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3Apr/1248

NFL IN LA: SIFTING THROUGH THE SECONDHAND SMOKE

133693561JH020_LA_Mayor_wilBy 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.

***

Forgot what an EIR is? Check out our NFL in LA Glossary here. And as always, take our NFL in LA Challenge here.

 

Photo: Getty Images

jaboner@footballphds.com

Comments (48) Trackbacks (0)
  1. When the EIR gets released, let the blood bath between Roski and AEG begin. All their lawyers will get richer.

  2. Is anyone else now utterly confused? It seems like there might be something behind the scenes between the NFL, AEG and Roski for power. All sides are letting this play out through the media. But no one is giving us anything concrete beyond generalities. AEG has a team, I have to believe, otherwise why go through the expense of getting Farmers off the ground? I believe that the Chargers are probably that team. What I don’t believe is that AEG just wants a small part of them. I don’t believe the Raiders are coming back to LA. It’s way too poliitically charged. No one even knows what Mark Davis wants to do. Maybe AEG will buy the entire Raiders if they get a chance though.

    • Raiders will be for sale. AEG will buy the Raiders. LA Raiders will be back, just in time for a winning run to the Super Bowl. Raiders will own LA.

  3. My question is this? Will Mark Davis sell the ENTIRE team? Or only 16%?

  4. The tactics of the NFL, AEG, Majestic and the City of Los Angeles should not come as a surprise to anyone. 99% of the information spoonfed to masses is caring spun and packaged to sway public opinion. Every single party involved in the NFL returning to Los Angeles debacle has skin in the game. The NFL wants to use LA as a leverage tool against other cities. AEG and Majestic obviously want the revenue generated from leasing to an NFL franchise. AEG in particular wants the highly lucrative covention center business that will accompany the expansion to Pico Hall. The City of Los Angeles wants the incremental tax revenue that comes with the tourism generated by devoted NFL fans. The City also wants the union jobs that will accompany the construction of FF. With all of these agendas it is no wonder the messages so convoluted. It’s time that somebody expose these people for the corporate crooks that they are. Personally I hope the NFL never comes back to Los Angeles.

    • @greg I agree on these points but I disagree on not wanting the NFL back in LA. What’s the downside to having the NFL back? As long as public money isn’t used to bring someone to LA (and it’s not in the plans to use public money), then the NFL would be a good addition.

      • the downside is getting stuck with shitty local team games to broadcast on sundays and the possibility of blackouts….I’d much rather have 3 hand picked games by Fox & CBS than be stuck with the local team or worse yet 2 local teams….If I want to see a nfl game in socal I’ll drive or take the train to sd.

        as a tv fan we’ve got it pretty damn good right now.

        • IMO the NFL needs to put more games on in more places, especially the internet and streaming games. It’s kind of ridiculous that fans can’t watch the games they wanna see. All games should be on demand…there has to be a market for that. Of course, Direct TV has on demand games but not everyone has Direct TV.

        • I don’t know what you’re smoking but Los Angeles always gets the Chargers and/or Raiders on television. ALWAYS the Chargers, we’re in their secondary market, we always have to broadcast their games.

          • There was a poll I think by the LA Times that showed the favorite teams in LA. Anyone remember who was who or the link?

  5. @everyone. The NFL returning to Los Angeles embodies everything wrong in the business world. Corruption and greed run rampant with the tax payers being nothing more than pawns in the shameless money grab. We all know that the City and AEG or Majestic already have shady back door deals place that will result with the tax payers subsidizing billionaires. This is equivalent of our goverment being run by the Free Masons. The irony is that nothing is free when the Free Masons are involved.

  6. Remember the convention center? As a citizen of LA I Want the convention center expanded. If it makes it so football needs to come back then so be it.

    http://latimesblogs.latimes.com/lanow/2012/04/aeg-football-stadium-los-angeles.html

  7. I’ve been saying this all along: the NFL is messing around with LA again only because there still is no Vikings stadium and no Chargers stadium and no Rams deal etc. It won’t come back. I’ve heard about these scenarios for 20 years and I remember every attempt before. There was nothing wrong with past attempts except the NFL didn’t want to come back. Same thing now. It was all speak for the CBA and hoopla. If the NFL wanted to come back, they would be working with AEG and not against them. How does the NFL have blatant disregard for AEG’s plans? Shouldn’t the NFL be working with AEG if the NFL was serious?

    • it’s because aeg’s plan is a total lowball offer for partial ownership and relocation fee…the league has rarely played hardball with any cities other than sf/santa clara and they finally got the city of sc to bend over backwards into a very risky deal.

      also everyone seems to forget that this is aeg’s 2nd attempt at a downtown stadium so it’s not like they are known for getting into a negotiation and not backing out .

    • Because AEG wants to grab a majority of stake of the franchise, 49% of the ownership, they want a large piece at a deep discount. AEG will be charge in ticket prices, team marketing, relationships with suite and club-seat customers, naming-rights deals and the like. No NFL teams are willing to give up that power. The NFL wants the team to pay for the stadium, not a private company. This is why Majestic Realty will get the edge here and they will agree terms with the Chargers. Hopefully, they will also bring back the Rams. Keep the Raiders in Oaktown. I hope they move forward with the Oakland Live! project.

  8. Not every city will get a brand new stadium and one as lucrative as the LA market. This time it is for real and Rodger Goodell will pick the team. They can still use LA as leverage for a 2nd team in the future being AFC or NFC that doesn’t reside in LA. Doesn’t mean it will happen but the threat will still be there.

    AEG will secure a team because they have invested a lot learned a lot and admittedly knowing what the NFL wants according to Tim Leiweke he has been all over the media this week explaining the negotiations. They will soften the deal but they will want a percent of a team to keep it in LA.

  9. The NFL has functioned very well for nearly 20 years without a team in the primary L.A. market. The league may want a team in L.A., but it won’t be bullied into a deal by Roski, Anschutz, or L.A. politicians. Having two properly entitled (shovel-ready + satisfactory EIR) stadium sites in L.A. allows the league to leverage one site against the other to ensure the best deal for its owners (and the long-term viability of NFL football in L.A.). . . It’s simple: Roski and Anschutz will eventually sweeten the business aspects of their respective stadium proposals more to the NFL’s liking, or the NFL will bide its time until the next L.A. stadium proposal comes along. In the meantime, teams can still use the threat of relocating to L.A. to properly leverage funding, stadium upgrades, etc. from their current cities.

    The NFL can operate from a position of power on all fronts.

    And by the looks of things, Anschutz (with Leiweke as his mouthpiece) is beginning to publicly change his tune regarding the business aspects of his stadium proposal:

    http://blogs.laweekly.com/informer/2012/04/tim_leiweke_nfl_revenue_sharing_eir.php

    Dr. Spankatronix expects a response in kind from the folks behind the Grand Crossing stadium site (Roski, Semcken) soon. Things will really get interesting then.

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