time period made playing in stadiums with greater luxury elements an important part of an NFL franchise's overall financial health.  Unshared local revenues refer to revenues that NFL teams do not split with other franchises.  Stadium luxury box suites, concessions, and parking revenues are mostly unshared revenues, meaning that the corresponding NFL franchise retains these revenues exclusively.  This is in contrast to shared revenues, such as television contracts and merchandising, which are shared equally by all 32 NFL teams.  Unshared local revenues have typically contributed about 33% of a team's total revenue over the past decade, making unshared local revenues an important aspect of a franchise's overall financial health. 

 

Table 1: Shared and Unshared NFL Revenues

Type of Revenue

Definition

Examples

Shared

Revenues are shared equally by all 32 NFL teams.

 

Generally makes up 2/3 of a team's revenues.

Television contracts

 

Media contracts

 

Merchandise sales

 

Licensing and sponsorship agreements

 

Unshared Revenue

The NFL team keeps the bulk of this revenue and does not have to share it with other teams.

 

Generally makes up 1/3 of a team's revenues.

Stadium luxury box suites (most cases)

 

Stadium concessions

 

Stadium parking

 

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Timeline For "First Tier" Status

 

There are four key deadlines in 2012 for determining a plan for "First Tier" status for Edward Jones Dome.  The first deadline of February 1, 2012 involved the CVC making a proposal to the Rams.  The final deadline on an agreement between the CVC and Rams will be June 1, 2012.

 

Table 2: Deadlines for 2015 "First Tier" Review for Edward Jones Dome

ACTION REQUIRED

DEADLINE

The CVC must present its preliminary proposal, including a financing plan for the Edward Jones Dome "Top Tier" improvements

February 1, 2012

The Rams must accept or reject the CVC plan

 

March 1, 2012

The Rams can make a counterproposal

 

May 1, 2012

CVC must either accept or reject the Rams' counterproposal

June 1, 2012

Arbitration if no agreement by CVC and Rams

June 15, 2012

 

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If the CVC and Rams cannot agree on a proposal and financing plan for stadium renovations, the matter goes to binding arbitration on June 15, 2012.  The arbitration panel will then decide what improvements the CVC must make in order for Edward Jones Dome to reach "First Tier" status.  If the CVC cannot afford or chooses to not proceed with these stadium improvements, the Rams would be able to get out of their lease after the 2014-15 NFL season.

 

CVC's Proposal to Rams

 

The CVC has proposed improvements in fifteen different areas at an estimated total cost of $124 million.  The CVC has proposed that the CVC pay for $59.5 million (48%) of the total cost with the Rams paying for the remaining $64.5 million (52%).   The CVC based the 48%/52% split on recent stadium construction and renovation splits between public and private entities. 

 

The CVC hopes to finance its portion of the stadium improvements through ticket surcharges, parking surcharges, refinancing of current bonds, and tax credits.  Meanwhile, the CVC expects the Rams to finance their portion of the stadium improvements through a low interest loan from the NFL, which is referred to as G4 Financing, and which footballphds.com has covered extensively in prior articles. 

 

The entirety of the CVC's proposals and total costs for the improvements are contained in Table 3.

 

Table 3: CVC's "First Tier" Proposal

COMPONENT

DETAILS

COST

Box suites

Renovate current suites in two different styles

$21.5 million

Club suites

Addition of 50,000 square foot Baer Plaza

 

Addition of "Geek Suite" with Wi-Fi

 

Open air rooftop beer garden

$20 million

Regular stadium seating

Type of seat, depth of rows, etc will be standardized

--

Lighting and sound systems

Introduction of outside light

 

Upgrade current sound system and add acoustic materials

 

Upgrade broadcast system to fiber optic cables

 

Upgrade TVs to flat screen HDTVs

$13.2 million

Scoreboards

Addition of center hung display

$13 million

Advertising infrastructure

Digital advertising displays

$900K

Concessions

Upgrade appearance of concessions

 

Remodel and upgrade kitchens

 

Creation of pre-game festivity area

$10.75 million

Common areas

Creation of pedestrian aras outside stadium

 

