Monthly Archives: March 2012
For the end of the week:
- The NBA is stepping in to pay $3.25 million in predevelopment costs on the Sacramento ESC project after the Maloofs refused, saying that they shouldn’t have to pay since they’re tenants. It sure sounds like the Maloofs don’t see themselves as stakeholders in the arena, which is a bad sign. Everyone should be rowing in one direction. A group has organized to force the plan to a vote.
- AEG’s downtown LA stadium plan seems to be stalled, as the company and the NFL can’t agree on terms for what AEG’s contribution and minority share should be. Now that the Dodgers ownership saga is ending, there are renewed calls for a stadium in Chavez Ravine, either to sit next to or replace Dodger Stadium.
- The Giants unveiled several improvements to AT&T Park. The big changes are the new sponsor for the mezzanine club level, Virgin America, and the transformation of one of the field boxes down the first base line into the “Corona Beach Bar”, complete with sand. The narrow bridge on the promenade level next to the Fan Lot will finally be expanded. In addition, concession carts on the promenade level will be moved to the back walls, which will open up views of the field from the concourse.
- Peter Guber, Warriors co-owner, may end up partnering with the Giants on an arena in SF, while the Giants compete with Guber’s Dodgers.
- Rangers Ballpark will be serving a $26 hot dog this year. No, it is not made of unicorn meat.
- Ray Ratto gives his thoughts on what the Dodgers sale might mean for the Giants and A’s.
- The Atlantic compares two cities, Denver and Phoenix, and how building ballparks has impacted their respective downtowns. (thanks hecanfoos)
- Defying convention, the Census Bureau lists the three most densely populated areas in the U.S. as #1 Los Angeles, #2 San Francisco/Oakland, and #3 San Jose. There are flaws in the methodology, in that #5 New York City includes all of the suburbs in New Jersey and Connecticut, but SF/OAK doesn’t include the 680 corridor or any of the North Bay besides parts of Marin County. History and trends have largely defined the specific urbanized areas the Census uses in its surveys.
- Memphis Grizzlies owner Michael Heisley will not sell the team to Larry Ellison because of Ellison’s continued interest in moving the team to San Jose. From the article:
Heisley is asking $350 million for the Grizzlies and says he makes it clear with potential buyers that the team’s arena lease with the city and county is rigid. There are several clauses and financial penalties that make it a daunting task to move the Grizzlies before 2021.
- The NY Post’s Peter Vecsey reports that David Stern was in SF “inspecting building plans and the site” for an arena across from AT&T Park. He also notes that Larry Ellison was not daunted by the cost to break the FedEx Forum lease, though that’s not exactly easy to prove or disprove.
More as it comes. Probably no new posts until Monday at the earliest unless big news breaks.
Matier and Ross lifted the covers on a potential conflict of interest within the Coliseum Authority in today’s Chronicle. According to the report, a campaign for a cigarette tax headed by former State Senate President and recent Oakland mayoral candidate Don Perata paid $37,500 to Oakland City Councilman Ignacio De La Fuente. IDLF would then rally support for the initiative, Proposition 29, on this June’s ballot.
The conflict of interest could come from both men’s roles in relation to the Coliseum Authority. IDLF is on the Authority board, which will decide on a vendor for a new 10-year management contract for the complex. Perata is a lobbyist for SMG, the incumbent operator and one of three bidders for the next contract.
Naturally, both Perata and protege De La Fuente deny that there’s any conflict. Whether you think that these types of transactions can be properly siloed or were done deliberately to hide the details from the public, it looks at least a little suspect. Both pols are grizzled veterans and have been associated with shady Oakland dealings in the past including the Mt. Davis deal, so it’s not as if there’s no history there. To keep things from blowing up, it would be best if IDLF recused himself from voting on the matter. Or he could return that money.
A contract to manage the Coliseum complex is peanuts compared to the potential of Coliseum City. If there’s something to this conflict of interest allegation, god knows how corrupt the Coliseum City deal could be.
While my team was coming up short in bar trivia last night, news came over the wire that the group headed by Magic Johnson, Stan Kasten, and Peter Guber (yes, that Peter Guber) won the extremely competitive bidding for the Dodgers with a $2.15 billion offer. As recently as last week, the Dodgers were going to be sold for $1.4-1.6 billion, and New York hedge fund magnate Stephen Cohen seemed to have taken the lead thanks to having more cash in the bid compared to the Johnson-Kasten’s larger overall offer. The facts of the sale have been trickling out throughout the morning, and the details couldn’t have been more surprising.
