Thursday, April 17, 2008

San Jose Earthquakes Gets A Soccer Stadium

The San Jose Earthquakes, the new but old MLS expansion club, received approval for a new soccer specific stadium. MLS is constantly pushing for clubs to have stadia independent of other sports franchises on the theory that it will help sustain the teams.

San Jose Earthquakes owner Lew Wolff has agreed to a $132 million deal with city officials to build a new soccer stadium near the airport that could open as early as 2010.

The deal calling for the 18,000-seat stadium and an accompanying retail, office and hotel project was reached Monday. It still must be approved by the city council next month.
I don't know if the theory holds water, but I do know that if a government can be conned into providing some financial support for a soccer franchise something must be going right for soccer in the US. Despite Leigh Steinberg's proclamations.


Apparently, a commenter did something called research and discovered more details to the plan. I think those sorts of actions are reprehensible. This is a blog for god's sake. Anyway, it appears that the government may not be ponying up any money for the stadium. Lew Wolf, the owner, wants the city council to re-zone other industrial property he owns for residential development to offset the cost of building the stadium and acquiring the land of a former manufacturing plant.

Even more interesting is that the city bought the land for $81 million in 2005 and is selling it to Wolf for $132 million, plus Wolf still has to build the stadium. So, in under 3 years, San Jose has made a 62% profit on the land. That's some good business.

Moreover, if the council approves Wolf's plan, Wolf will receive a windfall on the profits he makes on his investment land rather quickly. Instead of having to wait and spend a great deal of time trying to get his land rezoned, he has bargained with the city to allow him to realize capital gains on the property much sooner, which are taxed at a lower rate. If he can get 1500 homes from the property at the average San Jose home price (about $500,000) that would amount to about $750,000,000.00 in revenue.

If he returns 25% on his investment that would give him about $187,500,000 in profit, less taxes of course. However, I imagine Wolf probably spent very little on this "industrial" property (probably a brownfield or something) and stands to earn even more profit than that, which of course would mean he could probably build the stadium and still put some coin in his pocket.

All things considered, if all of these facts are accurate, I would much rather see a city do this sort of transaction for a stadium than just blindly give out money. It makes much more sense.

1 comment:

Ian said...

I'm still not convinced. If you read the article the money from the Quakes' side only comes through if Lew can successfully complete and sell some big ass housing development elsewhere in SJ.

Also, what city wouldn't be willing to give away from industrial brownfields next to the airport?