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RSL's books forecast a profit, but county raising questions

Published: Wednesday, Dec. 13 2006 10:34 a.m. MST

Participants in Monday's meeting at Real headquarters include, left, David Kerschner, senior vice president of SCP Worldwide; Gary Reimer, CFO of Real Salt Lake; and Dean Howes, CEO of Real Salt Lake.  (Keith Johnson, Deseret Morning News) Participants in Monday's meeting at Real headquarters include, left, David Kerschner, senior vice president of SCP Worldwide; Gary Reimer, CFO of Real Salt Lake; and Dean Howes, CEO of Real Salt Lake. (Keith Johnson, Deseret Morning News)
Betting on high game attendance, concerts, investors and sponsorships, Real Salt Lake's financial records predict a bright future for the Major League Soccer franchise.
Salt Lake County officials, however, are questioning whether those assumptions are realistic and plan to take several weeks to pore over the nearly 50-page document.
Real opened its books Monday for the county and for local journalists. The 10-year financial report, labeled "Project Beehive," included the operating model for the team, the stadium and a future radio station.
At the heart of the stadium deal is whether county officials determine it deserves millions of taxpayer dollars. A county-commissioned report by Economic Research Associates (ERA), a private consulting firm that will analyze that data, will be released mid-January.
A rendering of Real Salt Lake's stadium, where work is expected to get under way soon. () A rendering of Real Salt Lake's stadium, where work is expected to get under way soon. ()
Salt Lake County Mayor Peter Corroon, who saw the finances briefly Monday, said numerous items caught his eye that he said will need further explanation by team officials.
"No matter what, there's very little down side for Salt Lake County. We're only buying land, and the land generally appreciates in value. Even if the team doesn't succeed, we're still in pretty good shape," he said. "But we want Real to succeed if we go into business with them."
Sandy city has already pledged $15 million in redevelopment agency dollars for the $110 stadium. But Salt Lake County's share of the public money for the stadium hinges on a positive recommendation from ERA and an evaluation from the county's Debt Review Committee.
 (Deseret Morning News graphic) (Deseret Morning News graphic)
The dollar amount from the county is $40 million. However, the county and Real dispute that number and say it totals $30 million in net present value or today's dollars.
On top of that, Real expects $15 million from a facility surcharge bond, which refers to an extra ticket fee. Since that fee will not be immediately available, Sandy is taking out a loan for it and will incur the debt, in addition to the RDA money the city has agreed to contribute, said Dean Howes, Real's chief executive officer.
"Certainly, I think we feel very good about this. I think we've wrung a lot of the risk out of it and questions out of it," Howes said.
In a letter Monday to Mayor Corroon, he wrote: "We firmly believe that this is one of the best public-private partnerships ever created for a stadium project, anywhere in America."
According to the financial data provided by Real, the team expects a significant investment from partners. Real owner Dave Checketts's company Sports Capital Partners and Whitehall, a real estate fund of global financier Goldman Sachs, will each own a 50 percent share of the team. Real expects the investors to pitch in a total of $46.6 million next year and continue giving that amount until 2013.
Of note are ticket prices, which will increase in price about 50-percent over seven years. A non-premium ticket during the 2006 season cost $22.31 — and in 2013, that price will jump to $32.85.
That is a middle-of-line price that accounts for inflation, said Gary Reimer, chief financial officer for Utah Soccer, which encompasses Real, the stadium and radio station. "Every team that's built a new stadium has raised ticket prices."
In addition, Real plans to earn revenue from significant attendance increases. Real has attracted fewer than 10,000 fans during the 2005 and 2006 seasons but projects a 29 percent increase to 15,414 by 2008, when the stadium opens. According to the team's projections, those numbers will continue to grow until 2013, when Real predicts they will level out.
Real also hopes to annually host an MLS playoff game in the new stadium and numerous concerts, from 11 in 2008 to 18 in 2013. A playoff game will bring 20,347 fans, while a concert will bring in 17,500 people, according to the model.
Howes contends that those are not overly rosy predictions. "We wouldn't put a number down we think we couldn't deliver," he said.
Doug Willmore, the county's chief administrative officer, said those estimates are one of the main items ERA will delve into, and it will take weeks to fully analyze the information.
"Every one of those assumptions has to be tested and proven," Willmore said.
The county will examine the financial report's underlying assumptions, the team's capital structure and the solidity of its investors, and the team's debt structure, he said.
So far, the team has not made money since it began operating in 2004. But Real will start turning a net profit in 2010, two years after the proposed 136-acre soccer stadium and adjoining hotel and broadcast studio are built.
Taking into account earnings before interest, taxes, depreciation and amortization (Ebitda) and debt service, the team will show a profit in 2008, the year revenue will be collected on the project.
Howes said Monday that the team wants to open the stadium on July 4, 2008. Construction is scheduled to begin in January or February of next year.


E-mail: astowell@desnews.com

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