It started in 2007 with a 9.9% stake and ended in 2018 with total control. Since then Arsenal fans have been wondering, who is Stan Kroenke and what is he doing here?
Stan Kroenke currently ranks at #167 on the Forbes rich list, worth an estimated $8.7 billion, but it's not from owning sports teams that the 71 year-old entrepreneur made his fortune.
In 1974 Kroenke married Ann Walton the daughter of Bud Walton who co-founded Walmart, an American department chain. The Walmart company's net worth is an estimated $386 billion.
The Walton family's collective worth makes then the wealthiest family in the United States. Ann's net worth currently sits at an estimated $6.5 billion.
Silent Stan, a name first given because he rarely gives interviews to the press made his fortune in the real estate industry. In 1991 he started the company, THF Realty. THF stands for 'To Have Fun' and the company is currently valued at over $2 billion.
Real estate is an insiders game played by the extremely wealthy, in short THF purchase land and Walmart build stores on it. Everyone's a winner except in most cases the tax payer. The fun being had is that of the rich getting richer.
Again, according to Forbes, Kroenke is one of and it has to be said, many billionaires that have not been overly generous with their fortune. An article for Forbes.com in 2018 claimed that the only charitable donation made personally from Kroenke was that of $1 million given to the Red Cross in wake of Hurricane Harvey back in 2017.
So what exactly does Stan Kroenke own?
In 1999 Kroenke created the holding company Kroenke Sports Enterprises which later became Kroenke Sports and Entertainment (KSE), back to them later.
Aside from the aforementioned KSE and THF Realty, Kroenke is currently 4th on the America's land owners list. He owns a whopping 1,380,000 acres of land in the U.S.
In 2016 he purchased a 535 acre Texas ranch for approximately $725 million. Six months later its residents, some of which had resided there for decades were informed that they were being evicted in a further six months. Proof, if ever it was needed that the mega rich care about nothing and no one when money is involved.
The Missouri born businessman's first foray into the world of sports came in 1995, when he purchased a 30% share of the NFL's Los Angeles Rams and in doing so helping the current owner George Frontiere move the team from Anaheim, L.A to St Louis, Missouri. This wouldn't be the only time that Kroenke was responsible for moving the team.
Five years on and Kroenke buys both the Denver Nuggets and the Colorado Avalanche in a deal that also included the newly built Pepsi Center, the venue in which both these teams play their home games. This stadium is also shared by another Kroenke owned sports team, the Colorado Mammoth of the National Lacrosse League who Kroenke has owned since their inception in 2003. In early 2019 the mortgage on the Pepsi Center was paid in full.
It seems that 2003 was a busy year for Stan buying sports teams, as in September of that year he purchased the Colorado Rapids of the MLS. In 2007 the Rapids opened a brand new stadium (DSG Park) which is owned by the city but operated by KSE, with the estimated construction cost of $130 million split between the two.
Next up is Arsenal F.C and in 2007 Silent Stan buys a 9.9% stake in the Premier league club, purchasing the shares from ITV PLC at a cost of £65 million. Several weeks later the American has increased his share to 12.19%.
Kroenke officially joined the Arsenal board in June 2008. Over the next three years Kroenke increases his stake to 28.3%. In 2011 this rises to 62.89%.
In 2010 during the middle of the battle for control of Arsenal Football Club he takes full ownership of NFL's St Louis Rams at an estimated cost of $750 million and here is where Kroenke's true colours really emerge.
Firstly, to become an NFL team owner you have to be approved in a vote by the 31 other owners. It's a (extremely) rich man's world. A world where they all become richer together.
Secondly, the NFL runs a revenue sharing scheme amongst its 32 teams. Each team receives an equal share of the revenue created by all the other teams. This this is mostly made up from television deals, sponsorship and merchandise sales. In 2018 each team received approximately $255 million in revenue share, this equates to $7.8 billion for the 32 teams. The NFL is huge business.
Back to Stan's purchase of the Rams in 2010. At the time the Rams were in the middle of a dispute with the city of St Louis in regard to a stadium upgrade and who was responsible for the cost.
When Kroenke took control of the team, he was quoted as saying, "I’m going to attempt to do everything that I can to keep the Rams in St. Louis. I’ve always stepped up for pro football in St. Louis." This wouldn't turn out to be the case.
The problem was that when the Rams moved to St Louis from Anahiem in 1995 the stadium, then called the Trans World dome was in need of a considerable upgrade. The dome, renamed in 2002 to the Edward Jones dome included in its contract, the 'State of the Art' clause.
The clause required St Louis taxpayers to not only pay for the whole stadium, $280 million, but the upkeep as well. Another part of the clause stated that the stadium had to rank in the top 25 in NFL stadia or the city would have to build them a new one. Of course being a major shareholder Kroenke knew all the details and it certainly wasn't going to stop him from purchasing the team.
Kroenke's "I’m going to attempt to do everything that I can to keep the Rams in St Louis" statement was deemed to be a total lie by the people of St Louis who desperately tried to keep the team where it was and there is certainly plenty of evidence to back up that claim.
Firstly the Mayor of St Louis, Francis Slay was quoted as saying "I have been Mayor of St. Louis since then and I – to this day – cannot ever remember meeting Stan Kroenke, much less engaging with him in any conversations about the future of NFL football in St. Louis". Slay was the Mayor of St Louis from 2001 to 2017.
Secondly in December 2015, the city of St Louis submitted a proposal to the NFL within the given time frame for a brand new $1.1 billion stadium to be built, the package proposed that the NFL would pay $300m towards the cost. A little over two weeks later the league owners voted 30-2 against the proposal and the Rams were heading to Los Angeles, leaving behind a stadium with a $144 million worth of debt not including the maintenance costs which will now be picked up by the taxpayer.
