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September 2, 2010 |
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| January 09, 2009 |
By: Wayne Tompkins and Eric Kalis |
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Bob DuPuy and David Samson
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lorida Marlins executives say they are confident the credit crunch will not deter financing for the Major League Baseball team’s $525 million stadium on the site of the former Orange Bowl in Miami’s Little Havana, even if it means they have to take out a straight bank loan.
 David Samson on stadium financing
But team president David Samson says one thing is likely: The terms of any financing will not be as favorable as once hoped.
City and county commissioners are set to vote this month on the stadium deal, which is in line for $370 million in taxpayer funds.
While sports economists who follow the Marlins’ long-frustrated efforts to build a new stadium are optimistic the team will find financing, they are more skeptical about whether the project will be able to control cost overruns and deliver promised economic benefits.
Samson said it will be another year to 18 months before the team has to seek financing in the market, after the worst of the credit crisis is expected to have passed and when many economists believe recovery will be under way.
Even if the team had to move immediately, however, the strength of Major League Baseball’s brand, its historic resiliency during economic downturns and the value of the franchise itself would be a strong incentive for wary lenders to play ball, he said in a meeting with Daily Business Review editors and reporters this week also attended by MLB president Bob DuPuy.
“We’ve got four banks who want to do business with us today,” Samson said Wednesday, noting the team is prepared to go forward with any number of financing options including, if necessary, a straight bank loan.
“Goldman Sachs actually met with us,” he said. “They would do the deal today and go to market today. Our bankers tell us that when we do go to market, they think they will have the entire a la carte menu of possibilities available to them. We are prepared for the worst possible terms, which we believe will be a four- or five-year term in a straight bank loan, as opposed to a construction loan, which has been the more conventional way of going to the capital markets in the past.”
The Marlins will finance $155 million of the stadium’s cost in the public-private partnership, with $347 million coming from Miami-Dade County and $23 million from the City of Miami. The 37,000-seat retractable roof stadium is currently scheduled to open in time for the 2012 season. The Marlins have played their home games at Dolphin Stadium since their 1993 founding.
As the team seeks financing, Jim Cassel, vice chair at Miami investment banking firm Ladenburg Thalmann, said that while the economy could be in recovery a year from now, the credit crunch — in the words of Yogi Berra — ain’t over ’til it’s over.
“Eighteen months ago, I’m sure we’d all feel in that frothy market ... they would hit it out of the ballpark,” Cassel said. “But things have changed, and it’s a very different financial world today. Part of the issue here is whether their financing is going to be senior type debt, mezzanine type financing or if they’re going to have to bring an equity partner in, and what kind of collateral they have to put up. What they really have is the collateral of the team.”
Cassel said in some instances the league itself has supported similar projects.
“I believe Major League Baseball views South Florida as an important place to be, for the proximity to South and Central America,” Cassel said. “I think they’ll be able to find the money. If it’s debt, they’ll pledge the team, that’s not unusual. At some point a year or two from now, the lenders who have lent on ball teams, like Citigroup, will certainly come back in. Worst case scenario, they may have to bring a minority partner in or turn to the league for some support.”
Bruce Weisenthal, an attorney with Schiff Hardin in Chicago who did the public financing deals for both Soldier Field and U.S. Cellular Field in Chicago, said the value of Major League Baseball franchises is still strong.
“The ability to raise the money I don’t think is so much in question,” he said. “The public’s perception that there is no liquidity is probably a little too severe. Although there is a liquidity crisis, rates are very low. If you have a financing that is attractive and is well-secured, you can get pretty favorable financing right now.”
In the Marlins case, one thing that works against them is a history of weak fan support, said Patrick Rishe, director of SportsImpacts, which conducts economic impact and demographic studies for sports teams.
The Marlins ranked dead last in the league last year in attendance, drawing 1.33 million fans, or about 16,700 per game. They also are saddled with Forbes magazine’s ranking as the major league’s least valuable franchise, at $256 million. The top-ranked New York Yankees, by contrast, are valued at just over $1.3 billion and drew an equally league-leading 4.3 million, an average of 53,069 per game.
“That would give some investors some concern over the long-term rate-of-return on the investment,” Rishe said. “You still have this kind of apathetic fan base.” That gets to the heart of the Marlins bet, of course, that the new stadium will revive fan interest, generating higher revenue streams that will allow it to keep a better product on the field.
In spite of those concerns, Samson said investors are keeping baseball in their lineup.
“There’s a tightening and so what you have is a change in terms and change in pricing, but you still have deals getting done,” Samson said. “Baseball teams have continued to do deals with banks whether it’s Goldman Sachs or the Bank of America, or JPMorgan or Citibank. Very recently, MLB has done a deal as an industry, the Yankees have done a big deal, the Mets have.”
Even if the financing is nailed down, there are still concerns over whether the project will be able to avoid the sort of devastating cost overruns that plagued the new football stadium for the Giants and Jets in New Jersey, where the initial $750 million cost more than doubled to $1.7 billion. While lower construction and labor costs could reduce that risk, some experts remain concerned.
