MLS expansion city profile: St. Louis

Friday December 23rd, 2016

Market Analysis 

The four-term mayor of St. Louis, Francis Slay, played on youth soccer teams affiliated with his local parish and went on to win three NAIA titles at Quincy University, which is just across the river in Illinois. While competing for Southern Equipment Co. (known as SECO)—a club moniker fitting for a city that produced U.S. Open Cup champions named after a hat company, a department store, a car dealership and a funeral home—Slay met his wife. She was the sister of a player on an opposing team. They went to a St. Louis Stars game on their first date.

That’s a ho-hum story if you’re from St. Louis. Because if you’re from St. Louis, there’s a good chance you’ve got a connection to soccer. The sport’s deep roots were planted decades ago by immigrant populations that spread throughout the area, which in many ways remains defined by that cluster of suburban communities and the schools and churches that anchor them. Those roots were fostered by the litany of pros and internationals that hail from the region and the 10 NCAA titles won by the SLU Billikens.

What the city itself has lacked since the NASL Stars moved to California in 1977, however, is a top-tier pro soccer club. It’s a bizarre bit of discord that MLS has hoped to correct for some time. An effort by local attorney Jeff Cooper to secure a team fell through a few years ago—probably for the best. He planned to build his stadium in suburban Illinois and his second-division team, AC St. Louis, lasted only one season (2010).

The city waited, and MLS continued to hope investors would step up. St. Louis is at the center of the country’s 21st-largest media market and 20th most-populous metro area. It’s home to nine Fortune 500 companies—an impressive number for its size—as well as Anheuser-Busch, which doesn’t count because its parent is headquartered in Belgium. TV ratings have been a mixed bag—they weren’t great for the 2010 or 2014 World Cups, but last year’s Women’s World Cup did fabulously well in St. Louis, which ranked No. 1 among U.S. markets. There are around 30,000 registered youth players in the area.

The city’s prospective MLS investors say they’re not worried about drawing crowds, however, especially among the millennial population that’s leading the slow but welcome migration back to downtown St. Louis.

Ownership Group

It’s a large one, led by Boston-based investor Paul Edgerley, who grew up in Kansas City and owns a piece of the Celtics and AS Roma. In addition to working as Bain Capital’s (see Romney, Mitt) managing director, Edgerley invested in a Jamba Juice franchise run by Dave Peacock, the former president of Anheuser-Busch and current chairman of the St. Louis Sports Commission. 

Peacock, who earned his MBA at Washington University, has been wanting to bring an MLS team to St. Louis for years. And things started to take shape in 2011-12, when World Wide Technology founder and CEO Jim Kavanaugh took over the St. Louis Scott Gallagher youth club and the Fenton, Missouri soccer park that includes a small stadium. Naturally, Kavanaugh played. He turned out for SLU and the U.S. Olympic team ahead of the 1984 Games and spent time indoors with the Los Angeles Lazers and St. Louis Steamers. In 2015, he launched St. Louis FC at renovated World Wide Technology Soccer Park. The USL team plays in Scott Gallagher’s blue and green colors.

Planet Futbol
Prospective St. Louis MLS expansion team names ownership group

Kavanaugh is the vice chairman of the ownership group and also holds a stake in the Blues. WWT had revenue of $7.4 billion in 2015.

The group includes nine more minority partners, including Peacock, Lodging Hospitality Management chairman and CEO Bob O’Loughlin and Cleveland Indians vice chairman John Sherman.

Stadium Plan

It all hinges on this. The renderings look great and the location is ideal—a 24-acre site just west of the city’s historic Union Station, which is undergoing its own redevelopment and eventually will include restaurants, retail, an aquarium and a Ferris wheel. The stadium would be made available for other events and would lie just one mile from Busch Stadium and even less from the Blues’ Scottrade Center.

SC STL, as the MLS hopefuls are called, wants to build a 20,000-seat arena that could expand to 28,500 if needed. And the group says it's willing to spend more than $300 million on the franchise rights (the league’s expansion fee will be $150 million), the stadium and start-up costs. But it also wants about $80 million in city money and another $40 million in tax credits from the state covering land acquisition and site development.

Peacock told SI.com that the tax revenue that will be generated by the stadium will exceed the $80 million, and he added that a state study agreed with that finding. Furthermore, SC STL intends to fund stadium maintenance, operation and cost overruns even though it won’t own it. It intends to sign a 30-year lease, and the group hopes that an April vote on a half-cent increase in the city’s sales tax, which could generate up to $20 million annually. Some of that would go toward building the $200 million stadium, which would be ready in 2020. 