Cosmetic upgrades

 

Lighting and management system upgrade

$24.5 million

Facilities support equipment

Dedicated VIP entrances for club and suite levels

 

Cosmetic upgrades

$750K

Team football-related facilities

Upgrade cheerleader locker rooms (seriously)

$150K

Playing field

No improvements proposed

--

Ticketing and computer systems

No improvements proposed

--

Physical structure of stadium

Replace roof

 

Exterior improvements

$8.8 million

Other

Press box

$1.3 million

Engineering, architectural, legal work

 

$1.15 million

Contingencies

 

$8 million

TOTAL

 

$124 million

 

Rams As Secondary Player for Relocation to Los Angeles

 

The Rams remain far behind the San Diego Chargers for possible relocation to AEG's Farmers Field and the Oakland Raiders for possible relocation to Majestic Realty's LA Stadium.  Neither AEG nor Majestic Realty has reached advanced discussions with Stan Kroenke and the Rams for relocation because of the Rams' lease situation.  Current NFL relocation guidelines prohibit NFL teams from relocating when a current lease is in effect.  Despite the possibility that the Rams might get out their lease after the 2014-15 NFL season, the reality of the situation is that the Rams have an active and current lease.  Lease termination is conditional rather than absolute.  This is in comparison to the lease situations for the Chargers and Raiders.  In the case of the Chargers, the lease has an unconditional out that can be executed yearly by the Chargers.  Meanwhile, the Raiders' lease unconditionally terminates at the conclusion of the 2013-14 NFL season.  Advanced negotiations between the Rams and AEG or Majestic Realty before the process with the CVC and Rams is complete would open up the Rams to litigation from the CVC on the basis of negotiating in bad faith. 

 

It also worth noting that "First Tier" clauses such as the one between the CVC and Rams are commonplace in the NFL.  The Cincinnati Bengals, Kansas City Chiefs, and Dallas Cowboys are only a few of the NFL teams with similar clauses in their stadium leases.  In fact, the recent renovations at Arrowhead Stadium were trigged by such a clause.  Even the Chargers had such a clause in their lease, although the Chargers and City of San Diego eliminated this clause in 2004 based on the assumption by both parties that they were close to building a new stadium.  In most cases, cities and stadium authorities have been able to reach agreements with their NFL franchises. 

 

Accordingly, Los Angeles stadium developers have been unable to rely on the Rams as an anchor tenant for their respective stadium projects.  The Rams remain a possibility as the second team relocating to Los Angeles, but not currently as an anchor tenant.  At this point, local stadium developers have done nothing more than keep an interested eye on the Rams' stadium situation.  So even though Kroenke is making a bid to buy the Los Angeles Dodgers, he still has stadium issues in St. Louis to resolve before being considered a primary contender for the NFL in LA.

 

***

Footballphds.com will continue to bring our Wonderful Readers the most comprehensive analysis anywhere regarding the NFL in LA.  Meanwhile, catch up on our definitive NFL in LA coverage here and take our NFL in LA Challenge here. 

jaboner@footballphds.com

 

Comments (19) Trackbacks (0)
  1. Where is the CVC going to get the money to fund these improvements if their lease contract with the Rams is so unfavorable?

  2. “Chargers had such a clause in their lease, although the Chargers and City of San Diego eliminated this clause in 2004 based on the assumption by both parties that they were close to building a new stadium”

    That’s the only part of this article that matters. It’s harder to get a stadium than you think. Does Kroekne sabotage his STL stadium for a maybe LA stadium. Then you end up on top of it. Add relocation fees on top of it, it’s expensive.

    Dodgers bid is more important than this article says. Kroenke can sell Rams to AEG and use that money to buy the Dodgers. I wouldn’t be surprised if this wasn’t already in the works.

    • Kroenke doesn’t have $2 billion stuck in his couch cushions?

    • once again LA serves its role as the ultimate bargaining chip for new stadiums and renovations…this is nothing more than posturing to get the best deal possible as the relocation fee makes moving any franchise utterly ridiculous.

      what never ceases to amaze me is how these agencies get bent over the barrel and screwed over and over again with these lopsided deals.

