To understand BayIG’s plans for the Coliseum, look to San Diego

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.

The new Chargers stadium would have been located two blocks east of PETCO Park

The new Chargers stadium would have been located two blocks east of PETCO Park

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.

11 thoughts on “To understand BayIG’s plans for the Coliseum, look to San Diego

  1. The “coverage” of San Diego’s efforts are just plain disgusting. The UT, which is nothing but the mouthpiece of mega developer Doug Manchester, does nothing but push his 10th Ave Terminal stadium project despite the fact no one in the city or the public wants the stadium there. And in doing it they’re constantly trying to derail SD’s convention center expansion plan which will keep Comic-Con in that city indefinitely (and Comic-Con is far more valuable than the Super Bowl and it is held annually).

  2. The other place the Chargers have been speaking in relocating is San Antonio’s Alamodome which was built in 1993 for the Spurs as the Bolts can relocate there because Spanos is close friends with the owner of the Alamodome.

  3. Too bad Dan. Either san diego gives in or lose the chargers…

  4. Spanos is friends with the owner of the Alamodome? The dome is owned and operated by the city of San Antonio. The city (and Bexar County Judge Nelson Wolff) weren’t very happy with the way they were used in the Marlins saga and while I believe they could come up with the money quickly to bring the dome up to current standards (seems like it would’ve been $150 million or so when the Saints were negotiating the in the years before and following Katrina) they’ll be hesitant to waste their time just to help someone else get a stadium across the finish line. Most of the Spanos/Chargers to SA stuff comes from Spanos being a Rick Perry donor, and Perry aggressively going after out-of-state corporations to relocate to Texas. Not that it’s impossible, but I’ll believe it when I see it. It’s always funny to read about these deals that are supposedly happening because rich guy owner x is friends with rich guy developer y or donated money to politician z. One day Mark Davis is going to LA because he went to a Clipper game with Ed Roski; a few years ago Spanos was going to Anaheim because he knew Mayor Curt Pringle. Powerful people know other powerful people.

  5. @Joe.
    I didn’t know that. Mark davis/Raiders is hard to figure out….he is showing Oakland s fair chance to come up with the money to build a stadium.. yet it does seem like he has L.A in his back pocket. Maybe he is looking at the bay area market and realizes how the 49ers have been takin more public and private power away from the Raiders. Maybe Mark Davis feels the Raiders would have a better chance to succeed in the L.A market second time around..

    Some advice for Oakland. ..since they hate lew wolff so much..why dont they push the A’s out and give the Coliseum and some land control to the Raiders? Would RAIDERS stay? I mean i would at least ask.

  6. “Too bad Dan. Either san diego gives in or lose the chargers…”

    Or San Diego can push for them building at the only location that makes sense, the current stadium site. Unlike the Coliseum, Qualcomm Stadium is in a nice part of town and accessible by both rail and 4 major freeways. There’s no reason not to build on the existing site and the public knows that. They don’t want the stadium in the East Village, and they sure as hell don’t want it at the 10th Ave Marine Terminal (where it would put hundreds of well paid longshoremen out of jobs). And Fabiani and the Chargers know this and were starting to warm to the idea of building at Qualcomm in the fall independent of Mr. Manchester.

    As for the Alamodome, don’t know where that came from. The Spanos’ haven’t mentioned the Alamodome in any threats, veiled or otherwise, that I’ve seen. A link would be appreciated.

  7. The Alamodome is not good enough to be a permanent home for an NFL franchise. Unless someone in SA wants to drop hundreds of millions on improvements or a brand new dome, SA is not under consideration.

  8. @ Harry

    I agree with pretty much everything you say – why Oakland is spending time on this giant plan to build three facilities for three teams when two of the teams desperately want to leave is mind-boggling. Focus on the Raiders.

    As to the Raiders to LA, I think it comes down to Roski and Anschutz wanting a big piece of a team. They both tried the “we’ll build you a stadium in exchange for equity in a team” pitch, and nobody is interested, which means they’ll first have to pay market value for a share of any team. That’s problematic for the Raiders, as the Davis family only owns 47% (last I heard – I know ML mentioned that they were trying to buy out more of the limited partners, so maybe that number has risen). NFL rules say the controlling owner has to have at least 30% (again, there was talk that may drop to 25% but I haven’t seen anything concrete) amongst them or their family, so the most Davis could sell off, and get a windfall on up front, would be 17%. I doubt that’s worth it, especially if all it does is then make the other limited partners shares skyrocket.

  9. Hey ML what about my suggestion about Oakland giving the Coliseum land to the Raiders. ..could it work???

    • @harry – It’s an election year. None of the candidates for mayor or city council want to make it look like they’re favoring one team over another, or give up on keeping a team. Tossing the Coliseum to the Raiders over the A’s is a big step towards defeat, and it’s a good way to show MLB that you’re more interested in the NFL. It would be the honest way to go, but given the politics, not likely.

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