Major League Soccer is now one of the major players in American sports, at least according to one important industry: the banks. According to SportsBusiness Journal, the newest wave of stadiums being built, including those for Orlando City, LAFC, and D.C. United, are being financed in a way that was previously only available to those sports considered eminently profitable, such as the NFL, NBA, and MLB. While this is going to get a little in the weeds, stay with me; it is a big deal.
Traditionally, soccer-specific stadiums in the United States have been built in a fashion more akin to a personal loan: the lending institution would get a cut of the revenue, but the ownership group would pledge to step in if the revenue wasn’t sufficient to cover the loan payments. While the lending institutions were more than willing to take soccer’s money, they didn’t trust it enough to make it the sole guarantee on the loans.
That, however, has now changed. This newest round of stadiums is being financed “like a traditional stadium loan in the major sports, backed by stadium revenue,” SBJ writes. This is the way that new stadiums in the NFL, NBA, MLB, and NHL are financed, and the revenues coming into MLS have proven lucrative enough to merit the same treatment.
Project finance gives the bank a cut of the revenues produced by the stadium, including games, concerts, and other ancillary events held there. By not requiring owners to backstop the loan, if the revenue falls short of covering the loan payments, the bank has no recourse against the team owners. It’s a riskier loan without that personal guarantee, but it’s one that lenders are for the first time willing to take on soccer.
Banks such as JPMorgan Chase and Sumitomo, in the case of Orlando City, and Goldman Sachs, in the case of LAFC and (potentially) D.C. United, are massive outfits who would not be investing in MLS if they didn’t think it would make them more money than the alternative.
As Tom Penn, LAFC president and co-owner put it “That the business is being viewed as substantial enough on its own, and the assurance of revenue coming in would cover the debt...[is] a great indicator of the growth of MLS.”
This, just as much as the quality of the play on the field, the size of the crowds packing stadiums, and the new TV deal for the league, shows that MLS has clearly made its case to be considered along with the NFL, NBA, MLB, and NHL as the major sports in American life.