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Volume 20 No. 41


Nelson Rodriguez did not hesitate. The players, coaches and staff of Chivas USA, the embattled franchise that was taken over by Major League Soccer in February, deserved an immediate response from the new man in charge.

So Rodriguez traveled across the country from New York on Feb. 26 to deliver a pair of five-minute speeches. As detailed by Rodriguez, the message was the same in both meetings — first with the team at training camp in Arizona, and the next day with staff in Los Angeles.

Rodriguez faces the challenge of bringing Chivas USA fans back to StubHub Center. 
Photo by: ICON / SMI

“No. 1: We will do the right things,” said Rodriguez, who had just been named club president. “No. 2: We will do things right. And No. 3: We will always give 100 percent effort.”

Rodriguez was appointed to the position by the league, which purchased Chivas USA from former owners Jorge Vergara and Angelica Fuentes after years of missteps resulted in a last-place soccer club and a nearly empty stadium. MLS Commissioner Don Garber needed an experienced hand to stabilize

the franchise while a new owner was sought. Rodriguez, a veteran MLS executive, was an obvious choice. But there was a catch.

Rodriguez had resigned from MLS on Jan. 9 after 14 years as an executive with the league in marketing, game operations and competition. He had started his soccer management career in the late 1990s in operations with the New York/New Jersey MetroStars and yearned to return to the team environment. He left MLS in search of that kind of opportunity, but he did so without having a job to move directly into. It was a risky decision.

“Neither my family or I are of sufficient wealth that I could afford to take much time off,” said Rodriguez, laughing. “It was not with the intention of sitting on the sidelines a long time and having some sort of Zen moment. It was purely a leap of faith that I might be able to find something.”

His faith was rewarded. When MLS took over Chivas USA, Rodriguez contacted Garber and MLS President/Deputy Commissioner Mark Abbott to ask for consideration to run the club. They said yes.

“He has experience at the club and league level,” Abbott said. “When we were thinking about people who could make an immediate impact with the team and behind the scenes, Nelson was a natural. He has a lot of energy and a lot of conviction behind everything he does. He’s very good at supporting the people who work for him.”

With his wife and four young children remaining in New Jersey, Rodriguez moved to Los Angeles.

“I left MLS because I wanted to stretch myself,” he said. “Nothing could stretch me more than moving across the country and taking on these sets of circumstances.”

Those circumstances include: a league-low average attendance of 8,366 fans per game last season — the worst mark in the league by more than 4,000 fans and a 36 percent drop from Chivas USA’s average in 2012; a team that finished last in the Western Conference last season by winning only six of 34 games; and disenchantment from fans and sponsors who grew tired in recent years of the team’s souring fortunes.

In his first 10 weeks on the job, Rodriguez has preached patience and practicality.

“There’s no magic elixir that we can use to change overnight what’s gone on in the past, so we have to simplify things,” Rodriguez said. “I’ve set this challenge to the business staff: ‘Ask yourself, Is what I’m planning to do going to help bring more people to our stadium or enhance the fan experience? If the answers are no, then we’re not doing it.’ My feeling is, we cannot be all things to all people. If we do the right things consistently, we will earn the trust of our fans and earn new fans along the way.”

Rodriguez reports directly to Abbott in the MLS office, filing a report every Friday morning that details finances, issues to resolve, and recommendations to improve the franchise. Abbott did not request the report; Rodriguez chose to do it, saying that the weekly accountability was a good exercise for him.

“The report is very thorough,” Abbott said. “When we asked him to take over the team, we told him that everyone at the league office should be a resource for him. He’s been very good with keeping us up to date. It’s only been two months, but Nelson has brought a real stability to the club.”

Through the club’s first five home matches this season, Chivas USA is averaging 8,719 fans per game. While that is only 32 percent of capacity at StubHub Center, it is an 8 percent increase from last season’s average of 8,045 through five home matches. The biggest crowd this year came on April 6, when more than 15,000 attended a Chivas USA game against the LA Galaxy, the team’s StubHub Center co-tenant. (Chivas USA did not host the Galaxy until June 23 last season, drawing 14,575 for that match).

Chivas USA’s budget for the 2014 season was set jointly by the league office and Rodriguez.

“If we want an expenditure that’s outside the budget, we need to make our case to the league,” Rodriguez said. “I’m satisfied that we have all the necessary resources to make us competitive on and off the field.”

When he wants to make a major deal, Rodriguez is in regular communication with Abbott and other league executives. He has a pair of offers out for a jersey sponsorship deal — he declined to identify the target companies or their categories — but both are for one-year terms.
The team is one of only three playing in MLS this season without a jersey sponsor.

“In our situation, the league office wants to make sure that we are not encumbering a future owner,” Rodriguez said. “That’s just common sense.”

And what about that future owner? Asked if he believed that the 2014 season would be Chivas USA’s only one under league ownership, Rodriguez said, “It is my firm expectation that the club will be sold this calendar year.”

