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Money Talks

November 29, 2011 Leave a comment

Before I get into this, I want to acknowledge that the chances the Jaguars leave Jacksonville are slim — or none, according to some — lest I incur the wrath of their fans. One of the running gags in the NFL is the Jaguars’ inevitable relocation, and Twitter exploded with such jokes (myself included) when news broke that Wayne Weaver was selling the team to Shahid Khan, owner of auto parts maker Flex-N-Gate Corp.

The Jaguars are currently valued at $725 million by Forbes, the lowest in the NFL. Khan paid $760 million for the team in cash — the man is obviously part of the 1%. As part of the purchase agreement, Khan has given his assurances the Jaguars would not be relocated. Indeed, their lease in Jacksonville runs through 2030 and is “ironclad” by all accounts. This did little to quell jokes and speculation about their eventual relocation, though, as sports journalists and fans across the country continue to do so as I type. Do Khan’s assurances and the stadium lease eliminate the possibility the Jaguars will relocate?

Here is the rub: money talks, and Khan clearly knows how to listen. Consider this scenario:

The Jaguars, again, are the lowest-valued NFL team at $725 million, while most of the other teams are valued around or over $1 billion. It is a fair assumption that the team’s value would dramatically increase by merely relocating to the right market like, say, Los Angeles. If the estimated increase would take the team close to or over $1 billion, that would be about a $275 million increase — again, simply for relocating. If broken anytime soon, the Jaguars would supposedly owe the city over $60 million in rent on top of losses from parking, taxes, and other Jaguar-dependent sources of income. I can only guess at what that would all amount to, but I imagine it cannot be much more than $275 million if it even comes close to that number — before researching some of this information, I saw it would cost “hundreds of millions of dollars” to break that lease, no small amount of money.

From here it seems like simple math: if the franchise value increases by $275 million or so, and it costs that much or less to break their lease in Jacksonville, it seems like Khan would break even, at worst, by simply moving the team to the right market. He certainly has the money to pay to break that lease before he sees the franchise increase in value. Of course, Khan could then look forward to a sharp increase in revenue from the bigger market and fanbase — it is hard to argue the Jaguars can make more money in Jacksonville than Los Angeles. There is the small matter that the L.A. group purportedly wants a significant stake in the team, but this scenario does not have to play out in southern California. (Though, if I were Khan, I would offer 30% of the team to the LA group, immediately recouping any money paid out in Jacksonville exit fees while still retaining a controlling stake in the team.)

I am oversimplifying the situation, of course, but I never claimed to be an expert. I am playing Bill Simmons here — armchair money speculator. Khan seems to be genuinely interested in owning a football team for the right reasons — that is to say, the joy and thrill of owning a team, not just trying to make money. That would be great for the Jaguars and for football.¬†All I am saying is that handshake agreements and ironclad leases are obstacles, but ones that can be overcome if enough money is involved. To me it is a bit naive to say the Jaguars have zero chance of relocating.