SBJ/February 22 - 28, 1999/No Topic Name
NFL bidders offer differing approaches
Published February 22, 1999
If the NFL were to rely solely on financing certainty, the city of Houston would win hands down among the three bids competing for the league's 32nd franchise.
The offer from NFL Houston Holdings, led by billionaire Bob McNair, rests mostly on public money, with the remainder to be paid by personal seat licenses and ticket and parking taxes.
By contrast, Ed Roski and Eli Broad's effort to refurbish the Los Angeles Coliseum would require them to take on $217 million of debt. Plus, their plan rests on $100 million of PSL sales, a tall order in a city where sellouts were rare for the former Los Angeles Rams and Raiders.
The debt would be in the form of a bond backed by some of the more than $170 million in annual revenue that Roski and Broad predict their project will generate.
Movie mogul Michael Ovitz's bid perhaps the most leveraged of the three to build a football and retail theme park in Carson, Calif., rests heavily on BankAmerica Corp. Ovitz plans to pay for the stadium part of the project with $400 million of loans from the bank, $70 million of PSLs and $40 million of upfront revenue.
Sports finance experts agree that on their own merits the two Los Angeles projects would have few problems securing private financing. But the large amount of public money in the Houston bid makes that proposal financially more attractive.
"Based on our market analysis, there is a significant amount of private debt that could be supported on the [Ovitz] project," said Rob Tilliss, a sports banker with Chase Manhattan Corp. But "any stadium project that has a component of public funding may be more compelling to the NFL."
The Coliseum proposal, except for a tax break, does not envision much upfront public financial support. But much of the necessary infrastructure, like roads, sewage, water and land, is publicly provided or already built.
The NFL's review of the three proposals centers only on the stadium plans and not the groups' ability to actually buy the expansion franchise. The price could top $1 billion, according to some published reports.
Broad and McNair are billionaires, and Roski's fortune is estimated at $900 million. Ovitz is not considered in that league, but he already has $200 million in commitments from private investors.
An NFL team can carry only $100 million of debt, so any new ownership group would have to pay most of the purchase with cash.