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NFL oomph

Team relocation fee, at $550 million, could squeeze out Chargers

More and more analysts suspect that the National Football League owners won't make a decision on a team relocation to Los Angeles at their meeting January 12 and 13. For one thing, NFL Media Insider on the NFL's own network said Sunday that the relocation fee will be $550 million per team going to Los Angeles. That figure was thrown out a bit ago, but not by a source so close to the league.

Since the figure was leaked on NFL Network, Neil deMause of fieldofschemes.com says it's "as close to an official leak as you're likely to get."

Frankly, I believe that $550 million per team would knock out both the Chargers and Raiders who, while not exactly impecunious, don't have that kind of money to put into a relocation fee.

However, deMause cautions that the NFL "could invent some kind of revenue sharing credit" that would reduce the figure. Overall, "the rapidly rising dark house candidate" won't be decided this month, says deMause. The winner needs 24 of the 32 votes; both sides have enough oomph to block the other.

There is another point deMause doesn't mention: Stan Kroenke, who wants to move the St.Louis Rams to L.A., who with his wife is a double-digit billionaire, is the only owner who could come up with a fat relocation fee like $550 million. Possibly $550 million was chosen to squeeze the Raiders and Chargers out. Maybe Kroenke will go it alone in Inglewood until he sees how the market reacts, then take a tenant or partner, perhaps the Chargers.

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More and more analysts suspect that the National Football League owners won't make a decision on a team relocation to Los Angeles at their meeting January 12 and 13. For one thing, NFL Media Insider on the NFL's own network said Sunday that the relocation fee will be $550 million per team going to Los Angeles. That figure was thrown out a bit ago, but not by a source so close to the league.

Since the figure was leaked on NFL Network, Neil deMause of fieldofschemes.com says it's "as close to an official leak as you're likely to get."

Frankly, I believe that $550 million per team would knock out both the Chargers and Raiders who, while not exactly impecunious, don't have that kind of money to put into a relocation fee.

However, deMause cautions that the NFL "could invent some kind of revenue sharing credit" that would reduce the figure. Overall, "the rapidly rising dark house candidate" won't be decided this month, says deMause. The winner needs 24 of the 32 votes; both sides have enough oomph to block the other.

There is another point deMause doesn't mention: Stan Kroenke, who wants to move the St.Louis Rams to L.A., who with his wife is a double-digit billionaire, is the only owner who could come up with a fat relocation fee like $550 million. Possibly $550 million was chosen to squeeze the Raiders and Chargers out. Maybe Kroenke will go it alone in Inglewood until he sees how the market reacts, then take a tenant or partner, perhaps the Chargers.

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Comments
36

I can't even imagine any relocation fee being that high--not even close.

Jan. 5, 2016

aardvark: You may be right, but the source is the NFL's own TV network. Of course, the NFL is not a particularly reliable source. The owners -- who would split the fees among themselves -- will make the final decision. Best, Don Bauder

Jan. 6, 2016

If the assumption that the Spanos gang, for whatever reasons exist among the family members, don't want to sell the team is incorrect, the way is clearer. The gang, which has a strong record of making good deals, may be planning to sell the team to another bidder, and get more than the $1 billion that experts think the team is worth. An acquirer might be willing to pay a premium for the team and then bargain down the relocation fee. Or, and here's where it gets really screwy, that buyer might look at SD and decide that the team is worth plenty if it stays here. There are opportunities to increase the take from the team if they are handled right.

Whatever deal involves the Chargers relocating, the Spanos gang doesn't have the cash to pull it off. So, my take is that they're waiting for the iron to get hot, very hot, and then either sell the team, or sell a slice of it to a deep pocketed buyer. Who that buyer might be, I have no idea. Just keep in mind that there are hundreds of billionaires out there (yes, that's billionaire with a "b") who could just love to take a cut of the team for a fat price.

Jan. 5, 2016

According to Forbes, the value of the Chargers is already higher--at $1.525 billion, but I can't see someone buying the Chargers and keeping them here without a new stadium here.

Jan. 5, 2016

aardvark: Yes, Forbes thinks the value of the Chargers has leapt in the last year. Still, $550 million is about one-third of $1.5 billion. That's a stiff price. It's probably a bigger percentage of the Raiders' worth. Best, Don Bauder

Jan. 6, 2016

Visduh: I have mentioned several times that the Spanos clan might sell the team, particularly since pro sports teams are going for ridiculous prices. For all we know, the team may be in negotiations with a multi-billionaire now. Best, Don Bauder

Jan. 6, 2016

Once the move is approved L.A. Chargers will have a valuation of > $3B, maybe even $4B. I don't see why it would be that hard to come up with $550M. If they have to sell a stake of the team they can sell a stake in the team. Or sell the whole team for that matter.

