By Jaboner Jackson 8 a.m. | Last week, Yahoo! Sports was late to the NFL in LA party when Jason Cole reported what footballphds.com had already reported two months prior--AEG's attempt to secure the return of professional football to Los Angeles had run into a few road blocks. In January, footballphds.com noted that Mayor Antonio Villaraigosa had met in late 2011 with AEG's owner, Philip Anschutz, to discuss stalled progress on Farmers Field in light of a delayed Environmental Impact Report (EIR) and the NFL's own concerns about the financial model and cost of the stadium. We stated that "although Farmers Field has always been a done deal at the city level, it is the NFL that must finally make Farmers Field a reality." Today, we sift through the smoke surrounding the NFL in LA with the insight and objectivity that only footballphds.com can deliver.
Forget The Past
While Yahoo! Sports and LA Times focus on stories that we have already reported on, we move into the future to address ongoing negotiations between AEG and the San Diego Chargers and Majestic Realty and the Oakland Raiders. Majestic Realty's LA Stadium in City of Industry has been shovel-ready since 2009 while Farmers Field will be shovel-ready early next year. Majestic dealt deftly with Sacramento in 2008 to provide EIR litigation protection for LA Stadium and then this past summer AEG moved mountains in Sacramento to provide their own form of litigation protection for Farmers Field. Accordingly, Los Angeles will have two shovel-ready stadium plans by the end of the 2012-13 NFL season.
The key date for the NFL in LA will be February 15, 2013. This is the date by which an NFL team must notify the league offices of its intent to relocate. Up until this date, both AEG and Majestic will continue to negotiate in earnest with the Chargers and Raiders respectively.
AEG, Farmers Field, and the San Diego Chargers
Contrary to Cole's report, AEG is far from dead in the NFL in LA race. AEG and its lead architect, Gensler, have already modified stadium design plans for Farmers Field to address construction cost concerns raised by the NFL. And this summer, AEG and Anschutz will begin to renegotiate with the Spanos family about relocation.
Specifically, we expect Anschutz to explore in earnest the acquisition of 30% of the Chargers with a Right of First Refusal on additional equity positions. The 30% acquisition by Anschutz will satisfy estate tax planning needs for the Spanos family and provide a minimum rate of return of 15% for Anschutz on his equity position.
Even though Anschutz has tried to negotiate a portion of the Chargers at a discounted valuation, we expect Anschutz to buy into the Chargers at market value, meaning a 30% equity ownership stake would cost approximately $240-270 million. We expect Anschutz to defray the cost of this equity position by selling the Chargers a minority equity position in Farmers Field.
Majestic Realty, LA Stadium, and the Oakland Raiders
While AEG continues to focus on the Chargers as their anchor tenant for Farmers Field, Majestic Realty and owner Ed Roski will continue to negotiate with Mark Davis and the Oakland Raiders about relocation to LA Stadium. Davis and his mother, Carole Davis, currently own 47% of the Raiders. Davis will look to sell approximately 16% of the team to Roski as a limited partner. We also believe that three additional limited partners of the Raiders--Dan Goldring, David Abrams, and Paul Leff--will also explore an equity sale to Roski. In turn, the Raiders will finance the construction of LA Stadium, utilizing the same debt model employed by the San Francisco 49ers for Santa Clara Stadium, a situation that we have explored in full on this site.
AEG Versus Majestic
Contrary to Cole's article, the NFL will not decide whether Los Angeles will once again be home to professional football. Due to federal antitrust provisions, the NFL does not have the right to preclude an NFL team from relocating so long as the NFL team fulfills relocation criteria. Al Davis' successful litigation against the NFL in the 1980's and 1990's established these precedents.
Although the NFL spearheaded the process by which Majestic and then AEG became involved in local stadium development, the Chargers and Raiders will now figure more prominently in the process. The NFL will ultimately determine relocation fees of between 10-20% of the franchise valuation of the relocating team but will let AEG and Majestic battle for the NFL in LA.
Meanwhile, neither the Chargers nor the Raiders will be naïve enough to think that the NFL in LA is a done deal. Both the Chargers and Raiders will continue to explore their own stadium situations in San Diego and Oakland, using Farmers Field and LA Stadium as negotiating platforms for stadium financing in their current cities. But unfortunately for San Diego and Oakland, both municipalities will still be years behind Los Angeles' two shovel-ready stadiums.
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