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Kraft parlays parking lots into thriving franchise

By Les Carpenter, Yahoo! Sports Nov 24, 2:38 pm EST

FOXBOROUGH, Mass. – On a set of muddy, undulating parking lots along the road to
Providence, R.I., Robert Kraft saw an empire. Where an old stadium and a dilapidated
race track and a mobile home park met the woods, a Boston businessman could
imagine a gleaming new sports palace and a shopping center and people flocking day
after day after day.

This was 25 years ago and Kraft was about to make the first of three strategic moves
that eventually landed him the New England Patriots. The purchase has propelled him
to being perhaps the most influential owner in the NFL with a franchise that Forbes
values as third best in the league, at $1.37 billion, while possessing three Super Bowl
titles and a coach and quarterback widely considered to be the best in the sport.

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“I see the young players today coming from the parking

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lots to the practice field, they have no idea of this,” the
69-year-old Kraft said one day just before the start of
this season as he gazed out the window of his Gillette
Stadium office toward the shopping plaza he ultimately
built. “When I bought the team our players had to get
into their unis and drive five miles, like Pop Warner, to
a practice field that was part of a mental health
grounds that the City of Foxborough leased to the
Patriots.” Thanksgiving Day picks

In 1985, the Patriots and their stadium were owned by Thanksgiving Day picks
a businessman and promoter named Billy Sullivan who
was beginning to struggle financially. At that time, an Week 12 locks Young vs.
option to buy the 300 acres of parking lots outside the Fisher Fight for No. 1 in
stadium was offered by the group of businessmen who NFC
More NFL Videos
owned them. Kraft, who operated a packing-supply
business and long harbored a desire to
own the Patriots, saw his chance. If he
could get control of the parking lots, then
maybe he could find a way to control the
stadium. And if he could be in charge of
both the lots and the stadium, then
maybe he could get the team, too.

Kraft and a partner won the bid for the

lots, paying $1 million a year rent for 10
years before buying them for $18 million.
Today he figures the same land would
cost about $40 million or $50 million.

“In any business I’m in I’m trying to think

ahead of where I was going,” Kraft says. “I know some financial advisor thought I was
nuts because we paid an option for the land that exceeded the revenue from football
parking.

“The cost of the right to maintain the option was a million a year,” Kraft continues.
“The costs of parking for football would never cover that. But that was the first step in
a three-legged stool to try and own the team one day. So I know whoever would wind
up owning the team would have to come to me at some point because they couldn’t
play games in the stadium because they didn’t have the rights to the parking or if they
wanted to put on concerts.”

Kraft didn’t attempt to buy the team when it was sold in 1988 to Victor Kiam, the
owner of Remington Products, in part because the stadium wasn’t included in the
deal. He could see the debt the Sullivan family was building up after Billy’s son, Chuck,
lost millions as a promoter on The Jacksons Victory Tour. The stadium fell into
bankruptcy. When a bankruptcy court convened to sort out the sale, Kiam bid low, just
below $20 million. Kraft bid $25 million. The difference was large enough for the judge
to give the stadium to Kraft.

“If [the bids] had been close the bankruptcy judge would have given the stadium to

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Kiam, but we got awarded the stadium,” Kraft said. “So what did that mean? By then
an unknown financial advisor told me ‘You’re crazy, that stadium is a white elephant.’
If that team moves you’re going to be stuck with a single-purpose stadium. But for me
it meant I now controlled all the revenues of the team except for tickets. So all the
signage, all the concessions, all the parking – whenever there was an event at the
stadium I had all the revenue streams.”

More importantly, he had the stadium’s operating covenant which was essentially a
lease that said the Patriots had to stay in the stadium until 2001. This meant that
Kiam, who had talked about moving the team elsewhere, or any other potential buyer
had to come to Kraft. And soon enough, that’s exactly what happened.

As Kiam struggled financially, control of the team fell to one of his creditors, James
Orthwein, in 1993. A St. Louis businessman, Orthwein was determined to move the
team to Missouri. He put the team up for sale hoping Fran Murray – a man he
partnered with to bring the team to St. Louis – would buy it.