For the record, Los Angeles is America's second biggest media market, remember that revenue share? The cost for the Rams owner of moving the Rams to L.A was $550 million.
The people of St Louis did not take this betrayal lying down. In April 2017 the city filled a lawsuit against Kroenke and the NFL over the relocation. The lawsuit included several different factors such as, the NFL's own 'relocation rules', compensation for the loss of the team and reimbursement for the millions of dollars spent trying to keep the team in St Louis.
In January 2019 a Missouri court rejected several motions from Kroenke and NFL lawyers to move the case to arbitration (an out of court settlement) and this has to be a concern to both Kroenke and the NFL.
A separate lawsuit filed by fans of the team who purchased personal seat licences (this gives the of holder of this licence the right to buy a season ticket in a certain seat) claiming a return in thier investment. The court ruled in their favour which could cost KSE up to $24 million, something of a bittersweet victory for those fans who would rather the team never left.
It should be emphasised that NFL ownership restrictions forbid a team owner from owning teams in the other major sports (NBA, MLB and the NHL) therefore, in 2015 Kroenke had to transfer ownership of both the Nuggets and the Avalanche to his wife, Ann. In late 2018 this rule was overturned but as yet the ownership of those two teams has not been transferred back to Stan.
But the controversy was just beginning. In early 2014, it emerged that Kroenke had purchased 60 acres of land in Inglewood, L.A. The piece of land was previously owned by Walmart, the 'insiders game' continues. It was later discovered that in August 2013 a meeting had taken place between Kroenke and the San Diego Chargers owner, Dean Spanos in regard to both NFL teams moving together to Los Angeles. The site that was discussed was the one that Kroenke later purchased, something which Spanos had no knowledge of, until it became public.
The Rams new stadium is currently under construction on that very piece of land in Inglewood and although its original projected cost was originally $2.66 billion the current cost of construction stands at $4.9 billion and is expected to go over the $5 billion mark before its completed. Previously, the most expensive sports stadium constructed was the Mercedes-Benz dome in Atlanta. It opened in 2017 and cost $1.6 billion, this included $600 million in public funding.
So who is paying for the new stadium in L.A.?
Kroenke took out a $2.25 billion bank loan, the interest alone on this loan is $50 million a year. Kroenke has invested $1.6 billion of his personal equity, an unprecedented investment even amongst the mega rich NFL owners.
The NFL will stump up $400 million. That's £100 million more than the NFL would have paid on the rejected new St Louis stadium proposal, speculate to accumulate. The new stadium has no public funding.
Remember, that real estate or in this case construction is an insiders game, the stadium is being built by Stockbridge Capital Group who are in partnership with, The Kroenke Group.
The naming rights for the stadium are worth $400 million alone, but Kroenke also owns the stadium parking lots as well as the concessions. The entire complex that also includes housing, a retail park and offices is bigger than Disneyland. Kroenke is building and financing this area of the complex separately to the stadium itself.
In February 2017 the Los Angeles Times projected how much money this new stadium would make. It estimated that the KSE owned Rams could make up to $350 million per year. This includes income from luxury suites, ticket sales, personal seat licencing, parking and concessions. According to Forbes the move from St Louis to Los Angeles alone increased the Rams value from $1.45 billion to $2.9 billion. For the record Arsenal were valued at $2.4 billion (£1.89 Bn).
Despite Arsenal playing a minimum of 10 home games more than the Rams over a season, the revenue from home matches is much lower. While the Rams are expected to make $350 million per year (£275m) Arsenal make just over £100 million although this is one of the highest match day revenues in World football.
In 2017/2018 Arsenal’s 'football revenue', which includes television money was £388 million.
Despite this, Arsenal’s total profit for 2017/18 after tax was a mere £56.5 million. Failure to qualify for the Champions League effected the club's operating profit by around 60%, that works out to be approximately £34 million.
Many fans have questioned whether the extremely 'wordy' and complicated Financial Fair Play (FFP) rules are the main reason for KSE's lack of investment at Arsenal and the simple answer is no.
Although KSE wouldn't simply be able to pump in hundreds of millions of pounds just like that, there are perfectly legitimate ways to effectively, cheat the system.
Since Roman Abramovich has been at Chelsea (2003) he has loaned the club just over £1 billion. The club has spent over £800 million on players during that time so it's easy to see where the money has gone. These loans only become an issue if Abramovich decides to recall the loans which he can do with 18 months notice from when they were originally taken out, or when he wants to sell the club.
Now £1 billion is certainly not an amount of money that any football or even NFL team has at its disposal at any one time but a similar type of investment to that of Abramovich on a smaller scale would give Arsenal the opportunity they need to compete in today's transfer market.
Now, even though Arsenal will likely never turn into a club that is not self sufficient and one that relies solely on a mega rich owner to keep them competitive, Kroenke could easily put a figure of around £80 million into the transfer kitty this summer without initially impacting FFP rules, that are based over a rolling three year period.
Like it or not, Stan Kroenke bought Arsenal Football Club with the sole intention of making money, something which the club has always been very good at. However, the well documented loss of income brought about from the teams failure to qualify for the Champions League cannot continue. Simply put, each year Arsenal’s profit will get smaller and smaller and the amount of money needed to rectify the situation will only get bigger and bigger.
Arsenal fans will hope that a smart and ruthless businessman such as Kroenke, knows at some point he must 'speculate to accumulate'. You can't help but wonder if the huge construction project in Los Angeles, plus the pending lawsuit from St Louis is holding up any potential investment into Arsenal. Only time will tell.
@davefalconUK
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