The Sacramento city council last night unanimously approved Republic F.C.‘s stadium term sheet, which proposes building a new $180 million MLS stadium almost entirely with private money, once MLS deigns to give Sacramento a franchise.
Republic owner Kevin Nagle says he and his investment partners can pay for two-thirds of the $180 million construction budget with “equity” (I assume he means cash, unless he’s really going to give the stadium contractors shares in the team) and borrow the rest. Add in an expected $100 million expansion fee, and that’s $280 million Nagle and his partners will need to earn back before turning any kind of profit — so figure close to $20 million a year in revenues needed in order to make this a reasonable investment. How does that compare to other MLS franchises?
|
Value ($M) | Revenue ($M) | Operating Income ($M)1 |
|---|---|---|---|
| Seattle Sounders | 245 | 50 | 10 |
| LA Galaxy | 240 | 44 | 4 |
| Houston Dynamo | 200 | 26 | 5 |
| Portland Timbers | 185 | 35 | 4 |
| Toronto FC | 175 | 32 | -7 |
| Sporting Kansas City | 165 | 29 | 4 |
| Chicago Fire | 160 | 21 | -6 |
| New England Revolution | 158 | 25 | 7 |
| FC Dallas | 148 | 25 | -3 |
| San Jose Earthquakes | 146 | 13 | -1 |
| Philadelphia Union | 145 | 25 | 2 |
| New York Red Bulls | 144 | 22 | -9 |
| D.C. United | 140 | 21 | -1 |
| Montreal Impact | 128 | 22 | -3 |
| Vancouver Whitecaps | 125 | 21 | -6 |
| Columbus Crew | 112 | 18 | -4 |
| Real Salt Lake | 108 | 17 | 1 |
| Colorado Rapids | 105 | 15 | -3 |
| FORBES estimates; revenue and operating income is for 2014 season 1 Earnings before interest, taxes, depreciation and amortization |
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Yeah, I have no idea how this is going to work out either, unless it’s a roll of the dice on MLS franchises making a whole lot more money in the future. Or rich people just think it’s fun to own soccer teams. Which, sure, so long as they’re spending their own money, it’s no skin off taxpayers’ noses.
Meanwhile, here are pretty pictures to look at. It sure does look fun, no? I don’t know about $280 million worth of fun, but then, I have no way of knowing what $280 million worth of fun looks like, so maybe I’m not the one to judge.
Just go back later and plead for a bailout. Governments always listen to that song-and-dance.
Sports Illustrated just interviewed MLS Commissioner Don Garber about expansion, including the question of how to find room for Sacramento in the mix:
SI: Speaking of expansion, it has now been 664 days since the press conference announcing David Beckham was exercising his option to own an MLS team in Miami. He’s got Tim Leiweke on board now, which is a good sign, but they still don’t have a stadium deal, and now they’re talking again about alternative sites. Sacramento’s MLS stadium renderings come out today. At what point would Sacramento or San Antonio leapfrog Miami for spot No. 24?
Garber: We remain focused on trying to close a deal in Miami with David Beckham and his partners. And before we can do that they need to finalize a stadium plan. They continue to make progress and are now looking at a new site. So the question for me is not does Sacramento come in before Miami? It’s more: How do we get Sacramento into MLS? And I have enormous respect for the Republic and their owners and everything they’ve done and the municipal support they have.
Age of Ultron cost $280 million. If you think that Age of Ultron was fun, then that’s your metric. Does this stadium look like Age of Ultron? Not to me.
I would understand if the Republic were an untested commodity. However, they have been a proven draw and have repeatedly sold out soccer matches where the attendance is approximately 11,000 ticket buyers. There is business risk in virtually every endeavour. In this case, the taxpayer risk has been minimized. Remember, Sacramento is an area with approximately 2 million residents. There are adjacent counties with numerous soccer fans. The closest MLS team is in San Jose, which is located approximately 122 miles away. Its quite obvious the Sacramento Republic will attract a large following. The transportation logistics couldn’t be any better. In fact, the Amtrak station in Sacramento is a short walk to the proposed location of the stadium.
That’s all lovely, but it’s still not likely to produce enough revenue to create a reasonable return on a $280 million investment. The Republic would have to be the most profitable team in MLS for that to work out.
It’s not my money, however, so I’m not complaining. It is puzzling, though.
I think San Diego is a better market and would offer some sort of public contribution for a stadium. I’d rather have a MLS club than keep the Chargers.
What’s going on with LAFC? They announced a plan for a stadium next to the coliseum 6 months ago but nothing since. Minnesota United announced the location but I read that it’s not a done deal. What am I missing?
I’m not certain as to what are the composite details of the projected revenue streams. However, if MLS teams are huge money losing ventures then the league would fail to exist. If anything, the Sacramento Republic is banking on a loyal fan base. How much money they’ll bring in is another question. It will depend on the expectations of the owners.
@Ben: LAFC had a public meeting on the stadium design a couple of months ago to present their vision and to garner feedback. They aren’t due to take the pitch for another two seasons, so I’d imagine that things are moving along at an appropriate speed for the new stadium.
[youtube https://www.youtube.com/watch?v=QJP0ITdmAeo?version=3&rel=1&showsearch=0&showinfo=1&iv_load_policy=1&fs=1&hl=en-US&autohide=2&wmode=transparent&w=640&h=360]
@ Neil – I don’t think SRFC’s owners are looking long term at a “reasonable return” on investment; if that were the goal, then they’d keep the team at the USL level and at the current – and very inexpensive – Bonney Field, where they are currently making money hand over fist. Admittedly, much of that money-making ability for the team is predicated on the goal of SRFC going up to the MLS level.
Going by the team values listed in the Forbes valuation, how much of that will change when NYCFC and Orlando and Atlanta and the Undead Corpse of Chivas are factored in? SRFC’s expansion value will be $100MM, but given the market and the current popularity of the team, the equity value will probably go up significantly above that initial $100MM buy-in.
Equity financing. It’s what makes America great.
Up to $280m? Not bloody likely.
MLS has spoken out about Sacramento:
http://www.sacbee.com/news/local/article47737585.html
Long story short: We’re the back-up plan. If one of those other three cities comes to its collective senses, er, drops out, we’ll be there to supply insanity, er, be an expansion team.
If it looks like that rendering I’d drive up to see it. Not many things I’d drive to Sacramento for and its not even that far. I know there are some Sac residents here so I would like to affirm that that’s not meant as a dig. Hope they keep it affordable rather than just another luxury item for sports fanatics (keeping in mind I very much am one).
Some owners in MLS feel that TV money will rise dramatically in next 10 years. Also demographics and a cultural shift might be all billionaires need to pull the trigger on a 300mil investment that has potential to grow into a top 3 sport in this country. Keep in mind that MLS sells its product all over the world including TV rights.
I seriously doubt there will be any such thing as “TV” in 10 years. Not that I’d rule out sports leagues still finding a way to charge through the nose for rights fees, but I wouldn’t bet my money on it.
Good point. The owner did say rights fee and not TV.