Posted by John Vrooman on Saturday, November 8, 2014 in National Football League.

Interview with NY Times.

NFL Stadium Package.

Mostly what I wanted to ask John about is if it makes sense — given the role the TV deals play in NFL economics — for a team to move to Los Angeles if it will have to pay for construction of a new stadium, land, practice facility and a relocation fee? If so, why?

 Yes the NFL will certainly charge a hefty relocation fee but not so much as to actually capture all of the potential gains and prevent the relocation. The stadium and franchise deals will probably have to be joined in some manner similar to the scenarios outlined above.

Current confusion and congestion from competing franchise owners and stadium developers is similar to the morass than stifled the potential expansion into the NFL in 2002.

The league finally opted for Houston (and its $700 million expansion fee offer) after granting LA several delays for self-defeating expansion groups and paralyzing political games from counteractive commissions. It was a political maneuvering mess then and it is still a mess now. The only solution to LA stadium gridlock politics is for a privately funded project but there are currently too many players on the field.

 In the pretzel economic logic of the NFL, the exorbitant relocation/expansion fees and astronomical venue costs make economic sense because the cash flows continue to support them. The new TV deals of $206 million per club through 2022 can alone be converted to a base franchise value over $1 billion.

This is why the Buffalo Bills can be valued at $1.4 billion and the St. Louis Rams are probably worth $1.2 billion even playing in the now not so state of the art Raymond James Stadium.  The cash flow from the Dallas Cowboys AT&T Stadium from Cowboys NFL games alone has a present value of at least 5 times the stadium cost of $1.2 billion.

The general rule in the NFL is that if you want to make money in the NFL you have to spend other peoples’ money, but in the political maze that is LA, the competition among big boy developers may force the money issue to become a more personal matter of wealth and influence.

 Then again the NFL could orchestrate the entire stadium/relocation deal as a natural born cartel and no-one will stop them. This would be similar to what MLB owners did with the relocation of the Montreal Expos. The Expos were purchased for $125 million in 2002 form Jeff Loria (Miami Marlins) and then flipped for $450 million as the Nationals in 2005 after “negotiating” a $650 million 100% public ball park deal in DC. The difference here is that the LA deal will probably be private to even get done but the NFL can always float the loan itself with a $5.375 billion credit facility backed by the $58.8 billion TV deal through 2022.

 My money is on the coalition of Stan Kroenke and Philip Anschutz in LA because they hold all of the skin in this highly leveraged extortion game. The most probable scenario is a minority equity swap of probably 30 percent of AEG stadium equity and 30% of Kroenke Rams franchise equity.

 Also, what role Los Angeles being vacant has had in other teams’ negotiations for new/renovated stadiums?

It is entirely possible that the LA football market has been more valuable to the NFL if it is empty than occupied since 1995. This is because it is used as third leg in an extortion triangle to leverage public money for mid-markets to keep or attract fast and footloose NFL franchises. (Public subsidies are inversely related to market size).

In the extortion game surrounding the NFL expansion into Charlotte and Jacksonville in 1995, the NFL leveraged 75 percent public subsidies for about $2.5 billion public funding for the 13 stadiums built after the expansion and before the NFL’s G-3 loan program in 1999.

 It is standard operating procedure for the NFL Commissioner(s) and other concerned owners to drop the not so veiled threat of relocation to LA in the negotiation of each of the mid-market NFL stadium deals since the 1995 relocation derby, even when the relocation threats were not remotely credible. But now that the stadium extortion game is coming full circle for a second revolution (after 20 years) the time has come to call  NFL bluffs in St. Louis, Oakland and San Diego– even though it seems that the unregulated NFL cartel has most of the cards and all of the chips.

 Please see the Stadium Table attached…the architectural rendering is of a proposed stadium that was to be inserted into the bowl of the LAMC and it shows what I call the motel in the middle. This internal structure is built first and the lower bowl and upper deck are appendages to the luxury seating rather than the reverse in the previous multipurpose cookie cutter stadiums. I

t is not hard to construct a financial plane where the entire stadium can be privately funded by motel revenues alone.  This is the prototypical design that caused the stadium revolution in all 4 major NA sports leagues, unfortunately about half of all these new cash cow stadiums have been publicly financed.

V