Abbott would not offer a definitive timeline for a new owner, saying, “The league’s intention is not to own the team long-term, but the league is prepared to own the team until we find the right owner.”

As for Rodriguez, whose family will join him in California from their home in New Jersey when school ends in June, he’s looking only at what’s directly in front of him. He has no way of knowing if he will want to work with the new owners, or if they will have any interest in working with him.

“From the beginning, my family and I have considered this an adventure,” he said. “But adventures don’t have predetermined outcomes. I’m very open-minded. In the end, it will come down to whether the new ownership and I both see this as a good fit moving forward. Until then, I’m enjoying it.”

The value of sports teams continues to skyrocket.

While a billion-dollar figure speculatively swirls around a possible Los Angeles Clippers sale, an investment bank is now in the market with a $1 billion valuation on the Brooklyn Nets.

Forest City Enterprises, the real estate developer that controls 20 percent of the Nets, is shopping its stake in the franchise and has valued the team at the $1 billion figure.

The Nets’ deal with YES expires in 2016; renewal talks are underway.
That mark is far and away the highest price ever set for an NBA team and comes amid rapidly escalating expectations for what basketball clubs are worth.

A surging media-rights fee landscape, extended labor peace and a growing international business are combining to fuel a perfect storm for NBA franchise prices, sending them into the same vicinity as those enjoyed in the NFL.

“We feel so confident on the billion … because every team will benefit from the new national TV deal,” said Lyle Ayes, managing director of Evercore Partners, which Forest City hired to sell the 20 percent position. Market observers expect the NBA to double its rights fee from national media with new deals after the current national agreements with ESPN and Turner Sports expire in 2015. Ayes also cites the Nets’ local TV deal with YES Network as a factor in the valuation. That deal pays the Nets around $20 million annually, a relatively low figure for a team in the country’s largest market. By comparison, the Los Angeles Lakers, who share the nation’s second-largest media market with the Clippers, are expected to receive an average of $200 million annually from Time Warner Cable SportsNet through 2032 under terms of their local broadcast deal.

The Nets/YES Network deal does not expire until 2016, but the two sides have begun negotiating a new agreement.

The surprising valuation placed on the Nets —  an assessment made solely on the team and not including its Barclays Center home — adds to a growing list of story lines featuring NBA clubs and surging franchise values. In addition to the talk surrounding the Clippers, just three weeks ago, the Milwaukee Bucks, a team that plays in an outdated arena and in a modest market, raised eyebrows with a $550 million sale agreement, the most ever for majority control of a club. Last year, new Sacramento Kings owner Vivek Ranadivé valued the Golden State Warriors at $850 million as part of the sale of his stake in that team, sources said.

Now, Evercore hopes to top the $1 billion mark with the minority investment and full valuation around the Nets.

Forest City owner Bruce Ratner bought control of the Nets in 2003 in a $300 million deal. He subsequently sold the controlling interest to current Nets owner Mikhail Prokhorov but maintained the share now on the market.

There are some caution flags in the current sale, however. The Nets spend well above of the NBA’s salary cap, incurring a huge luxury tax payment that reddens the balance sheet. According to Forest City’s most recent earnings report, the real estate developer lost $2.8 million on the Nets in the 11 months ending Dec. 31, 2013. That $2.8 million translates for the team to a loss of $23.33 million, based on a 12 percent ownership share for Forest City. (The other 8 percent that Forest City is selling is owned by limited partners who are forced to sell if the developer requires them to do so.)

Another possible downside: Prokhorov as lead owner. The Russian oligarch has shown no hesitation to deficit spend, meaning whoever owns the 20 percent stake is liable for that share of the loss.

Forest City paid Prokhorov a fee to avoid capital calls through July 2015, according to the developer’s annual report, so the purchaser of the stake would apparently enjoy one capital-call free season, in 2014-15.

Evercore is approaching about 20 potential purchasers rather than conducting an auction. The team carries about $200 million of debt. As a result, a buyer needs $160 million of equity to fund the purchase of the 20 percent stake if Evercore gets its targeted price.

One unspoken allure of the stake is it could position the buyer favorably if Prokhorov is ever forced to sell because of the geopolitical issues surrounding Russia’s relationship with the United States. Already earlier this year the NBA had to respond to reports Prokhorov wanted to domicile the team as a corporation in Russia. The NBA would not allow that.

As for Barclays Center, Forest City owns 55 percent of the arena. The company has not said if it intends to do anything with that ownership. Prokhorov owns the remaining 45 percent.

Prokhorov purchased his 80 percent stake in the Nets in 2010 as part of a $223 million deal that valued the Nets at less than $300 million. Now four years later, with labor peace at hand and escalating TV rights, franchise values are popping. Not only could the Clippers fetch $1 billion if the team is forced from the hands of owner Donald Sterling, but Evercore’s Ayes said that if he were selling full control of the Nets, their valuation would have ascended to $1.2 billion.