It's not every day that a real estate developer considers walking away from $400 million in tax money.
But for St. Louis Rams owner Stan Kroenke, it just might make sense.
Moving his team to his 80,000-seat stadium in Inglewood will boost the Rams' profits and greatly increase the value of the franchise, sports economists say. And there is even more money to be made in the massive real estate development around it.
All that helps explain how Kroenke might profit from building the most expensive stadium ever in the U.S. — with no public money.
Inglewood city officials unanimously approved zoning changes Tuesday night for a $1.86-billion stadium at the old Hollywood Park racetrack. That vote gave Kroenke a clear head start in the NFL-to-Los Angeles derby that intensified last week with the unveiling of a competing stadium in Carson that would be shared by the San Diego Chargers and Oakland Raiders. That plan could yet derail Kroenke's ambitions.
The real estate baron's partnership with the developers of Hollywood Park reflects how profits from modern-day stadiums come from more than just the stadium.
The Rams owner bought a stake in Hollywood Park Land Co., which is turning a nearly 300-acre racetrack site into homes, office buildings, a big shopping center and now potentially an NFL stadium. It's the kind of thing that Kroenke can't do in St. Louis, which is proposing a publicly owned riverfront stadium surrounded mainly by parking lots.
The Inglewood plan follows a model increasingly popular among stadium owners, said Rodney Fort, a sports economist at the University of Michigan.
"You've got to spend money to make money, and he can make a lot more off his own development in L.A.," Fort said. "It's more like a real estate development than a stadium."
The terms of Kroenke's arrangement with Stockbridge Capital — the Bay Area investment firm that's been financing the redevelopment of the Hollywood Park property for a decade — haven't been disclosed. But Chris Meany, a senior vice president for the project, confirmed that Kroenke has bought a stake in Hollywood Park Land Co. and that his involvement extends beyond the stadium.
That means the deal would not be "unwound," even if the Rams don't move to L.A., Meany said. The Inglewood stadium proposal still must navigate the Byzantine politics of winning NFL approval should Kroenke formally request to move the Rams.
Even without the development deal, some economists see a strong case for moving from a smaller market to Southern California.
Although NFL franchises split about two-thirds of the league's revenue — including television contracts worth $4.9 billion last year — local factors could give a big boost to Kroenke's profits, said John Vrooman, a Vanderbilt University economist who studies the NFL.
He estimates that the Rams could earn $100 million more each year on sponsorships, marketing and premium seating than the team could in a new stadium in St. Louis. Further, a move could increase the team's value about 40%, to an estimated $2.5 billion.
"The move to L.A. is an economic no-brainer," even if the Rams pay for their own stadium, Vrooman said.
Others disagree, including Neil DeMause, editor of Field of Schemes, a website that tracks stadium subsidies. Even for Kroenke — who Forbes estimates is worth $5.7 billion — and his deep-pocketed partners at Stockbridge, paying for a stadium is a big undertaking. The $1.86-billion construction estimate doesn't include a likely "relocation fee" paid to the NFL; those estimates run as high as $1 billion.
"That's an awful lot to spend out of your pocket," DeMause said. "It's a huge, huge risk."
One way to make that investment back is to use the stadium for more than just pro football.
The Dallas Cowboys' AT&T Stadium in Arlington, Texas, and the San Francisco 49ers' Levi's Stadium in Santa Clara, Calif., are helping to pay down their 10-figure price tags by hosting big-name concerts, international soccer matches, motocross and pro wrestling matches.
It's a way to make more money from $10 beers, $40 parking spaces and luxury suites, said Victor Matheson, a sports economist at Holy Cross College in Worcester, Mass.
"You want to use these things as much as you can," he said. "But there's just not that many 60,000-plus person events."
And the stadium would be entering a crowded market. The Rose Bowl and the Los Angeles Coliseum have long-term contracts with UCLA and USC football, respectively, and have been branching out to attract more concerts and soccer. Dodger Stadium, Stubhub Center in Carson and Staples Center also compete for some of the same events that might fill seats in Inglewood.
"There are events for stadiums, but it's not an infinite number," said Darryl Dunn, general manager of the Rose Bowl.
A state-of-the-art stadium could draw new events, said David Simon, president of the L.A. Sports Council. Today, the Southland can't host a Super Bowl because it doesn't have an NFL team. Nor can L.A. host an NCAA basketball Final Four, because it doesn't have a large enough indoor arena.
The Inglewood stadium is being designed with those sort of opportunities in mind, Meany of the Hollywood Park Land Co. said. It would be covered with a roof made of a clear plastic film — allowing it to host "indoor" basketball events — with open-air sides to let in the Southern California climate.
"This will accommodate basketball, soccer, concerts," he said.
Hollywood Park plans would make the football stadium the hub of a larger sports and entertainment district with a performing arts center and a broader development that would include six or seven office buildings, a shopping center 1 1/2 times the size of the Grove in West L.A., and about 2,500 new homes.
The Inglewood stadium would sit relatively low in the ground, and face the shopping center at its narrowest point, with an open plaza, instead of a broad expanse of concrete. It would include 12,000 on-site parking spaces for tailgaters on game days, plus more at the neighboring Forum.
That's a different approach than the one being pitched in St. Louis or the Carson project that involves the Chargers and Raiders, who last week released a video of a bowl ringed with vast tailgating lots on their 168-acre site.
The Inglewood development underscores why big-time sports aren't just about sports anymore, said Fort, the University of Michigan sports economist. The sports are often the anchor of a larger enterprise.
"It's getting tough to tell whether they're baseball teams or sports networks, basketball teams or part of a real estate development," he said. "That changes the perspective. The stakes have gone up."