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Volume 23 No. 13
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Rams owner to borrow about $1 billion for stadium project

The proposed stadium in Inglewood is currently priced at as much as $2.66 billion, which would make it the most expensive sports facility ever built.
Photo by: HKS ARCHITECTS (2)
Los Angeles Rams owner Stan Kroenke is borrowing roughly $1 billion from JPMorgan Chase to finance his planned stadium project in Inglewood, Calif., sources said last week.

The amount is one of the largest, if not the largest, stadium loans ever extended by a financial institution.

Priced currently at as much as $2.66 billion, the Inglewood development, which would include NFL Network facilities, would be the most expensive sports venue ever built, surpassing by $1 billion the likes of New York’s MetLife Stadium ($1.6 billion); Atlanta’s new Mercedes-Benz Stadium ($1.5 billion), opening next year; and San Francisco’s Levi’s Stadium ($1.3 billion).

The stadium is scheduled to open in three years.

Rams President Kevin Demoff confirmed Kroenke is borrowing from the bank but declined to comment on the amount.

In his relocation proposal, which owners approved last week with the caveat that a second team has the option to move into the stadium as well, Kroenke wrote he would invest $800 million of equity. However, two sources said he told owners last week the amount is $1 billion. The money he is borrowing is not to cover his equity but in addition to it, a key source said.

League rules limit to $250 million the value of a stadium and franchise a team can pledge as collateral for debt, but those rules are often waived for stadium construction. The league last year agreed to let the Atlanta Falcons borrow $850 million for their new stadium project.

Kroenke is borrowing from JPMorgan’s private bank, suggesting he is a client of the financial institution. The head of sports lending for JPMorgan, Scott Milleisen, declined to comment.

The loan would be to the new stadium’s operating company, not to Kroenke himself.

One sports finance expert said Kroenke could expect at least $700 million in seat license money at the new stadium, and maybe that much in naming rights as well, money that would serve as collateral for the loan. This person requested anonymity because he has worked with parties involved in the NFL’s Los Angeles process. However, under the owners’ resolution allowing Kroenke to relocate to Los Angeles, Kroenke cannot begin marketing the new stadium until February 2017 unless another team joins the Rams at the venue before then.

Early last year, Kroenke formed a joint venture with real estate investment management firm Stockbridge Capital Group for development of the Inglewood parcel. How much Stockbridge is contributing to the project, and what a potential second team might put in, is unsettled.

“The financial structure of the stadium will be sorted out as we move forward on the final arrangements in Inglewood, especially as it relates to the potential relationship with a second team,” Demoff wrote in an email.
Still, the parameters of the financing structure are coming into focus. There is $1 billion of borrowing, $1 billion of equity, Stockbridge’s investment, plus $200 million from the NFL’s stadium financing pool. If a second team were to come in and become an equity partner in the stadium, that would reduce Kroenke’s equity burden. Also, the $650 million relocation fee Kroenke owes as part of the Rams’ move is due over 20 years, meaning he likely could pay it out of cash flow.

For JPMorgan, the loan is a big win, as the lender has largely been shut out of the recent big stadium financings. The trio of U.S. Bank, Goldman Sachs and Bank of America has largely controlled that business, with large loans to the Falcons, 49ers and Minnesota Vikings recently for their stadiums.

Goldman Sachs was left on the outside last week, as it not only was the financial adviser for the stadium effort in St. Louis aimed at keeping the Rams in that city, but it also would have lent to the Carson, Calif., stadium had it been chosen by NFL owners as the site for the league’s return to Los Angeles.

Rams’ temporary home short on premium