MLS Commissioner gives his thoughts on Sacramento’s potential for Republic FC
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The Sacramento Bee is in Orlando, Florida, this week covering Major League Soccer’s board of governor’s meeting, where an expansion bid for Sacramento could be decided.
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Sacramento fans have waited years to hear they’ve made it into the big leagues of American soccer. They just may have to wait a little longer.
Major League Soccer’s board of governors meets today behind closed doors at the Waldorf Astoria Hotel here to discuss Sacramento’s soccer hopes, and possibly even to vote on whether to grant the city a franchise in the nation’s top-tier pro soccer league.
Over the last three months, Sacramento soccer investors and MLS officials have been negotiating a deal that could lead to Sacramento joining the burgeoning league as early as 2021.
But league officials recently warned there will be no official announcement this week, even though Sacramento officials and the entire league are gathered in Florida for a celebration of the sport during its annual all-star game week.
The league typically announces its latest expansion during a press conference held in the new city.
League officials say they intend to expand from 27 teams to 30 teams. St. Louis also has been in recent serious negotiations with the league as well. And Charlotte has emerged in recent months as a strong contender, headed by David Tepper, the billionaire owner of the National Football League’s Carolina Panthers.
Sacramento officials earlier had expressed hope they could wrap up a negotiated deal this month on what has been described as a 150-page set of complex legal agreements.
Ben Gumpert, president of Sacramento’s current lower-tier professional team, Republic FC, said the Sacramento investor group has been in almost daily contact with MLS league officials on deal terms and stadium designs the last few months, aimed at closing a deal in July.
“We’re still confident we can knock down everything we need to do in that time frame,” Gumpert said earlier this month. “We’re progressing on the final steps of a partnership that can last for generations.”
He declined comment this week, however, saying he preferred that league Commissioner Don Garber and MLS take the lead in offering updates.
St. Louis, Charlotte bids
The league met with St. Louis and Charlotte officials earlier this month at their New York offices to talk details. League officials indicated at the time there was no need to meet with Sacramento because the league already had a detailed understanding of the steps Sacramento was taking in its attempts to qualify to join the league.
It’s been a long effort for Sacramento to join the big leagues, starting at about the time the city landed a franchise in 2014 in the lower-tier United Soccer League.
Sacramento officials had thought they were on the cusp of winning an expansion franchise two years ago, but lost out to Cincinnati and Nashville in the expansion derby, and MLS officials essentially told Sacramento it wouldn’t gain entry without a billionaire lead investor.
Sacramento’s effort got the major lift it needed earlier this year when Los Angeles supermarket magnate and billionaire Ron Burkle and a partner, movie producer Matt Alvarez, revealed they would invest in bringing a team to the capital city. Burkle is principle owner of the Pittsburgh Penguins hockey team and briefly considered buying the Sacramento Kings.
The price of admission is going up. In 2015, the expansion fee was what seemed steep at the time, $70 million. Sacramento competed and lost out. Since then the number jumped to $150 million, and is now $200 million.
In addition to the $200 million entry fee into the league, the Burkle and Alvarez investment group must privately finance a stadium in the downtown railyard that is expected to cost in the $250 million-plus range.
In an aggressive push to land Major League Soccer, Sacramento Mayor Darrell Steinberg and city officials recently agreed to a $33 million package of fee waivers, tax rebates, advertising rights and infrastructure financing to boost the soccer investment group’s plans for a downtown stadium.
Republic president Gumpert said the team wants to be in position to launch stadium construction as soon as final MLS documents are signed. Much of the discussion between the league and the local investment group involve the design details of the planned soccer stadium.
Burkle’s stadium plan
Burkle hasn’t talked publicly about his interest in the capital city, other than saying he has worked hard on landing a team for Sacramento.
His partner, Alvarez, told The Bee this spring the two are major sports fans and have wanted to partner on a new venture. Sacramento, a fast-growing city, is a great launching ground, they say, for that venture, in part because the deal here would be bigger than soccer.
The pair has secured a larger 31-acre plot in the downtown railyard for both a stadium and for other development, possibly including housing, offices, entertainment venues or other money-making uses.
If Sacramento gets into the league, its ownership group must expect to spend heavily and lose money some years while the league gains its footing. It’s all about the future, and the belief that soccer is about to become the next big thing in American sports.
“We look at this like we are getting in early,” Alvarez said. “The league is in its infancy. We think this is the right time to get in. It has an upward trajectory, and its audience is much younger (than other sports). And we are excited by the way MLS fans are consuming the game on their mobile devices.”
The increased franchise entry fee shows that franchise values are exploding – which will help investors stomach the annual losses they will surely incur. A Forbes magazine analysis said two-thirds of MLS teams lost money last year. MLS, less than a quarter-century old, still trails other U.S. professional sports as a business. Its television deal pays a reported $90 million a year, while the NFL rakes in nearly $5 billion.
“We feel very strongly that expansion is a driver of interest, it furthers the momentum story,” Garber said in April. And the next few years should be downright explosive: Garber believes the World Cup coming to North America in 2026 should be “rocket fuel” for MLS.
Investors “certainly realize there is a day-to-day financial slog that, for most, leaves them in the red,” said David Carter, a Los Angeles consultant and sports-business professor at USC. But the asset continues to appreciate .... They’re making a long-term bet on franchise appreciation.”
Republic FC’s executives say Sacramento is a perfect fit for a league that’s on the rise.
“There’s a huge amount of growth that’s happening in soccer,” Gumpert said. “We see it on our doorstep. Sacramento is one of the most thriving youth soccer markets in the entire country .... You see it every Saturday morning out on every square inch of grass.”
For Burkle and Alvarez, investing in Republic FC also brings other benefits – namely, the chance to get in on the ground floor of developing a portion of the downtown railyard. Burkle has plenty of experience in the hotel business, and he and Alvarez are prepared to turn 15 acres around the stadium site into a diversified entertainment and office district.