Rams stadium tops $4 billion

Los Angeles Rams owner Stan Kroenke and his wife, Ann Walton Kroenke, are investing $1.6 billion in the team’s new Inglewood stadium, a project that now costs in excess of $4 billion. The information was provided by finance sources after banks met earlier this month to arrange a $2.25 billion loan for the construction.

The Kroenkes’ $1.6 billion investment is higher than the final price of the last NFL team to sell, the Buffalo Bills, which were bought by Terry and Kim Pegula for $1.4 billion in 2014. That underscores the allure of the L.A. market as well as the surging price of building the yet-to-be-named stadium.

“It is unprecedented,” one banker said of the investment. By comparison, after debt, the top equity infusions into stadiums from NFL team owners, such as the Cowboys’ Jerry Jones and Falcons’ Arthur Blank, have topped out at a few hundred million dollars. Kroenke also has agreed to a completion guarantee, the finance sources said, meaning he covers cost overruns and is responsible for the debt if the project does not open on time.

The $4.25 billion cost for the 298-acre site just four miles from LAX airport more than doubles the most expensive stadium ever built in the U.S., the $1.7 billion spent on MetLife Stadium in New Jersey. The cost also includes the value of a 6,000-seat amphitheater but not the planned retail and commercial development, as well as the building of a new NFL Network home that is expected to drive the total cost of the project close to $5 billion if not more, the finance sources said.

The price tag has skyrocketed since NFL owners first approved the stadium in January 2016, when Stan Kroenke estimated a price tag of $2.3 billion. It soon rose to $2.6 billion, and then in March got cited in media reports as $3 billion. Part of the soaring cost is due to ensuring that the venue can withstand an earthquake, and the new projected figure includes what are known as soft costs, which cover items such as access roads and utilities and by themselves are budgeted at $850 million, the sources said.

The Rams declined to comment.

The sources asked for anonymity because the bank meeting on May 4 in L.A. was confidential. Kroenke met with the bankers at a reception after the meeting and a tour of the construction site.

JPMorgan Chase is leading the bank group, which includes Bank of America, Citigroup, US Bank, Citizens Bank, Sumitomo, GSP Capital, MUFG Bank and Fifth Third Bank. The minimum a bank is lending is $50 million and the maximum is $300 million, the sources said. The deal should close this spring.

JPMorgan declined to comment.

In a loan like this, the lead bank arranges for other lenders to buy into the debt as a way to spread the risk. That process is called syndication.

The stadium, scheduled to open in 2020, will house both the Rams and Chargers. The Rams are the primary equity partner in the stadium operating company, though the Chargers have a piece, too, and so will pay off a portion of the debt costs.

The loan’s pricing is 200 interest points over the floating rate index, the London Interbank Offered Rate. Last week, the three-month LIBOR was 2.35 percent, so if for example the Rams were paying interest last week, the rate would have been 4.35 percent. The Rams are not borrowing the full $2.25 billion right away (they tap the credit as construction moves on) and that total amount will be reduced after personal seat license fees are used to pay down the debt. Nevertheless, interest alone could be well north of $50 million annually.

The deal includes a $183 million interest reserve, so the Rams can pay interest in coming years before all the revenue starts flowing, one of the finance sources said.

Of course, the stadium is expected to be a revenue-gushing machine. The loan requires pledges of revenue that is 1.75 times debt, the finance sources said. Including PSL sales, that suggests stadium revenue of close to $4 billion.

The stadium is to host not just the Chargers and Rams but concerts, other sports and events for the 2028 Summer Olympics. The 2022 Super Bowl also is scheduled for the stadium.