The campaign hasn’t started well. Missouri’s governor-elect, Republican elect Eric Greitens released a statement this week calling the project “nothing more than welfare for millionaires.” He added, “Right now, because of reckless spending by career politicians, we can’t even afford the core functions of government, let alone spend millions on soccer stadiums.”

Edgerley quickly postponed a meeting with a state board regarding the tax credits and released as statement reading in part, "While we were disappointed in the statement …We continue to believe in the substantial economic and other benefits of this project to the state and to the city of St. Louis …. We’re hopeful that Gov. Elect Greitens, who campaigned on a pro-business platform, will welcome the opportunity to learn more about the upside of the project for the state and city alike.”

Greitens has said he’ll meet with the group, but SC STL’s formal application is due to MLS on Jan. 31, well before the vote would take place.

“I think we’re in a really strong position with the league to get one of the next two franchises as long as we can nail down the balance of our plan,” Kavanaugh told SI.com. “We have a really good plan here in St. Louis. We’ve got a great investor group, one that has the financial wherewithal, the experience running businesses and sporting organizations and also the specific passion and expertise relative to the game of soccer. And now it’s about really nailing down the stadium piece.”

Soccer and Sports Scene

The Cardinals and Blues do well and Kavanaugh and Co. look forward to a good relationship with both. But it’s the absence of the Rams—who were set to command some $400 million in public money—that means the most to SC STL.

“There’s a certain level of sponsorship and ticket revenue and discretionary spending that left the market—that leaves a vacuum—and when you come in with the internal soccer passion and heritage in this market, it should lend itself to being successful,” Peacock said. “I think those are among the reasons the league is so interested in St. Louis.”

Kavanaugh’s St. Louis FC has done reasonably well at the gate. The club ranked sixth in the 29-team USL this season drawing 4,923 fans per game. It didn’t do very well on the field, where it finished 14th in the 15-team Western Conference. To fix the latter, Kavanaugh hired former Toronto FC, Chivas USA and Sacramento Republic coach Preki Radosavljevic in October.

The U.S. national team attracted 43,433 fans to Busch for a World Cup qualifier against St. Vincent and the Grenadines in November 2015. It was the first appearance for the U.S. men in St. Louis since 1997.

St. Louis FC is the USL affiliate of the Chicago Fire, but the plan is to bring it in-house as part of a comprehensive club pyramid that Kavanaugh touts as one of the strengths of the SC STL bid. The MLS team will sit atop an organization that includes USL, PDL, Academy, travel and recreational teams that already are in place. Scott Gallagher has more than 7,000 players at all levels.

MLS Pros

The league has longed to tap in to the St. Louis market, which would bring a level of tradition and authenticity for which MLS has yearned. The ownership group is ideal. It’s well-heeled and has appealing ties to local communities and businesses as well as other pro sports organizations. The stadium location is perfect.

St. Louis also helps MLS fill out the midwest U.S.—the league cares about geographic coverage—and instantly creates a couple of promising potential rivalries. An I-70 derby with Sporting Kansas City could become one of the league’s premier showdowns, while the enmity Blues and Cardinals fans traditionally have for their rivals in Chicago could form the basis of another run rivalry.

MLS Cons

The fact that SC STL hasn’t pledged to fund the entire cost of stadium construction is the only drawback, but it’s a significant one. If the tax increase passes in April, then all is well. If it doesn’t, then Edgerley and his partners will have to either ante up or pull out. The latter very well could send St. Louis to the back of the expansion line.

“I really do think this is an opportunity that if we miss it, it may go away and not come back,” Kavanaugh said. “Soccer in the U.S. is growing so fast. It’s at a bit of an inflection point …. It’s going to be a shame if we can’t figure out a way to make this work.”

He said that issues of jersey and stadium naming rights sponsorship, which is high on the league’s priority list, haven’t been resolved but shouldn’t present much of an obstacle. Kavanaugh stressed he’s had “very positive feedback from a number of large companies that are interested in sponsorship and being a part of this overall organization.”

As stated, it all hinges on the stadium. Get that resolved, and St. Louis is in.

Commissioner’s Thoughts

"I think if the vote fails, it's in many ways a referendum on behalf of the community as to whether or not they want to support the plan for a stadium downtown …. The St. Louis ownership group needs to determine whether or not the public support exists. I think the question as to whether or not they remain an expansion candidate would be probably a question for them much more so than for MLS if they don't get the public vote,” commissioner Don Garber said in recent conference call.

“We're very encouraged by what we've been seeing there at a number of different levels. Both in terms of what the ownership group has put together. The political support of the mayor, the [current] governor, the viability of the market from a soccer perspective, the newly reduced amount of pro sports competition. We like their thoughts on stadiums, so we feel pretty encouraged by what we've been seeing.”

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