  3. HAHAHA I LIKE IN THE CHART THE PART BOUT RAMS CHEER LEADERS GETTING NEW LOCKERS AND THEN PUTTING SERIOUSLY NO WAY STAN CAN SAY NO TO STAYING IN ST LOUIS NOW WHEN THE CHEER LEADERS GET NEW LOCKERS

  4. The CVC has never stated how the Rams would pay for their share of the renovations.

  5. How does a less than 20 year old stadium just become obsolete? It doesn’t. CVC has been doing upgrades all along. Rams aren’t talking because they don’t have anything to say. My only question is it confirmed that arbitrating is binding?

  6. Until these cities start telling the NFL, we don’t have the money for your godzillion dollar club the same rinse recycle repeat process will continue. Lets see what the Vikings do. they are about to sell out 7000 million of tax dollars if approved by this years ballot.

    I see Rams most likely staying in St Louis Kronke is a Missouri guy. The Raiders can’t do anything unless they spend some money @ the Oakland coliseum site. They don’t have the Money to work a deal at grand crossings and can’t work a deal with AEG unless they sell the team. It would be cheaper for the Raiders to build a 800 million stadium on their current lot.

    The chargers are the only team I see moving to AEG’s site if they sell 30 % of the team and tell San Diego city we have waited long enough, you guy have done nothing for the past 15 years to get us a stadium and we are heading north.

    There are no other options for LA. The Raiders would make a fortune in LA but don’t have any finance partner to date to help them build the at the grand crossings site.

    I don’t think anyone is coming to LA. The Raiders would be the best option for their club but they have no bargaining chips. And by the way their short term lease was a just a short extension and stipulates the team can break it at anytime as long as the pay 5 million dollars to the city of Oakland. They could leave next year if they wanted.

    The biggest problem is this commissioner is the biggest road block and 24 clubs would have to approve it and I think they are happy with their LA bargaining chip to let a team pre maturely relocate to LA until the league is satisfied with all their new shiny stadiums across the board.

    • Bargaining chip. Exactly. It’s ludicrous to thing the Rams would come to LA when there isn’t even a stadium here. When are our politicians going to get smart and stop messing with the boy who cried wolf.

  7. Minneapolis, St Louis, San Diego, Oakland. The first city that doesn’t come through with a subsidized stadium acceptable to the NFL will be made an example of and their team will be fast tracked to LA.
    The NFL will lose no leverage because they can designate LA as a 2 team market.

    • I agree on this issue. 2 California teams now have stadium issues. San Fransisco Got their deal now their are the Raiders, and the Chargers. California is broke and the League knows that.

      Tax payers will not pay for a new chargers stadium and I feel the same way with the city of Oakland.

      If one of those 2 teams don’t get it done where they are Farmers field is it. It is getting close to finishing its EIR and push forward. This stadium will be for the chargers. They have small shares to sell to Phillip Anchutz to make a deal. The Raiders do not. Al Davis sold off shares in 2009 and I believe he owned around 47% of the team. Mark doesn’t have a much wiggle room unless he buys those shares back or sells the team and that could be tricky and could go to litigation if it is not approved by the minority stake partners.

      It will be a while before something happens if it does at all. I am still remembering LA being AWARDED the 32nd expansion franchise hand shake. Paul Taglibue in front of the LA Coliseum with city officials made the deal seem sealed and to this day there isn’t a LA team Because those greedy NFL bastards saw a lot more green in Houston while running LA in circles not able to make up their mind on who they supported. As fast as they approved the New La Coliseum deal it was over. After all that time, money, energy and deadlines La got kicked to the curb.

  8. Pretty good piece. The author didn’t comment though on if the upgrades would make EJD top tier. I don’t think they will. Rams will not accept.

  9. rams staying in st louis, get over it. stan and cvc working on a lease right now. la can keep dreaming.

  10. I agree. St Louis is the type of city dumb enough to pay a billionaire whatever it takes to be “major league”

  11. http://www.forbes.com/profile/stanley-kroenke/

    Shouldn’t he be paying St Louis and not the other way around???


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