By Jaboner Jackson 8 a.m. | As the NFL offseason kicks into gear, the NFL in LA situation continues to unfold. Both AEG and Majestic Realty continue to work behind the scenes to secure an NFL team for their planned football stadiums--Farmers Field in downtown Los Angeles for AEG and LA Stadium in City of Industry for Majestic. Footballphds.com has extensively covered the stadium situations and all of the potential relocation candidates for Los Angeles, while also zeroing on the San Diego Chargers as the anchor tenant for Farmers Field and the Oakland Raiders as the anchor tenant for LA Stadium. Today we take a step back update the NFL in LA situation for our newer readers.
San Diego Chargers
Over the past several months, not much has changed for the Chargers in San Diego. Behind the scenes, the Spanos Family and Mark Fabiani continue to push for an East Village stadium in downtown San Diego. Unfortunately, little tangible progress has been made. The City of San Diego and the Chargers lack a shared vision not only for a location for the stadium but also in terms of financing.
Meanwhile, AEG remains singularly focused on the Chargers as the anchor tenant for Farmers Field. Unfortunately for AEG, negotiations between AEG and the Spanos Family have remained in limbo while AEG tries to finalize stadium and Convention Center design plans before pushing out the Environmental Impact Report (EIR) for Farmers Field. Since the EIR will require an analysis based on more established design plans than are currently available, the EIR has been delayed. The last Los Angeles City Council Ad Hoc Committee meeting on Farmers Field was early February 2012, at which time the Bureau of Engineering and Populous Architects presented updated design plans on Pico Hall. (The expansion plans for Pico Hall can be found on footballphds.com's Google Docs page here.
The Spanos family is still looking to take advantage of Bush-era tax cuts relating to capital gains and estate taxes that are set to expire at the end of 2012. In 2010, the Spanos Family hired investment bank Goldman Sachs to orchestrate a 30% equity sale to investors for estate tax planning purposes. But when Congress and President Obama extended these tax cuts until the end of 2012, the Chargers put the transaction on hold. We expect the Chargers to explore this option again this year before favorable tax laws expire.
If Farmers Field comes to fruition, the Chargers will be the anchor tenant for the stadium. Furthermore, AEG's billionaire owner Philip Anschutz will own a portion of the team, although at this point the Spanos Family and Anschutz have not reached an agreement as to what percentage this will be or at what cost. At the city level, Farmers Field has been a done deal for over a year now in that the City Council has shared AEG's vision from the start. But the NFL is waiting on the EIR and AEG's final ownership and financing models before sharing the city's enthusiasm.
The Raiders are a more recent entry into the NFL in LA race. As we reported almost a year ago, AEG did have preliminary discussions with the late Al Davis about relocating to Los Angeles but these talks never reached advanced stages. Accordingly, AEG focused on the Chargers instead. But when Davis died in October 2011, the relocation situation for the Raiders became more complex. De facto new owner, Mark Davis, has exhibited a willingness to discuss relocation with stadium developers because of estate tax planning issues and operational cash flow situations.
The Raiders are the clear frontrunner for relocation to LA Stadium in City of Industry. Mark Davis--and his mother, Carole Davis--currently own 47% of the Raiders. Under NFL bylaws, Davis must maintain at least a 30% ownership stake in the Raiders to maintain operating control. As we demonstrated in December, Davis likely will look to sell between 15-17% of the team to settle estate tax bills that will become due upon the death of his mother. As importantly, a minority ownership group that owns 20% of the Raiders and is led by east coast financiers Dan Goldring, David Abrams, and Paul Leff, is open to the possibility of selling their equity positions.
In order to return an effective return on his investment for both LA Stadium and an ownership stake in the Raiders, Majestic's billionaire owner Ed Roski needs a 30% ownership position in the team. Davis' equity sale for estate tax planning purposes coupled with Goldring et al's equity sale will allow Roski to achieve the required profitability on the transaction.
Nonetheless, we expect the Raiders to sign a contract extension with the Oakland-Alameda Coliseum Commission for O.co Coliseum this year and continue to explore options for remaining in the Bay Area.
St. Louis Rams
Although fans have commonly cited the Rams as a major contender for relocation to Los Angeles, using Stan Kroenke's bidding for the Los Angeles Dodgers and current negotiations with the CVC of Edward Jones Dome as fodder for this speculation, the truth of the matter is that neither AEG nor Majestic Realty has reached advanced discussions with the Rams about relocation. As footballphds.com demonstrated last month, the lease situation for the Rams precludes stadium developers from relying on the Rams as an anchor tenant. Nonetheless, the Rams remain a contender for being the second team relocating to Los Angeles if the lease is not extended.
Despite a muddy stadium situation, the Vikings have never been a contender for relocation to Los Angeles. Neither AEG nor Majestic has ever reached advanced negotiations with the Wilfs. The NFL has always intended to maintain the Vikings in Minnesota. Talk about relocation to Los Angeles has been nothing more than a bargaining ploy by the Vikings and NFL to extract additional financing from county and state agencies in Minnesota for a new Vikings stadium. For this reason, footballphds.com has never focused on the Vikings in our NFL in LA analysis.
The NFL would love to relocate the Jaguars to Los Angeles because the cash flow situation for the Jaguars in Jacksonville has been meager at best. But due to an ironclad stadium lease with EverBank Field, the Jaguars and new owner Shahid Khan remain wedded to Jacksonville. And thankfully for Khan, winning will help place fans in the stands and improve his cash flow. Now, he only needs to field a winning team.