Colony Capital, the Santa Monica-based hedge fund, is in a rather enviable position. It is poised to save two NFL teams from leaving their hometowns: the Oakland Raiders and the San Diego Chargers. In 2013, Colony inserted itself into both teams’ respective stadium quests, directly working with the Chargers early last year on their downtown stadium proposal and then becoming part of the BayIG consortium for the Coliseum City project.
If you want to get an idea for what Colony and partner HayaH Holdings (Rashid Al Malik) intend to do in Oakland, there’s no need to look further than San Diego. Colony has been working slightly longer on the Chargers’ plans than they have the Coliseum’s. The timing has been seemingly fortuitous. As the dissolution of redevelopment has left cities scrambling for ever dwindling public funds, Colony has emerged as a potential source of funds to bridge major funding gaps for both stadium projects. Because of this, pro-stadium groups in both cities have pinned their hopes on Colony to make these stadium concepts work.
Last fall, the Chargers and Colony took an unusual approach in advocating for a downtown stadium. Together they came out against an expansion of the San Diego Convention Center. Instead they proposed a facility within their planned stadium that could also hold smaller conventions up to 250,000 square feet. In the end the body that runs the Convention Center wrote off any plan that didn’t have an expansion adjacent to the current facility, so the downtown plan died in the process.
It made sense for the Chargers and Colony to look for public money for the stadium, in the form of a convention center expansion effort. It’s a good way to subsidize part of the stadium cost. Now that the option has evaporated, they’ll go back to their original plan of developing various publicly owned parcels to help pay for a new stadium. San Diego actually has two such properties in play, the 166-acre Qualcomm Stadium land and the 38 (up to 95) acres at the old Sports Arena in the Midway neighborhood. Both bring in minimal revenues to San Diego: the arena brings in less than $500k per year, and the stadium is subsidized to the tune of $17 million per year – reminiscent of the Coliseum.
It’s difficult to blame the Chargers/Colony from looking for ways to potentially reduce their contributions. Any stadium in San Diego or Oakland will cost around $1 billion to construct, and the combined Chargers/NFL contribution is expected to be in the $300-400 million range. That leaves a major funding gap of $400-500 million for both stadia, which somehow Colony and its partners will have to cover. Effectively that’s $1 billion in private money for 2 new stadia.
Not including the acreage set aside for the stadia (or parking), the combined acreage in Oakland and San Diego is 300 acres. Let’s say that the land is given to the real estate firms for the purpose of building residential complexes near the stadia, in exchange for Colony covering the entire funding gap for both. A typical medium-density residential development has 20 units per acre, whereas a high-density development can have 100 units per acre. Medium density won’t cut it, because 300 acres X 20 units/acre = 6,000 units, translating into a $166,666 subsidy per unit, prohibitively high if a developer is trying to turn a profit. High density makes more sense as that translates to only $33,333 in per-unit subsidy by the developer. There are obvious issues with making high density work in those areas, mostly having to do with building the necessary infrastructure (access ramps, garages) to support those high rises, on top of replacement stadium parking that would be required.
Coliseum City’s development plans are a little more complex, as they include a mix of residential, office, and retail. That can help defray some of the costs, but in the end it’s still $1 billion that has to be covered by someone other than the team or the NFL. And that doesn’t include a funding gap for a new A’s ballpark or a replacement arena in San Diego. I’m not employed by a big real estate hedge fund, so I’m not smart enough to figure out how it’s all going to work. Thankfully, we should have some vision into this over the next six months, at least as far as the Raiders are concerned. At the moment, East Bay media is taking a wait-and-see stance peppered with a little hope, while the San Diego Union Tribune is in full cheerleader mode. I look forward to seeing what deals are made, and to serious public participation in the process.