- The $2.15 billion bid is in two parts: $2 billion for the team and stadium, and $150 million for the parking lots through a joint venture with outgoing owner Frank McCourt.
- Despite McCourt’s bankruptcy foibles, he’ll end up clearing around $1 billion in profit after dealing with creditors, including his ex-wife. In 2004, McCourt bought the Dodgers from Fox for $430 million, not putting up any cash to do so. Plus he gets the parking vig.
- The bid appears to be ALL CASH. If so that’s incredibly impressive and has major implications down the road.
- Johnson and Kasten had six private investment firms come in to bid for the right to claim the majority share. The winner was Guggenheim Partners, a Chicago/New York firm that manages $127 billion in assets. As part of the deal, the control person or managing partner will be Guggenheim CEO Mark Walter. The new entity that owns the team will be called Guggenheim Baseball Partners.
- For now it appears that nothing will change day-to-day in the Dodger front office. That means that Ned Colletti stays put as GM, though Stan Kasten will slide in above him as President and Magic Johnson will probably have an Executive VP role, similar to the one he had with the Lakers. Keep in mind that while Kasten oversaw much of the Atlanta Braves’ successful run throughout the 90′s and early 00′s, he had John Schuerholz run the baseball side of the house.
- There is potential in developing the parking lots, though everyone in the joint venture would have to sign off on any plans.
Local and national writers have run the gamut speculating what this new ownership group will do going forward. The first obvious step is to get some kind of new TV deal done, which McCourt tried to do under the gun but was blocked from doing by a bankruptcy court judge. The Dodgers could continue with Fox Sports for $200 million or start their own network. A Dodger network may be the best call, though ownership will most certainly run into some hard negotiations with Time Warner, LA’s predominant cable operator. Time Warner will operate the Lakers’ upcoming dual-channel, dual-language sports network, so there is built-in competition.
Ticket prices will also go up at some point, commensurate with rising payroll. For 2012 the active roster payroll is only $90 million, plus $11 million in deferments to Manny Ramirez and Andruw Jones. The Dodgers had been dropping ticket prices precipitously over the past year or two, allowing for a great amount of headroom for hikes when the time comes. That time may be next year, when the team has to make decisions on Andre Ethier and James Loney, while deciding what kind of extension to give Clayton Kershaw. Those three alone could translate to some $40 million per year in additional salaries. Even so, that only brings payroll to $130 million. The Dodgers could make one or two additional huge free agent splashes in the next 48 months, which is why the Giants have to be absolutely frightened.
From a macro perspective, every owner now has to be wondering what this clearly overpriced sale will mean for them. Sale prices have already been trending some 20% higher than Forbes valuations, so this only extends the bubble that’s been forming over the past five years. The bubble was created by great increases in media revenues, chiefly from new and often team-owned regional sports networks like YES and MASN. In response, several incumbent RSNs have overpaid to keep teams on their channels, such as the Fox Sports regionals in Dallas (Rangers) and Los Angeles (Angels). The table below shows franchise valuations and sale prices, in conjunction with relative values to generated revenue and the aggregate value of all franchises. Most franchises are in the 2.5-3 range. The Yankees sport a 4+ multiple, whereas the Dodgers nearly reach 9 – an artifact of how the Dodgers have been run lean while in bankruptcy. Have-not and small market teams have a multiple in the low 2 range.
Higher valuations or potential sale prices doesn’t mean that there’s going to be a bunch of franchises for sale. For one, Commissioner Selig doesn’t want to have a “glut” of teams available since that will only decrease competition and deflate if not pop the bubble. We know that Padres and Orioles are available, even if they’re not being actively shopped at the moment. Maybe that will change now, with both current owners looking for $500+ million paydays. MLB can also draw out the sales process to unbearable lengths (see: Astros, Padres) while it completes its “due diligence” on any buyer. And if higher sales prices are being propelled by new media deals, teams in small markets aren’t necessarily going to receive huge valuation bumps if their TV deals aren’t bumped in accordance.