Jan. 5, 2016

ImJustABill: I don't know the valuation would jump to $3 billion or $4 billion. Is L.A. that good a market? Two teams, doing poorly in L.A., moved out in the mid-1990s.

The Rams, Chargers, and Raiders all had losing records this year. That could negatively affect the selling of personal seat licenses. There are a lot of variables floating around here. Best, Don Bauder

Jan. 6, 2016

ImJustABill Seriously?? You actually believe that the Chargers value will at least double, possible almost triple, making them more valuable than both the Patriots and the Cowboys, just buy moving them to Los Angeles?? Again, seriously??

You need to look at the details oh how Forbes values the teams, not just what they value he teams at. When 2 teams share a market and/or a stadium, those values will be halved. I find it hard to believe that the Chargers sharing a stadium in the number 2 market would make them more valuable than a team playing in the number 1 media market. And that's not even considering the fact that the Chargers brand is worth less than one half that of the of the Jets and less than one third of the Giants. I can see the Chargers value increasing to $2 billion, possibly $2.25 billion, AFTER the stadium is completed and IF they play in the same stadium as the Rams. But more than $3 billion, maybe even $4 billion?? I would say not even close.

Jan. 6, 2016

danfogel: I agree that a $3 billion or $4 billion valuation is a big stretch.. Best, Don Bauder

Jan. 6, 2016

Forbes has grossly underestimated NFL team valuations for decades - that can easily be seen by comparing Forbes valuations with actual sale prices for teams which have changed hands. Forbes' methodology is obviously wrong.

Given the recent sales of the Dodgers and Clippers at around $2B I don't think it's a stretch to say the L.A. Chargers would be worth $3B - $4B.

Maybe the owners of the Dodgers and Clippers overpaid but they've still established a precedent for valuation of L.A. sports teams that will be hard to undercut.

I think any NFL owner of an L.A. team would laugh out loud at a $2.25B offer - unless that owner was completely desperate for cash.

Jan. 6, 2016

ImJustABill In my opinion, that the Dodgers and Clippers sold at around $2B merely indicates that if you have enough money and want to own something bad enough, value and how much someone will pay have nothing to do with each other. The last valuation had the Clippers valued at $1 billion less than the Lakers and only 80 percent of what Balmer paid for them. We will see how that changes when the new valuations come out in February.

Jan. 6, 2016

danfogel: So Ballmer paid 20 percent over estimated market value. That's not unusual. Best, Don Bauder

Jan. 6, 2016

don bauder. No, actually. Before the bidding for the Clippers began, B of A had placed their value at between $1 billion and $1.3 billion. Btw, the second-highest bid was $1.6 billion. Balmer went in at $2billion because he wanted to own a basketball team and has even said publicly he didn't care if he paid over their value.

Jan. 6, 2016

danfogel: Ballmer's economic reasoning was similar while he headed Microsoft. I don't know why it took so long for Gates to oust him. Best, Don Bauder

Jan. 6, 2016

I think this is probably the answer to your question. From WSJ:

"Under Ballmer's tenure as CEO, Microsoft's annual revenue surged from $25 billion to $70 billion, while its net income increased 215 percent to $23 billion, and its gross profit of 75 cents on every dollar in sales is double that of Google or International Business Machines Corp"

Jan. 6, 2016

danfogel: Microsoft numbers couldn't help but go up. The company's innovation record under Ballmer was poor. He was laughed at in Silicon Valley. Best, Don Bauder

Jan. 8, 2016

ImJustABill: Remember that part of the payment for the L.A. Clippers was in Microsoft stock that could not be sold right away. Best, Don Bauder

Jan. 6, 2016

Neil DeMause: We're honored to have you contributing to this blog. How easy would $550 million be to finance for a family worth $2 billion at the most, and probably considerably less? As you point out, the financing of the stadium would also be going on. The value of the Chargers is by far the biggest asset the Spanos family has.

The NFL itself possibly leaked the $550 million figure. If so, why? It could be a deal killer for the Chargers and Raiders. Best, Don Bauder

Jan. 6, 2016

don bauder it has also been leaked by those inside the NFL that as of the relocation filing date, none of the three team have the necessary 3/4 majority owner votes needed to have their relocation approved. I would suggest that this possible $550 million relocation fee is simply a tool to soften the blow for at least one team whose relocation application will be rejected. An excuse for the NFL, as it were, to tell one, or possibly two teams that they are stuck where they are because they don't have the money. And as for financing the move by selling part of the team to raise the capital for the relocation fee, remember that the sale of ANY portion of the team has to be approved by the league and I have heard it reported that that the owners will not approve any transfer of ownership for relocation purposed unless it involves a majority of ownership, in which case it could take up to a year to vet and approve such a sale.

