The Wilf family is not easy to feel sorry for, exactly, what with its controlling interest in a National Football League franchise and a significant portfolio of commercial and residential real estate.
But it was at least a little painful to watch the Wilfs, Zygi Wilf in particular, get pounded last week for simply using basic business common sense.
What the Wilfs' Minnesota Vikings had done was survey customers about a stadium builder's license, or seat license. That's a one-time purchase of a right to buy tickets that would generate funds to pay part of the $477 million the Vikings have committed to the planned new stadium in downtown Minneapolis.
It blew up into an issue after Gov. Mark Dayton released a letter strongly objecting to seat licenses, on grounds that they make the games so much less affordable that a "People's Stadium" would turn into a "Rich People's Stadium."
In stadium politics, it seems, it must be hard to keep your eyes on the ball.
Here's the situation from this seat: We, as a state, agreed to participate in this deal because we came to agree that the economics of operating in the current facility were inadequate, so denouncing the ownership group for trying to realize economic benefit from the new stadium seems wrongheaded.
What the Vikings owners are pursuing is not some sort of East Coast sharp-elbows trick of real estate tycoons. It's common sense, the kind of thing the owners of a rental duplex would get in five seconds. Finance the deal by using cash flow from the deal.
At least let them try. Explore whether this real estate -- a stadium seat -- is a whole lot more valuable in the new place than it was in the old one. It should be. But if there's not demand for big-dollar licenses, then no big-dollar sales.
This debate has nothing to do with Vikings fans watching TV at the Corner Bar, who will not be hit up for fees. The team's own customers may be, depending upon what the team learns from its survey, but going to customers for money is what businesses do.
The owners signed up for $477 million of the project's $975 million in costs, and that's a pretty big hole to fill, even for businessmen as accomplished as the Vikings ownership group -- Zygi, Mark, and Leonard Wilf and their partners Jeffrey Wilf, Reggie Fowler, Alan Landis and David Mandelbaum. But they would certainly know how to go about filling it.
The group made its money primarily in real estate, and it's axiomatic in real estate that owners seek to lower their cash invested in a deal. Other sources of cash -- loans, grants, tax credits, bond proceeds, what have you -- all beat cash equity. No surprise that they are treating builder's seat licenses as a potential source of funds.
Lester Bagley, the team's executive in charge of public affairs and stadium development, said it remains to be seen how its financing takes shape, including seat licenses. It seems the outlines are clear enough, however, beginning with the team seeking $200 million from the NFL's newly refreshed program to fund new or upgraded stadiums.
Based on a league document, part of that $200 million will be repaid by the visiting team's share of some game-day revenue, part is a grant from the league and part is essentially a corporate loan. Any loans will come with controlling team owner guarantees, and all of it is contingent on "private contributions" from the team. And seat licenses count as a private contribution.
That's one reason seat licenses are as common in the NFL as a cover-2 defense. The league labels seat licenses a private contribution because the money comes from the team's customers and the value is generated by the entertainment value of the games.
Throw in the value of stadium naming rights and assume $50 million for seat licenses, and a rough, back-of-the-bar-napkin guess gets the Wilf group's equity down to around $150 million.
That would come on top of capital that the owners have put into the business since buying the team for approximately $600 million in the middle of the last decade. Although team officials declined to comment, Forbes in 2011 reported that an annual capital call averaging about $20 million -- meaning partners writing checks for equity -- has occurred since the date of acquisition to fund debt service and other cash needs.
Yes, a huge capital asset essential to operating a football team is going to be built here with the public's involvement, but maybe it's time to stop asking the Wilf group members to finally step up and put in some personal money.
I am not sure how a governor makes a big issue out of a situation one week and then quietly drops his objections later, but that is what should happen here.
A seat license makes sense for the most basic of reasons, and is between this group of business owners and their customers. Let them work it out.
firstname.lastname@example.org • 612-673-4302
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