The A’s could see something of a bump, but how much is very unclear. They’re locked into CSN California for at least another decade. Since the terms aren’t public, we don’t know if moving to San Jose would provide a bump, but I have to think that it does simply from the much larger, healthier pool of available advertisers in the South Bay. When prospective buyers look at the books, they’ll know this going in or find out soon enough. Wolff and John Fisher aren’t going bankrupt anytime soon, so if they wanted to sell they could hold out for as high an offer as they wanted. In any case, Selig would probably dissuade Lew Wolff from even considering a sale, stalling while he “figures out” a solution. On the flip side, the Giants could actually harden their stance on territorial rights, saying that it’s their only way to compete with a soon-to-be mega money Dodger franchise. At the very least, the news should force the Giants to make a commitment to Matt Cain, since the Dodgers would be well-positioned in six months to blow the Giants out of the water with an offer. To that I have to say, Welcome to the club, Giants. Enjoy your stay.
OT Note: The second game of the season vs. the Mariners will be shown live on MLB Network, as MLB has been so magnanimous as to lift its blackout. Oh thank you, capricious TV gods. /s
What’s the pic? It’s a ramp leading to an underground service tunnel for the abandoned stadium next to ARCO Arena/Power Balance Pavilion. Overgrown with grass and trees, the foundation is practically invisible except for unfinished rebar columns sticking up from the concrete foundation.
The arena and its stillborn brother would never have come to fruition without the vision of Gregg Lukenbill, a developer who lured the NBA’s Kansas City Kings from the Midwest in 1985 with promises of a new arena and a growing community. The Kings played in a converted office building (ARCO Arena I) for three seasons before moving to their “permanent” home in the largely undeveloped Natomas area north of downtown along I-5. Even as the money game of owning a franchise passed Lukenbill by, he remained a cheerleader of the city, as well as a critic of both Sacramento politics and the Maloofs.
Lukenbill almost managed to lure teams from elsewhere in California as well. He lobbied hard to pull the Raiders from Los Angeles, as Al Davis entertained offers from numerous cities and played all of them off each other. The Sacramento Raiders plan would be based on a $120 million, 53,000-seat stadium next to ARCO Arena. Though it would’ve looked a lot like Anaheim Stadium in its football era, the stadium would’ve been different from either The Big A or Candlestick Park in that it would’ve been built first for football, and later baseball (43,000 capacity) if everything came together. The rising costs of competing in the major sports space eventually caught up with Lukenbill, who was not nearly as rich as many others entering the game, and tried to construct venues on the cheap – a practice that would become unsuitable once Camden Yards opened.
The big coup, though, would’ve been if Lukenbill had brought the Giants up I-80 to the Capitol. Bob Lurie’s ongoing dissatisfaction with The ‘Stick was well known, and Lukenbill was well poised to pounce on the opportunity. Just as the Giants are politically involved in the A’s stadium situation now, Lukenbill thrust himself into what the Giants were doing then by funding a mailer against Proposition P, the original China Basin ballpark plan championed by then-SF Mayor Art Agnos. Proposition P was defeated in 1989 in the wake of Loma Prieta, causing serious turmoil for the Giants over the next few years, while allowing San Jose and Santa Clara to enter the picture. Lukenbill was subpoenaed after the election, but nothing came of it.
Plans to bring the Giants (or any other baseball team) never gained much traction, and Davis turned his attention back to LA in short order. Still, it’s interesting to think about Sacramento having three major sports franchises in its midst: Kings, Raiders, Giants. Would Lurie or Davis have been satisfied with the stadium in the long run? Probably not. As the Kings, Giants, and others chose not to go to Sacramento, Lukenbill ran out of money and sold the arena to one of his co-owners and the Kings to Jim Thomas.
The greatest legacy of the failed stadium is a closed-off tunnel which leads north from the arena and connects the two. It’s only accessible from the bowels of the arena and has gotten some interesting uses over the years. It doesn’t quite have the flexibility of the Exhibit Hall setup at the Coliseum, yet it’s emblematic of Lukenbill’s vision: bold, big, and ultimately, unfinished.
Tomorrow: A (probably) final visit to ARCO.
If you’re one of the 80% of A’s fans who drives to games, you just might get a quicker trip to the Coliseum in the future, thanks to a flurry of new road projects that Caltrans is starting this year.
