The Oakland Raiders Owner Mark Davis has reportedly told the members of the finance and stadium committees of the NFL Owners Group that the organization has a plan to finance the construction of a new stadium with or without Las Vegas Sands CEO Sheldon Adelson. That’s a tall order that, when one starts to think about it, doesn’t really pass the stadium financing smell test. Take a look at why with me (and see the video at Zennie62 on YouTube by Zennie Abraham).
Oakland Raiders: $500 million
Nevada Subsidy $750 million
Stadium Cost Gap 1 $350 million
Total Stadium Cost $1.6 billion
The problem is that without Sheldon Adelson’s help, there’s still a $350 million stadium cost gap that would have to be filled if the total cost was $1.6 billion and not $1.9 billion. Its not enough for the Raiders to say that Goldman Sachs will finance the stadium without Adelson, and because they’re not investors – they’re investment bankers.
Goldman Sachs’s speciality is in bonds and loans for, in this case, the construction of NFL stadiums. If they were to give the $350 million to fill the gap, it would have to be matched by some stadium-related revenue stream that would throw off $350 million over some period of time. Think about this.
Goldman is not going to just say, “Hey Raiders! Here’s $350 million, and don’t worry because you will not have to pay us back!” You believe that’s the case, you’re a fool. What Goldman would want is what Sheldon Adelson wants, and that means a percentage of stadium revenues necessary to raise $350 million.
Where would that come from?
Well, the Raiders have already pledged $500 million from stadium-related revenues and NFL loans. But really that’s just $200 million from the sale of personal seat licenses. So, right off the bat, the Raiders have to shave off $550 million in stadium revenue to help pay for it’s construction. Chances are, naming rights will be about $150 million at best, which gets The Raiders less than halfway to the mark. The remaining gap would have to be filled by luxury box revenue, but when you start to run those numbers, the remaining answer means the Raiders would wind up using all of their luxury box revenue for stadium construction, and nothing would be left over for the team’s use.
Think about it.
Let’s say the proposed Oakland Raiders Las Vegas NFL stadium has 137 luxury boxes, each costing an average of $80,000. Assuming a 100 percent sales rate – all 137 suites – that comes to $10,960,000 a year. Over a 30 year period (the length of the bond issue tied to the Nevada Subsidy of $750 million) that comes to $328 million. So we could use luxury box revenue to fill most of the $350 million gap, or we would wind up using $178 million of that if the Raiders landed a naming rights agreement of $150 million.
That still means The Raiders would use 54 percent of luxury box revenues for stadium construction. And that’s if the stadium manages to cost $1.6 billion – if it went to $1.75 billion or higher, then both naming rights revenues and luxury suite revenues would be entirely used to pay for the stadium’s construction. The Raiders would use 100 percent of both sources – no money for the team.
Mark Davis can’t be happy with that prospect. Moreover, I can’t see how his meeting with the NFL Owners, who know this as well as I do, went so well at all. Davis can’t do this without Adelson or another investor. That group or person is going to want their cut – there’s no avoiding it.
Davis’ only way is by having development around the stadium – but that calls for a new developer and investor. Kind of like Majestic Realty. Remember them? The ones who brought $150 million? Bet Davis wishes he had them back in about now.
Davis should stay in Oakland.