The sale was handled by Goldman Sachs and from the beginning, it seemed everyone
had conspired to keep the Krafts from buying the team. Namely the Krafts weren’t
allowed to see any of the club’s financial information unless they agreed to put a value
on operating covenant. But pricing the covenant would make the team easier to sell, so
Kraft simply said the covenant had no value. This infuriated the people who ran the
sale and as a result Kraft was the one prospective buyer out of 15 who wasn’t allowed
into Goldman Sachs data room to study the Patriots’ books.

One morning Kraft met some Goldman

Sachs executives for breakfast at the
Pierre Hotel in New York. Jonathan
Kraft, Robert’s son and now the team’s
president, remembers the Goldman
Sachs people demanding a value on the
covenant. Eventually Robert Kraft
threw down his napkin and said “I’m
not putting a value on the lease, either
you let me in the data room or not.”
Then he stormed out of the room,
followed by Jonathan.

The ploy worked; the Krafts got four hours in a data room. But unlike the spacious,
comfortable suites with conference tables and a sprawling view of the Statue of Liberty
like most Wall Street data rooms, the Krafts were set up in a small, windowless room
that appeared to Jonathan Kraft to be a storage closet. They could only read the
documents; no photocopies, no notes. And so Jonathan Kraft, two attorneys and a tax
advisor sat on metal credenzas dictating key points over telephones to their office
voice mails.

“The right number to buy the team was 116 [million dollars] and I was willing to go to
125 million because it was clear they were going to move the team to St. Louis and we
had injunctions ready to go. It would have been a mess. Anyway, we went to St. Louis
[in January 1994] and I met with that Orthwein and we agreed to pay 172. It shows you
the craziest thing I ever did. That price in 1994 was the highest price paid for any
sports franchise in the world in any sport.”

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Yet even after the deal was agreed upon and Kraft said he would pay far more than he
thought the Patriots were worth, there came on the eve of the announcement one last
attempt to get the Patriots and move them to St. Louis. Kraft remembers getting a call
and being offered $75 million to get out of the stadium lease.

Kraft put down the phone.

“I can’t believe they are trying to bribe us,” he says he told Jonathan.

Only his wife Myra thought it was a good idea.

“You paid $25 million for an old stadium and you’re going to get $75 million,” he
recalls her saying. “We can give more money to charity and you will get a new team,
another team.”

She was right. It was a great offer. Still Kraft couldn’t bring himself to do it.

“I went back to the early ’50s,” he says. “My team was the Boston Braves. When I was
a kid we never got to see Hank Aaron. This wasn’t about money. Certain things in life
are what you are passionate about. This was my chance to step up. I went way beyond
what was appropriate but I knew I would never have another chance. And I had the
confidence of sitting in those stands that there was tremendous brand equity in that
region that could be tapped if we ran a respectable operation.”

In the end, that is what it became. He leveraged

the threat of the team moving to another part of
New England to get $70 million in infrastructure
loans from the Massachusetts legislature and a
low-interest loan from the NFL to build Gillette
Stadium, which opened in 2002. The shopping
center came five years later. Now it is a sprawling
megaplex on the side of Route 1.

“It struck us then [Robert and Jonathan] were

the smartest people in the room,” says Marc
Ganis, a sports business consultant who was
working with a rival bidding group that included
Tom Clancy, Paul Newman, Tom Selleck and
Walter Payton. “I was blown away and we had
lost. I knew then from seeing how it worked, that
we were seeing someone who would be a great
owner in the NFL.”

Of course it has not come without dispute. Kraft infuriated Connecticut leaders in the
late 1990s when he agreed to move the team to Hartford in exchange for a
publicly-built stadium, then pulled out of the deal to stay in Foxborough. Many in the
league also question the Patriots success after they were caught taping other team’s
signals in 2007 in a celebrated case that later came to be known as Spygate. Suspicions
were further raised when the league office destroyed the tapes it confiscated from the
Patriots, in a sense destroying the evidence – some allege to protect a powerful owner.

But to imagine what Foxborough was and what it has become is remarkable. Especially
in just 25 years.

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“I was always trying to figure out how I could buy the team,” Kraft says. “For me life is
about execution. If you want to make something happen you have to find a way to
execute your wishes.”

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