Friday, March 24, 2017 | 2 a.m.
The Oakland Raiders soon will find out if they can put a $1.9 billion stadium on layaway.
The team’s complicated stadium financing structure must pass its first major stress test next week in Phoenix, as the Raiders seek to persuade at least 24 of the National Football League’s 32 franchise owners to pave the road to Las Vegas in a relocation vote.
Oakland’s reconfigured capital stack relies heavily on a total of $850 million in loans from Bank of America and the NFL after Sheldon Adelson withdrew his investment from the project in January. Bank of America spokeswoman Colleen Haggerty declined comment Thursday on details of the company’s agreement with the Raiders.
That loan pairs with a record $750 million in public funding from Nevada to form the bulk of the necessary funds for a 65,000-seat stadium that underpins the team’s interest in Southern Nevada.
The proposed funding setup appears to require only a $50 million cash commitment from the Raiders toward the stadium. Given that post-Adelson deal appears to call for the Raiders to serve as the stadium events company generating revenue at the facility throughout the year, the large amount of conventional debt did not surprise some experts.
“When you start looking at the size of the debt, you also have to start looking at the size of the revenue streams available to pay off that debt,” said Irwin A. Kishner, partner and chairman of the executive committee at Herrick Feinstein LLP, a New York-based law firm with extensive experience in stadium transactions. “The fact that the Las Vegas stadium can be used for 365 days a year will, in and of itself, mean there will be many more opportunities for more revenue streams.”
The Raiders plan to replace Adelson’s $650 million with Bank of America’s loan commitment and their original $500 million stake always included a $200 million loan from the NFL’s G-4 program — the maximum amount allowed in the league’s stadium upgrade borrowing setup. Revamped by the NFL in 2011, the G-4 program allows a team to use revenue from premium-seat sales to pay back the loan over 10 years.
The other $250 million from the Raiders comes from the sale of personal seat licenses (PSL), a controversial but nearly universal setup that requires those seeking season tickets to first purchase the right to buy those seats. Raiders fans in Oakland know the PSL setup well — late owner Al Davis raised $84 million from 45,000 fans when the franchise returned to the Bay Area from Los Angeles in 1995.
The use of these one-time fees is built into Senate Bill 1, the state legislation passed in October authorizing the use of a newly created hotel room tax for building an NFL stadium. Assuming a 65,000-seat stadium, the average per-seat cost for a PSL at the Raiders stadium would need to be $3,841 to raise $250 million. That cost will vary greatly based on seat location, with the upper deck costing far less than two rows up on 50-yard line.
The San Francisco 49ers expected to raise $500 million toward the 2014 construction of Levi’s Stadium in Santa Clara in a similar setup and ended up beating those projections by more than 5 percent. San Francisco’s licenses cost $2,000 to $80,000 per seat, forcing some fans wanting the best locations to seek financing to cover the expense.
If the Raiders come up short on the expected $250 million in PSL revenue, they must cover the shortfall. In concert with the loans and the team’s responsibility for covering potential stadium cost overruns, the need for PSL sales to cover half of Oakland’s commitment alarms Mark Conrad, director of the sports business program at Fordham University.
“It’s a high rate of leveraging,” Conrad said. "It’s not beyond the realm of possibility. Assuming the stadium is the way it is, it’s a lot of leveraging.”
The Raiders also must cover a hefty relocation fee payable to the remaining 31 NFL owners. Recent reports peg that fee somewhere between $325-$375 million, but that repayment can be stretched out over a number of years to avoid adversely affecting the team’s annual revenues.
“This is not a haphazard way of putting together these financing structures,” Kishner said. “This seems to be a very well-conducted symphony and a very well-thought-out plan of finance in terms of getting this done.”
Forbes valued the Raiders at $2.1 billion in 2016, a 47 percent jump from the team’s $1.43 billion valuation in 2015. That increase attributes largely to the anticipated new stadium and vaults Oakland from second-to-last in 2015 to 20th last year in franchise value. The Dallas Cowboys check in atop that list at $4.2 billion.
Raiders tickets ranked among the league’s most affordable (24th) last year at the struggling O.Co Coliseum in Oakland at $71.03 per ticket, and premium seat costs checked in last at $148.93, underscoring the team’s and the league’s desire to find a new stadium with more suites and club seats to sell closer to the NFL average of $277.29.
“I think the league wants it because they have to find more revenue streams, because it’s between Las Vegas and Oakland,” Conrad said. “Oakland came up with a plan on paper that’s not really a plan yet. I think it’s a concerted effort by the league to go to glamour markets and vie for the future.”
Professional football would only occupy 10 dates — at a projected average ticket cost of $95.30 — and UNLV would add six more, requiring the Raiders as the stadium events company to procure at least 30 more events per year to meet the projected $140 million in ticket revenue on which the stadium model is based.
“You could attract bowl games, concerts, all kinds of opportunities. You have to start looking at those revenue opportunities — naming rights, sponsorships, PSLs,” Kishner said.
Members of the Las Vegas Stadium Authority Board, the entity responsible for negotiating both the stadium lease and development agreement with the Raiders, spent the bulk of their March 9 meeting questioning their own counsel about how to ensure the team attracts sufficient event business to the facility to satisfy revenue needs.
Revenues for the Raiders obviously do not begin and end at the stadium gates. Despite some dip in TV ratings and in-person attendance in recent years, NFL clubs split a reported $7.1 billion in revenue in 2016 for an average of more than $222 million per team. The league’s massive TV deals, which will expire in 2021 and 2022, bring in close to $7 billion per year, combining broadcast networks, ESPN, and DirecTV’s Sunday Ticket.