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SBJ/20090316/This Week's News
FC Barcelona looks at Philly MLS stake
Published March 16, 2009
FC Barcelona is exploring an investment in MLS’s Philadelphia expansion franchise, which has been seeking new capital for months in an effort to further strengthen an ownership group fronted by iStar Financial CEO Jay Sugarman.
Joan LaPorta, president of FC Barcelona, visited Philadelphia on Feb. 28 and toured the site of the franchise’s future stadium being constructed in Chester, Pa. The tour took place days before FC Barcelona announced it wouldn’t pursue an expansion franchise in Miami.
MLS Commissioner Don Garber declined to comment on the visit but said, “FC Barcelona has expressed for some time an interest in Major League Soccer financially and strategically. They spent a great deal of time with us looking at Miami and are continuing to look at opportunities around the league.”
MLS Philadelphia CEO Nick Sakiewicz said he didn’t discuss investing in the franchise with LaPorta but acknowledged that the Philadelphia franchise is still looking for strategic partners.
“That’s always been part of our plan and it hasn’t changed,” Sakiewicz said.
FC Barcelona is just the latest in a string of potential investors to look at the team over the last few months. Comcast-Spectacor is also in discussions with the club to provide it with $7 million in debt as part of an agreement that would see the facility operator manage the stadium upon completion, according to sources who requested anonymity because of the sensitivity of the discussions.
A spokesman with Comcast-Spectacor said all discussions are private. Sakiewicz said that while the group has had discussions with Comcast-Spectacor, “No (money) has been discussed or formal agreement reached.”
Sugarman, the franchise’s majority owner-operator, has suffered substantial declines in the value of his stake in iStar Financial over the last year. Shares in the company were valued at $20.19 on the day Philadelphia was awarded an MLS franchise in February 2008, but the stock closed at $1.78 last Thursday. He has pulled more than $20 million out of the market since November 2006 and acquired 600,000 shares of iStar in the last six months, but the precipitous decline in stock price has cost him more than $38 million since February 2008.
Sakiewicz said that Sugarman’s net worth extends far beyond his shares in iStar, and the team’s effort to raise additional capital is part of an effort to find someone who brings sports, entertainment or soccer expertise to the table.
The $115 million stadium project in Philadelphia is fully funded and pilings began being driven into the ground last week, Sakiewicz said. Delaware County and the state of Pennsylvania contributed $77 million to the project, leaving $38 million in costs to Sugarman, Sakiewicz and fellow investors — Swarthmore Group Chairman James Nevels, Philadelphia attorney William Doran and Christopher and Robert Buccini, founding partners of the Buccini/Pollin Group.
In addition to construction costs, Sugarman and the group also owe an outstanding balance on the franchise’s expansion fee of $35 million, which is part of a standard contract due to be paid over several years. The club was able to secure a $25 million loan from Sovereign Bank last year.
Looking ahead, though, there’s concern in MLS ownership circles about operating expenses and losses once the franchise begins play. FC Barcelona or other minor investors could alleviate some of that concern. Details about the size of any future investment remain unknown.
When asked to respond to those concerns, Garber said, “The fact that the team has secured more than 6,000 season-ticket deposits and two sponsors a year before kicking off indicates the strength of the market and the organization Jay has put together in Philly. I have absolutely no concern about their ability to be successful.”
FC Barcelona has been seeking entry into MLS since last fall when it partnered with cell-phone magnate Marcelo Claure to bid on an expansion team in Miami. The club and MLS pulled the plug on the bid in early March because of “adverse market conditions” in Miami. But investing in Philadelphia would offer the Spanish club an easier, more affordable entry.
The Philadelphia franchise already has been approved by the board, secured a stadium and established a small staff headed by an experienced MLS veteran in Sakiewicz, who said that the continued interest from investors spoke to the strength of the club’s ownership group and deal with county and state.
Staff writer John Ourand contributed to this report.