Jan. 6, 2016

danfogel: The Chargers tried to make a deal with Anschutz when his plans for a downtown L.A. stadium were still on the table. The two sides parted company, and some reliable sources say that Anschutz wanted too high a percentage of Chargers ownership. The difficulty of getting it approved may have been a roadblock. Best, Don Bauder

Jan. 6, 2016

real money or money on paper for the tax man ?

Jan. 6, 2016

Murphyjunk: Thanks to the Federal Reserve's frenetic pumping up of money and credit beginning in 2009, nobody knows the real value of money anymore. Best, Don Bauder

Jan. 6, 2016

I believe ImJustABill makes an excellent point, particularly about the Clippers selling for $2 billion. IMHO I think the NFL owners lost their minds knowing that Donald Turkey Sterling's lousy b'ball team went for that much. They figure THEIR team/business is worth A LOT more given stadium deals, guaranteed NFL TV money, etc. The Clippers reset the bar. It created a money grab with the Rams, Chargers and Raiders trying to get there first.

Jan. 6, 2016

NothingSurprisesMeAnymore: There is no doubt that Ballmer's gross overpaying for the Clippers reset the bar. But by how much? Yes, among the various sports, pro football is by far the most profitable for owners, but it has long-term barriers, such as chronic traumatic encephalopathy. Best, Don Bauder

Jan. 6, 2016

The Buffalo Bills were sold in late 2014. As I recall, they sold for between $1.2 billion and $1.4 billion. At the time, Forbes valued the team at $935 million. In the 2015 list, they were the least valued team at $1.4 billion.

Jan. 6, 2016

danfogel: But if whoever bought the Bills (I can't recall) paid, say, $1.3 billion, he or she has already seen the value go up a bit, at least according to Forbes. The new owner is lucky he or she can sit in a luxury suite during the game and doesn't have to sit outside in Buffalo weather. Best, Don Bauder

Jan. 7, 2016

don bauder My comment was made to refute NothingSurprisesMeAnymore's theory that the Clippers sale price "reset the bar" for NFL owners, or any other sports team owners for that matter. I would also argue that it was the sale of the Sacramento Kings and Milwaukee Bucks, sold for well over their valuations, that raised the bar. In particular the Kings. They were valued at $300 million and a 65% stake sold for about $350 million, bringing their valuation to around $550 million. BTW, in contrast to the Clippers, who are now valued at less than the price paid for them, the Kings are now valued at $800 million, well above their post sale valuation. I should also mention that Steve Ballmer was also part of the group who initial tried, and failed, to by the Kings. As I said, he really, really just wanted to own an NBA team. apparently at any cost.

Jan. 8, 2016

danfogel: Maybe it could be said that the price Ballmer paid didn't reset the bar, but disquieted those sitting at the bar. Best, Don Bauder

Jan. 8, 2016

don bauder Attempted humor??

Jan. 8, 2016

danfogel: I guess it went flat. Best, Don Bauder

Jan. 8, 2016

Maybe the anti-Chargers folks can help with the fee. In any event the whole process was decided in smoke filled back rooms long ago the rest is just window dressing.

Jan. 7, 2016

AlexClarke: I think there is a fairly good chance that the Chargers will be sold to some multi-billionaire who could pick up the $550 million relocation fee (if in fact it is levied) with pocket change.

Opinion now seems to be leaning in favor of the owners actually making a decision next week. Note that Fabiani seems to be spending his time these days flacking for Sheldon Adelson. Maybe a Chargers deal has been cut already. I still think it likely that whenever the decision is made, the Chargers will be number two in Inglewood. Best, Don Bauder

Jan. 7, 2016

Don - did you see what happened in Marty Graham's comment section Border article? The South hijacked it, very strange. Wanted to tell you coconut oil may not be good cholesterol/ heart healthy. Walnuts very good and flax oil, CoQ10 but I'm not a health professional and you are probably on drugs. haha

Jan. 7, 2016

shirleyberan: The only food I thoroughly dislike is coconut. I think I inherited that. My father hated coconut. Best, Don Bauder

Jan. 7, 2016

Mike Murphy: Yes, there SHOULD be an investigation of the NFL -- particularly the obscene profits of owners. But there won't be an investigation. Best, Don Bauder

Jan. 8, 2016

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