According to Mr. Roadshow, the Bay Area is getting $5 billion to be spread among 19 projects. While none are in San Francisco, San Mateo, and Marin Counties, the bulk of the work (12 projects) will be in Alameda and Santa Clara Counties. Key among them are the extensions of carpool lanes along the Nimitz:
- I-880 from Hegenberger Road in Oakland to Davis Street in San Leandro ($108 million)
- I-880 from CA-237 in Milpitas to US-101 in San Jose ($31.5 million)
The South Bay project is less expensive than the East Bay project because most of the groundwork was already done for the former as part of a previous 880 widening project a decade ago. Combine these two with ongoing improvements to the Nimitz and improved interchanges at CA-92 and CA-262/Mission Blvd., and it should eventually be much smoother sailing in each direction for carpoolers, who are the usual profile for those who drive to games in Oakland.
If the A’s move south, the carpool lanes, along with at least 4 lanes in each direction the entire way between Oakland and San Jose, will help funnel gameday traffic. However, it’s not a complete, direct solution. Once a driver coming south along 880 hits the 101 interchange, the freeway will revert to not having carpool lanes, which could create congestion there and along surface streets as they try to make it the last two miles. A good way to go might be the Gish/10th Street exit on 880 South just before 101, as it’s a quick detour to downtown and SJSU.
The big ticket item is $2.3 billion for the 10-mile BART extension from Warm Springs (its own separate project) to Berryessa in North San Jose. Again, it’s not a direct trip to Cisco Field, but it’s a lot closer than Fremont and the only way to get to downtown San Jose is to first build to Berryessa.
Not related to Caltrans funding is one more big mass transit project, Caltrain electrification. The long-awaited conversion from diesel to electric trains will create an opportunity for more frequent service, which will drive down the operating cost per trip and help keep Caltrain solvent. To achieve this, Caltrain cut a deal with the state’s troubled high speed rail authority to devote $700 million towards the electrification project. To support the more frequent service and greater number of riders, the San Jose, Millbrae, and San Francisco stations will be expanded. The $1.5 billion project is expected to be completed by 2020. HSR is teetering right now politically, so it’s not clear if that project will ever be built. This money shift appears to be an acknowledgement by the authority that it may need to start in the most heavily impact areas first, before it commits to the full intra-state backbone. The move could backfire in the long run, as it may convince stakeholders and citizens that high speed rail would be best if it terminated in San Jose, not San Francisco.
Remember those groups that were rumored to be interested in buying the A’s, even though the A’s aren’t actually for sale? They may have a more realistic target now that Jeff Moorad has stepped down from his Padres CEO post. Although Moorad will stay on as a Vice Chairman, the new role appears to be little more than a placeholder as still-majority owner John Moores figures out what to do next.
The circumstances for Moorad’s departure are shrouded in mystery. It’s possible that, after all this time, enough owners had a grudge against the former agent that there was no way he’d get the gig. If so, that’s a cruel joke to play on the man, considering they and Commissioner Selig set in motion the “layaway” plan in 2009 that allowed Moorad to believe he’d buy the team in the first place. Another reason for getting rid of Moorad may be the allegation that he was looking to use upfront from the new Fox Sports San Diego-Padres broadcast rights deal to pay down debt, Frank McCourt-style.
At Gaslamp Ball, there’s a post with the notion that Moorad wanted to accelerate the sale so that Moores couldn’t get a taste of the new TV money, and when Moores found out how much that was, he suddenly wasn’t in such a hurry to sell the team. The new revenue stream should help Moores net a higher sale price than the $530 million negotiated in 2009. $600 million, anyone?
For now it appears that Moores is not in a hurry to sell the team. He’s got a nice new revenue stream, better profitability for the team and for himself, and he’s clear of his ugly divorce. He’ll meet with the minority partners, including Bob Piccinini, and tell them what his plans are, whether it’s to encourage them to bring in a new managing partner candidate or to sell their stakes back to him so that he can resell the team whole later. It’s clear that he’s done running a team, so a sale can be expected sooner rather than later.
That provides an opening for the many bidders who’ve lost out out on the Dodgers. The bidding list in LA is down to three, with no bid lower than $1.4 billion. The Dodgers will be a $300+ million annual revenue team once their next TV deal is made, whereas the Padres should be a $200 million revenue team with their new deal. Even at $600 million, the Padres look like a far better deal than the Dodgers, unless a bidder absolutely has to have the Dodgers or the team’s brand cachet. One of the parties supposedly interested in the A’s was an LA financier involved in the Dodger bidding, so it seems natural for him to turn his attention two hours south instead. (If you’re wondering, I don’t know who the second interested party is – yet.)
