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Sacramento MLS team on indefinite hold after investor pulls out of deal

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Major League Soccer announced on Friday that the expansion team set for Sacramento, California, scheduled to begin play in 2023, is now on indefinite hold after Ron Burkle, the primary investor of the proposed team, informed MLS officials that he has "decided not to move forward with the acquisition of an MLS expansion team" in the city because of the impact of the coronavirus pandemic.

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Multiple sources with knowledge of the situation cited increasing costs associated with building a stadium at the Downtown Railyards site as the primary reason Burkle, who also co-owns the Pittsburgh Penguins of the National Hockey League, decided not to move forward. One source said that the costs for the Sacramento stadium went from $300 million to $400 million, while infrastructure costs increased from $27 million to $47 million. On top of those increases, the ability to raise funds from the projects' limited partners, all in the middle of a pandemic, fell roughly $60 million short of what was anticipated

"After working for many years to bring an MLS team to Sacramento, the League continues to believe it can be a great MLS market," MLS said in a statement. "In the coming days, the League will work with Mayor Darrell Steinberg to evaluate possible next steps for MLS in Sacramento."

Sacramento Mayor Darrell Steinberg, in a statement to ESPN, said, "I am very disappointed in Mr. Burkle's decision to step out of his October 2019 public commitment to our city. Despite the difficult past year for our city, we have upheld every commitment to Mr. Burkle, the league, and our community. We took major steps to welcome Major League Soccer to a new stadium in The Railyards, and we remain prepared to move forward immediately.

"I greatly appreciate the support of Commissioner Don Garber and MLS. They have done right by us, and they continue to stand behind us. We will still bring MLS to Sacramento, and we will work with the league to find a new lead investor."

MLS announced the team in Sacramento to much fanfare in October 2019, but the deal was complicated. Not only did Burkle and co-investor Matt Alvarez need to put up a $200 million expansion fee, plus the costs of the stadium, but Burkle and Alvarez also needed to acquire a majority stake in USL Championship side Sacramento Republic from owner Kevin Nagle. That part of the deal was also not completed.

Doubts began to emerge earlier this year about whether Burkle would move forward with the project after The Athletic reported that his group had not signed the long-form agreement with MLS. That news proved a harbinger, as Burkle informed MLS on late Friday that he was pulling out of the deal. Sources confirmed an additional report in The Athletic that Burkle's group never signed the long-form agreement with MLS.

"I want to thank Mayor Steinberg for his continued efforts to bring MLS to Sacramento," MLS commissioner Don Garber said. "His commitment to the city and delivering for its passionate soccer fans should make all citizens of Sacramento proud.

"Interest in owning a club in Major League Soccer has never been higher. And I remain incredibly optimistic about finalizing expansion plans for our 30th team."

The announcement amounts to a massive setback, and possibly a death knell, for Sacramento's expansion hopes. While the Sacramento Republic remains well supported, finding an ownership group with sufficiently deep pockets has been a struggle. In late 2017, Sacramento was thought to be one of the front-runners in the expansion race but ended up losing out to Nashville and Cincinnati when Meg Whitman opted not to invest in Sacramento's expansion effort.

Burkle was thought to be Sacramento's main investor, but now, despite having a stadium site picked out, Sacramento's future as a home for an MLS team is in serious doubt.

"We are not starting from scratch by any means," Mayor Steinberg added, "We have an approved stadium plan and an approved plan to build and pay for infrastructure. We also have the best fan base in the country -- one that has shown time and time again that it can support an MLS team."

"We have only begun to fight for what our city deserves."