“Unless you get a true fixed-price contract on all the steel, materials and labor costs ... and no incomplete drawings, they’re doomed from the start,” said Barry LePatner, whose New York City law firm LePatner & Associates advises clients on major construction projects. “Costs will soar and — guaranteed — a large portion of those extra costs will be passed on to the taxpaying public.”
With the New Jersey football stadium project, “They are doubling the prices of the tickets, doubling the parking, doubling the cost of a Coke and everything and nobody can control it,” LePatner said.
To win over potential lenders and the city and county commissioners set to vote on the stadium deal this month, Marlins and Major League Baseball officials are touting the urban revitalization a baseball stadium would bring Little Havana.
A portion of the stadium land will be used as a plaza with restaurants and complementary retail space, Samson said. The team pursued acquiring additional land outside of the Orange Bowl site but could not find a willing seller.
Miami Mayor Manny Diaz’s growth blueprint for Little Havana helped convince the team that the area can become a thriving urban destination with a baseball stadium as a centerpiece, Samson said.
“Before we agreed to any development in Little Havana we needed to look at Mayor Diaz’s vision and understand how it would flow with the ballpark,” he said. “The [property owners outside the stadium land] will make a big difference in the community because the stadium will make developing the area a priority. It will experience increased traffic flow and the type of retail, restaurants and hotels that come with stadiums.”
Samson and DuPuy envision Little Havana serving as South Florida’s Wrigleyville, an area of Chicago four miles north of downtown where Wrigley Field is located.
Since Camden Yards was built for the Baltimore Orioles in the mid-1990s, most new ballparks have had the same development impact on the surrounding area as Wrigley Field, DuPuy said.
The Marlins stadium “will be the 23rd new or renovated ballpark since Camden Yards,” he said. “Every one has served as a destination point, whereas the saucer stadiums of the prior generation did not. In a lot of instances the stadiums have been centers for urban renewal. That’s the hope here.”
While the stadium’s location fits the description of an underserved neighborhood ripe for development, simply building the ballpark does not guarantee a domino effect, said Philip Bess, a professor of architecture at Notre Dame University. Bess wrote the book “City Baseball Magic: Plain Talk and Uncommon Sense about Cities and Baseball Parks.”
“The claim that a stadium automatically generates adjacent development really has no empirical evidence to support it,” Bess said. “It is just not the case that if you build a stadium there will be development. Any such development has to be planned and requires some kind of simultaneous construction as part of the whole package.
“The good news is by locating it in Little Havana, there’s already a network of streets and blocks,” he said. “The key element of any urban ballpark is that it exists in a network instead of a superblock.”
But even without adjacent development occurring in conjunction with stadium construction, bringing up to 2.5 million fans into Little Havana throughout a baseball season, starting in 2012, would generate the traffic needed for revitalization, said Robert Starkey, a financial consultant for Major League Baseball. Starkey is president of Starkey Sports Consulting in Minneapolis, where the Minnesota Twins are building a new stadium to open in the 2010 season.
“Attracting that many fans into an underdeveloped area that hasn’t had that level of traffic creates the opportunity for urban development,” Starkey said. “In Minneapolis things are already happening now in anticipation of the ballpark, with restaurant openings and developers becoming clearly interested in the prospect. You have to cut through the academic arguments and realize that if you put a ballpark on undeveloped land it will improve the area.”
Nearby residents of Little Havana are throwing their support behind the stadium because they believe property values will substantially increase once construction is complete, Samson said.
The prospect of increased property values — and subsequent additional tax revenue municipalities can receive — is a pivotal reason elected officials rally behind stadium efforts, Starkey said.
Whether property values around the stadium rise depends on the impact of parking and potential zoning changes that could occur as a result of construction, Bess said.
Increased property values “might happen, depending on the design and how neighborhood-friendly the park is,” he said. “Another issue is not putting parking too close to [single-family homes]. Also, the blocks immediately adjacent to the stadium might be up-zoned a bit. If a property is up-zoned to allow retail and residential it could have an interesting affect on the streets and indeed raise the property values.”
One uncertainty with a Little Havana stadium that has been a major component of recent stadium projects is access to public transportation. The nearest Metrorail stop is Culmer Station. Orange Bowl patrons who used the rail line had to catch the bus to the stadium.
The Marlins will implement “stop-gap measures” such as shuttles, Samson said. But expanding transit into that section of Little Havana comes down to political and community will.
“Instead of the tail wagging the dog this will be the dog wagging the tail,” he said. “When this area works, [public transportation] will become a requirement. We are certain that when the neighborhood changes, you will see public transportation and the half-penny sales tax put to use.”
Wayne Tompkins can be reached at (305) 347-6645.
Watch the complete David Samson and Bob DuPuy interview
Reader's comments
wrigley said:comparing little havana to wrigleyville is beyond idiotic. whole different demographic. not to mention, wrigleyville actually has viable public transportation. Jan. 9 at 5:24 p.m. |
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