FanPost

Rainy Day Fund... What is it really for? A New Arena

From the Forbes article on the Giants Franchise :

The team has been using its revenue to pay down debt on its privately-financed, $325 million ballpark ahead of schedule and to boost payroll.



Debt payment on the park is $20 Million per year.

What is driving the Giants ownership group to pay off the stadium early? The World Series Windfall made it possible,but what other business opportunities are opened up if they pay off AT&T? What does paying that off early get the Giants, other then a huge piece of property that can be used as an asset to borrow against? Hmmm. If I could borrow $300 Million, what would I build? And why would I want to build it sooner rather than later?


Point of fact, the new Golden State Warriors ownership group seems to have very close ties to The SF Giants. the Lacob/Guber group was originally reported to have investment capitol from the SFGiants Ownership Group, but either that formal monetary investment fell through, or Lacob/Guber has down a good job of burying that particular ownership detail. It would be easy enough to bury, if it was in the form of a loan to one or more of the lacob/guber group owners.

The Lacob/Guber group signed a new deal with Comcast SportsNet Bay Area, which of the Giants have a 30% ownership stake in.

The Warriors have also been in very public talks with the city of San Francisco, and the Giants, concerning a new Baketball arena, next to AT&T park. The interesting thing about this possible deal is that THE GIANTS ALREADY LEASE/CONTROL the land that this proposed arena would be on. It's a 66 year ground lease from the port commission for the relatively cheap price of 1.2 million in rent per year.


That mean's they've got over 50 years to leverage that 12 acres into a continuous and increasing revenue stream. A new basketball arena would go a long way towards that. If the area around the ball park were filled with people during both the NBA and the MLB seasons, local business development on that 12 acres could really take off, creating even more opportunities for revenue. A Luxury Hotel of some sort has always been planned as being on site. A nice place for NBA and MLB players to stay while in town, and a good fit in a city that has a constantly overflowing Moscone center.. a privately owned conference space adjacent to/connected to an arena that is empty half the year? Try finding conference space in this city! Having a conference center of any size in San Francisco is like a license to print money.

Given the control of the land, and the already existing relationships with financiers, it seems like it would be a no brainier for the Giants to fund an arena. Roughly $300-$400 Million would probably get an Arena built, and a 20 year financing deal would probably run pretty close to the 20 year deal The Giants paid on their 375 Million note on AT&T park. Point of fact, they could probably get significantly BETTER financing today then they did to finance AT&T. Less risk (as demonstrated by a track record for actually paying off this type of financing once already), a comparably valued asset as collateral, and an extremely depressed economy which has interest rates at historic lows suggests it might cost substantially LESS then the $20 million a year the Giants are paying now on AT&T.

Also, any new financing payments would come from operating revenues (lease payments from the Warriors, probably based on some form of ticket revenue sharing, plus revenue from other off season uses) instead of Ownership profits, and/or Giants team revenue. Combine this with a hotel development deal adjacent to/part of the Arena complex, and Giants could actually be end up bringing in significantly MORE money than the financing would cost.

The warriors have an out in their current lease in 2017. They would still technically be on the hook for any remaining oracle arena remodel debt... but the details of the Warriors June 2011 lawsuit settlement with Oakland Alameda County Coliseum Authority probably contains some relief for the team in this regard, and even if it doesn't, the Authority did agree to spend millions in Arena sound system/scoreboard upgrades over the next couple of years... Millions that the warriors don't have to spend, that instead can be used to pay off that 2017 lease debt problem. Getting out of Oakland and into San Francisco has probably been the new ownerships goal all along, given the record breaking amount of money they paid for the franchise. Corporate sponsorship and a more well heeled fan base means more season tickets/suits and increased revenue from merchandising.

A higher profile and San Francisco home also would mean higher ad rates for Warriors broadcasts (Hello, 30% CSN Bay Area Giants ownership).

The Giants could be poised to create a major new profit center using assets they already control (warriors broadcast rights, and Port Authority land lease/development rights) at fixed costs.

Given the financial incentives involved in this, for both the Giants and the Warriors, I see this as essentially being a done deal. It doesn't take any voter approval, or tax money. Just NBA league approval, and given the way the NBA has let teams whip back and forth around the country, I don't see that as being a stumbling block.

Remember, you heard it hear first. Your 2018 San Francisco Warriors, live from AT&T Arena.

All this new money will be needed to keep the Giants Dynasty together... Cain, Timmy, Madbum (free agent in 2018), Panda and Posey under long term contracts mean a Team Payroll somewhere north of 200 Million. :)

This FanPost is reader-generated, and it does not necessarily reflect the views of McCovey Chronicles. If the author uses filler to achieve the minimum word requirement, a moderator may edit the FanPost for his or her own amusement.

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