Illustration by Lorenzo Gordon. Photo by Getty Images
As the NFL season opens, Sportico is examining one of the main components of ever-rising team valuations: the stadium. With the cost of materials rising, stadiums have become more than just places to watch football, as teams seek to earn year-round revenue beyond the 10 games they host each season. This is the fourth installment of a multi-part series.
In recent decades, a significant hurdle for NFL teams seeking new stadiums has been garnering public support for where to place a new facility. In the mid-1990s, residents torpedoed plans for a domed stadium in South Boston, and in 2005 a plan for a Manhattan bowl for the Jets was sunk by business and political opposition.
But setting aside the political volatility of a stadium location, NFL owners sit in the enviable position of being able to finance top-of-the-line facilities for their teams more easily than many any other private parties, according to Steve Vogel, managing director at U.S. Bank’s sports finance group and one of the major players in stadium finance.
The league’s strength of ticket sales, corporate sponsorship and general popularity in each of its regions allows lenders to project long-term revenue streams to back stadium construction costs, allowing teams to fund facilities with relative ease.
“When we’re doing due diligence, we’re asking, ‘Has the corporate base grown? What are the demographics like? What is the broader economy like?’ All these things are taken into account,” Vogel said in a video call. “And then you see the NFL has been very successful, and it’s at the top of the food chain.”
In fact, the very things that contribute to the rising price tag of stadiums—including more and fancier suites, additional revenue-generating spaces such as clubs and bars and customer experience enhancements that also benefit non-sports events—have also made the process of financing a new facility easier, according to Vogel.
“Consumer behavior now is to have a lot more flexibility when they’re in the building, so teams are packaging club areas with other seating areas and having increased pricing for certain experiences in the stadiums,” Vogel said. He added that “fan expectations have changed and owners are building to what fans want. That’s a good thing, because you’re creating more contractual [and other] revenue.”
It would never happen in this day and age, but if an owner sought simply to pack as many seats into a bowl and forsake the luxury upgrades, the project would find it more difficult to secure financing because of the lack of different revenue streams.
Individual NFL teams benefit from the league’s remarkable financial discipline. “The bedrock of stadium finance is the NFL’s rules and regulations and the governance that the Commissioner’s Office hands down to the owners,” Vogel said. “The parameters and debt policies have been consistent for a very long time.”
Those include a $600 million cap on debt against a team—not much, considering the average team is now worth more than $5 billion. It also includes the league’s G4 stadium funding program, which teams can borrow from to help defray construction costs.
The league’s discipline gives it higher credit ratings—which means it costs less for teams to borrow money—and helps lenders make long-term revenue projections with confidence. In the North American corporate finance world, the NFL’s $10.87 billion of estimated debt rates an A+ or A from Fitch Ratings. Those are some of the highest scores the agency gives. Just 0.3% of all such loans are rated higher—and 88% are rated lower—than the NFL, according to Fitch data.
“The ratings reflect the NFL’s position as the most popular professional sports league in the U.S. and its strong and highly regarded economic model, … significant and equitable revenue sharing among its member clubs [and] a proven track record of conservative financial policies,” Fitch wrote in a March report affirming its opinion on the NFL’s debt.
The sheer amount of money needed and the length of time it takes to see a stadium deal from conception to completion also means the world of facility finance, dominated by large established lenders like U.S. Bank, hasn’t changed as much as an outsider may think, Vogel said.
Trendy new sources of sports-industry capital, including private equity and sovereign wealth, are making few inroads into the facility financing game.
“Access to capital has been very consistent,” Vogel said, noting that an owner today would experience a deal structure (such as tiers of secured loans) and process that has not changed much from when the Jets and Giants built MetLife Stadium, which opened in 2010. “The biggest issue is how much public contribution [will be included], and that ebbs and flows with the political environments in state to state.”
Jack Mula, who served as New England Patriots general counsel from 1999 to 2007 and advises teams on stadium deals, agrees. He sees modern stadium negotiations relying on an approach utilized by Robert Kraft for Gillette Stadium, which opened in 2002.
During a phone interview, Mula recalled how in the late 1990s, the State of Connecticut and its governor at the time, John Rowland, tried “to lure the [Patriots] to a proposed location in Hartford with a sizable public funding commitment” to put toward a stadium.
The Kraft family preferred to remain in Massachusetts—“a more central location for all of its fans in New England,” Mula explained. The Patriots and government officials in the town of Foxboro and at the Massachusetts legislature figured out a way forward: the first fully privately funded NFL stadium.
Mula said the Kraft Family was committed to remaining “local and local,” with a development “far beyond just a new home for the Patriots.” The Patriots obtained “additional revenue opportunities beyond Sunday football games,” he said, partly by targeting “more on-site parking, easier access and egress for vehicular and public transportation, hospitality and entertainment zones, public walking spaces, hotels, restaurants, retail and commercial space and a Patriots Hall of Fame.” The state of Massachusetts, meanwhile, agreed to contribute to infrastructure costs.
“What [the Patriots] did 20 years ago seems to [still] be the model now,” Mula believes. “New stadiums have been, and are being, built to include ancillary development with infrastructure, public access and public good issues front and center. A smart design providing an enjoyable game day fan experience with opportunities to utilize the venue 365 days a year as well as working together with governmental interests and accounting for present and future conditions are paramount.”
Two relatively new venues, Allegiant Stadium in Las Vegas and SoFi Stadium in Los Angeles, have similarly involved the building of commercial developments around them and reliance on positive relations between the team and the local government. Mula sees one current stadium situation as particularly emblematic of these same principles.
“Jacksonville’s proposed stadium redesign,” Mula noted, “looks as special as its location on the water’s edge.” He also suggested it’s encouraging to see Jaguars owner Shad Khan’s commitment to expand the project beyond a stadium, and to see how the Jacksonville city government and community want to find a solution for its stadium.
Irwin Raij—co-chair of Sidley Austin’s entertainment, sports and media industry group and longtime attorney on sports-anchored public-private partnerships for stadium and related development in the major pro leagues—told Sportico in a phone interview “it’s a very active environment” for stadium projects.
“Of late we’ve seen increased interest in ‘sports anchored development,’ where the project involves a stadium or even practice facility as an anchor for ancillary mixed-use development around it,” Raij said. He cited Battery Atlanta, a mixed-use development that features Truist Park for the Atlanta Braves and facilities for other businesses, as an excellent example of “experiential master development.”
However, Raij acknowledged the additional challenges for stadium deals, many of which are caused by the financial markets. Because interest rates are increased, borrowing becomes more expensive, and the cost of construction is soaring, as well.
In spite of these hurdles, Raij said, teams and developers, which are using sophisticated models, are “better” in terms of analysis, use of analytics and assessing markets. This helps them make a more persuasive case for community value.
To that point, Raij said that post-pandemic there is a revived appreciation for teams acting as a broad community asset that can support a commercial and social ecosystem. “It’s [viewing a] stadium or headquarters as an anchor,” he said, “like we once considered a Nordstroms in a shopping mall.”
State of NFL Stadiums—A Sportico Series
Part 1: State of NFL Stadiums: Smaller, Pricier, Busier Venues on the Way
Part 2: The New Stadium Paradox: Soaring Costs Sink Small Projects’ Appeal
Part 3: NFL Teams Find Practice Makes Perfect Space for Sales and Sponsors
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