brownbear Posted October 20, 2008 Share Posted October 20, 2008 Well, well, well... I had a very interesting dinner conversation this evening with someone in the MLS who told me two very interesting things: 1) Montreal may get into the league sooner than we thought as a direct result of serious financial problems of the backers' of the Philadelphia bid. 2) The stadium issue could be a deal-<s>clincher (in the negative sense)</s> breaker for the Vancouver bid. Let's take these one step at a time: First, the main backers (financially, at least) of the Philly bid are Christopher and Robert Buccini, co-founders of the Buccini/Pollin Group; Jay Sugarman, chief executive of iStar Financial. iStar Financial has seen it's share price drop 25-1.6/25=93.6% since the beginning of 2008. Wow! So it looks like Mr. Sugarman is much less wealthy today than he was not even 10 months ago. It's not a surprise given iStar's business. Check this out: quote:Majority Investor Jay Sugarman is the Founder, Chairman and Chief Executive Officer of iStar Financial, a publicly traded investment firm providing custom-tailored capital to high-end private and corporate owners of real estate in the United States. [:0]iStar also invests in other targeted areas through its European, AutoStar (auto dealership) and TimberStar (timber) platforms, and in the leveraged finance markets [:0] through its affiliate, Oak Hill Advisors. iStar’s current investment portfolio exceeds $20 billion. Now, $20 Billion is a lot of money (although this was written up as of Feb. 28, 2000, when iStar's shares were still worth north of $20/share. Given the nature of the corporate real estate market and the leverage that many of these firms used to make a killing as real estate prices were rising, the vertiginous drop in iStar's share price is probably an indication of the financial strength (or lack thereof) of the company as a whole and also ann indication of the old adage that "leverage works just as well when asset prices are falling as when they are rising." What's the easiest way to lose $100 million in real estate? Use $2.5 million of your own money and get someone else to lend you 40X that amount to invest in a sure-thing (which we know real estate is, right?) So, given a falling real estate market (both commercial-which is just starting to really decline right now--and residential), a highly leveraged portfolio can see its wealth evaporate lickety-split. As for the Buccini brothers, guess which industry they made their fortune in? One guess: quote:Rob Buccini is a founding partner of The Buccini/Pollin Group, Inc., a privately held, full-service real estate acquisition, development and management company with offices in Wilmington, DE, Washington DC, suburban Philadelphia, Baltimore, MD and New York City. Buccini/Pollin has developed and acquired office, hotel, multi-family, townhouse, industrial, retail, and parking properties in the Mid-Atlantic and Northeastern regions of the United States and is the largest privately held office landlord in the Philadelphia region. On the face of it, then, the news that the Philly investors are having money troubles is not surprising. Moreover, the stadium they were going to (are? will?) build in suburban Philly was meant to be--much like the St. Louis bid--a part of a much larger real estate development. Will the development go ahead? Given the nature of the US (and global) real estate market, the answer is likely no. Are Sugarman and the Buccinis big enough soccer fans to gift the people of Philly a soccer stadium if the rest of the development is a no-go? About that, I plead ignorance. Finally, I'm not certain about the firmness of the commitment of the state of Pennsylvania for its portion of the cost ($47 million), nor of Delaware County ($30 million). Economic times have gotten much tougher in Pennsylvania (see Barack Obama's double-digit lead in polls there) since the beginning of the year. The private investors were to have put $80 million into the cost of the stadium, but once again what is their level of commitment of the rest of the project becomes uneconomical? Now, the story (rumour) is that the Saputo/Gilett group will be asked to fill Philly's slot in the (increasingly likely) event that the Philly money is found wanting. By the way, does anybody know how old the Google satellite images are? I just checked and there's no evidence whatsoever of any construction having begun on a stadium in Chester--on the shore of the Delaware River near the Harrah's Casino. 2) As for the Vancouver bid, there's no more specific information but that the stadium portion of the Vancouver bid allegedly centered around BC Place as the Whitecaps' home and did not (could not) guarantee a SSS in the near future. This, according to my MLS source, could be a very big albatross for the Vancouver bid. Well, we'll know in a matter of months. Oh, and a bonus rumour. Atlanta's money--and the fact that the owner is an NFL owner--seems to have generated a lot of interest from the MLS. I don't understand the NFL owner part--synergies?--but that's the rumour. BB Link to comment Share on other sites More sharing options...
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