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In Assessing Chargers Options, Do Cost Comparisons
Tom: I hear you. So for a top of the line team such as Dallas moving to LA would probably result in a negative or very small relo fee. But the Chargers are in the lowest 1/3 of team valuations, so their relocation will result in a substantial relo fee. Which is what, according to your opinion? As for Davis, I am aware of his particulars. What I am saying though is that Davis will attempt to exact "something" from any team entering LA. Now, his claim might not be solid but some may attempt to settle on the basis of nuisance factor. As such, when I look at the Chargers this is another cost I have to consider. BTW, do you see any scenario of the Chargers moving to LA that does not have a minimum rent of $10-12 Mil a year for a new stadium? O.k. the Net Present Value of that alone is in the $200-250 Mil. category. So, at minimum the Chargers move will cost them in present dollars upwards of $300 Mil. (lease+termination fee+relo fee+ other) If so, why is Spanos offering only $200 Mil. for the new stadium here? Shouldn't he offer at least as much as the cost to relocate? And if so, given the NFL contribution of $100-200 Mil. the owner should offer the value of at least $500 Mil.(about twice of what he is offering now).— May 25, 2011 9:58 a.m.
In Assessing Chargers Options, Do Cost Comparisons
Tom: The $200 Mil. relo estimate seems reasonable for the LA market. This is why Spanos is offering the same contribution towards a new San Diego stadium. However, in the San Diego case the naming rights alone would be enough to reimburse the owner contribution and then some. That's why I think the owner is not honest with the people of San Diego. He is offering money that basically he will recapture soon afterwards and in any case the naming rights belong to the City but his proposal on the new stadium assumes that those are his for the take. As Don said, the City can strike(negotiate) a nice naming rights deal and then fix the Q and then enjoy any surplus. Viewed under this context, the owner is proposing a deal which is 100% OPM (Other People's Money). He wants to use OPM as a downpayment and wants City OPM for the rest. This is ridiculous.— May 25, 2011 8:22 a.m.
In Assessing Chargers Options, Do Cost Comparisons
Yeap.— May 25, 2011 8:13 a.m.
In Assessing Chargers Options, Do Cost Comparisons
Don: Allow me to insist on this point. The reasons Chargers are not a "fit" for LA are (a)market related (b) ownership related. San Diego is the 8th most populous city in the nation. You don't swap #2 with #8. In fact all the top tier 20 markets are not exchangeable with LA. The bottom 12 markets (21-32) probably are, but San Diego is not one of them. The owner here has a bit of an inferiority complex, so him moving to LA and mixing it with some really radiant personalities is not in his comfort zone. Even though the LA market is a theoretical possibility for an NFL team, the Chargers under the current ownership are anything but.— May 25, 2011 8:09 a.m.
In Assessing Chargers Options, Do Cost Comparisons
Don: This is a quote of a Forbes article on the matter: "For all the ongoing fanfare and speculation about Los Angeles, the town’s appeal as an NFL market is limited. Competition from other sports and entertainment options is plentiful. With no local television revenue to capture under the league’s money-sharing T.V. model, the natural big-market advantage that other sports leagues enjoy doesn’t really apply. And the NFL doesn’t necessarily need a franchise there to boost the area’s general Sunday viewership, notes [sports business consultant Marc] Ganis. As an open territory, L.A. is the beneficiary of an NFL doubleheader every week, with the league free to feature its most appealing match ups. Giving up the certainty of an established season ticket base to start from scratch is a risk most owners would rather avoid."— May 25, 2011 6:07 a.m.
In Assessing Chargers Options, Do Cost Comparisons
True. Davis lawsuit had nothing to do with the "entry fee". However, having prevailed in his lawsuit Al Davis has paid a substantial entry fee (in 82-83 dollars) which he claims must be reimbursed to him (with interest) if another team (other than the Raiders) enters the LA market. I am not arguing the validity of the claim; simply I am trying to discover what the "entry fee" for LA is. In a non-related issue, Davis sued the NFL again for a failed deal in Hollywood Hills; a case which he eventually lost. His alleged damages on that deal were $1.1 Billion or so, which goes to show you what the value of a "license" to operate the LA market would fetch. I am of the opinion that the "NFL entry fee for LA" is a very substantial figure.— May 25, 2011 6:01 a.m.
In Assessing Chargers Options, Do Cost Comparisons
SurfPuppy619: This is good info. So, how much do you think is the market rate for San Diego NFL team naming rights, given the fact that LA just cut a 30-year deal worth $700 Mil without even having a team yet?— May 25, 2011 5:49 a.m.
In Assessing Chargers Options, Do Cost Comparisons
The team currently pays $700,000 per year in rent. Simply moving the rent to market solves all maintenance issues plus the city can make a profit. Here is how it works. Tampa Bay pays $8.1 Million per annum in rent. I think San Diego should charge at least $10 Mil. To make the calculation simple, let's assume the rent stays the same year after year and the discount rate is 5%. The Net Present value of an annual $10 Mil. rent is then the following: NPV = Annual rent divided by discount rate = $10,000,000 / 0.05 = $200,000,000. Therefore by simply bringing the rent to market, the City has created a net present value of $200 Mil. against which it can easily draw a loan of $80 Mil. or even $100 Mil. for stadium improvements. It can also book a profit of $100 Mil or more. And this is not the only part of the potential revenue. As Don commented before, the other substantial part is the naming rights revenue. So, let's say a good negotiator for the City can strike a deal for $200 Mil. for extending Qualcomm's rights for an additional 20 years plus the right of first refusal (I actually think the City should get $500 Mil. for that , but hey, let's not be greedy like someone we all know). So the City can come out of this a winner and the citizens can take actual civic pride from engineering a deal that makes all of us feel and look smart.— May 24, 2011 9:35 a.m.
In Assessing Chargers Options, Do Cost Comparisons
The new costs of acceptable NFL stadia is a minimum $1 Bil.— May 24, 2011 9:20 a.m.
In Assessing Chargers Options, Do Cost Comparisons
Don: The Chargers can covet the LA market all they want, but the idea that they can move there is a fallacy of the first magnitude that needs to be urgently debunked. The rights to that market belong to the NFL and entering it has a substantial fee attached subject to the approval of 32 owners. When Al Davis initially tried to move Oakland to LA the NFL voted him down 22-0. He had to sue to enter the LA and he had to pay a fee. Now, Davis claims that the LA market belongs to him based on the fee paid and he is prepared to sue any team which contemplates an LA move. However, the true insiders know that the LA market is not for sale because it removes negotiating leverage for the NFL, especially now that absent public subsidy new stadia are unfeasible. This is a point that needs to be driven home, because it changes the whole chemistry of the city's negotiating position.— May 24, 2011 9:16 a.m.