The Padres aren’t the only team up for sale. A rumor emerged last month that Peter Angelos was looking to offload the Orioles. Angelos is in the catbird seat there, as he has the $360 million guaranteed sale price for the franchise and ownership of MASN, the area’s regional sports network that carries both the O’s and Nats. He can sell either or both. If he sells only the team he should get $500 million. If he sells both he could get up to $1 billion. The team has denied the rumor.
Anything is potentially for sale for the right price, including any baseball team. It’s easy to say you’re interested in a team or to enter bidding. Getting a sale consummated? With the incredible amounts of money at stake, it’s a lot easier said than done.
Another week, another media morsel. If it’s not the Giants leaking information out or Larry Baer defending the Giants’ territorial rights claims, it’s a national sports writer pleading Lew Wolff’s case or Lew himself answering questions. To me, it feels more like slow-motion tennis than baseball, and while I like tennis, this has gotten repetitive and tiresome.
This time it’s Fox Sports’ Ken Rosenthal again with a plan to resolve the A’s-Giants impasse. Rosenthal thinks that the Giants should be guaranteed a minimum revenue amount against potential losses incurred from an A’s-to-San Jose move. He cites the O’s-Nats deal as an example. However, while Peter Angelos got a $360 million sale price guarantee and $75 million to start up MASN, I don’t believe that he got an annual revenue guarantee ($130 million) as Rosenthal suggests. There’s a good deal of conflicting information on this. It’s sort of a moot point because the O’s cleared the supposed minimum in the first year of the agreement, 2005, and haven’t looked back. Forbes’ estimated revenue for 2011 was $179 million.
Guaranteeing revenue for the Giants is a different matter. According to Forbes, the Giants haven’t been below the $200 million revenue mark in three years. Last year the Giants were in the top ten at $230 million, whereas the average revenue was $211 million (median: $201 million). I have to think that MLB, in its desperation to get some kind of deal done, has floated a revenue guarantee number to the Giants, to which Baer has balked. I’ve argued frequently for some kind of compensation plan that includes revenue, but a revenue guarantee of $230 million gives me pause, so I imagine it gives Bud Selig and the other owners pause as well. Then again, Wolff is projecting a bump from $150-160 million to $230 million for the A’s, so for baseball the result should be a net positive.
Rosenthal also talked to Tulane law professor Gabe Feldman about the prospects of an offensive antitrust lawsuit against baseball. Feldman characterized such a suit’s chances as very slim, a “real longshot”. Also ready with a quote was San Jose City Councilman and future mayoral hopeful Sam Liccardo, who may see all of this baseball posturing end up as part of his election platform if the saga continues at its current pace.
The sucker punch is saved for the end:
Only a few hardy souls — a latter-day version of the flat-earth society — believe the Athletics still can make it in Oakland. San Jose is the largest city in the Bay Area. A new ballpark in the city not only would transform the Athletics’ business model, but baseball’s as well.
There will be some Oakland defenders who say things like, “If you tell a lie long enough people believe it”. No, that’s not it. Sometimes a spade is a spade. If it wasn’t the case, Oakland wouldn’t be pinning its urban revival hopes on a pie-in-the-sky plan like Coliseum City. If it wasn’t truthful, Signature wouldn’t be trying to offload O29 on any Tom, Dick, or Harry who might be interested in land. It’s telling that one of the chief pro-Oakland arguments is that baseball doesn’t have the wherewithal to change T-rights on Wolff’s behalf. That’s all well and good, but how is that confidence-inspiring for Oakland?
On a panel at the 2012 IMG World Congress of Sports, Giants CEO/President Larry Baer continued to flog the idea that the Giants own Santa Clara County. Via Sports Business Journal:
During a panel discussion, he cited a “territorial grant” that allows the Giants to market to Santa Clara County. Baer said the Giants franchise depends on revenue derived from there, with 35 to 45 percent of its market coming from San Mateo and Santa Clara counties.
I thought the number was 50%? Now it’s 35-45%. Two weeks ago it was 43% from Santa Clara County alone. No wonder we can’t keep these numbers straight. Baer can’t either.
Baer went on to cite how the Giants got it done with good ole’ sweat and gumption. He conveniently forgets one tiny little detail: When it comes to having billionaires ready to coalesce and save the franchise, Oakland is no San Francisco. The two groups that reportedly want to buy the A’s? Not from Oakland. Bob Piccinini? Not from Oakland. If the team is going to be saved in Oakland, someone will have to step up from Oakland. It’s one thing to talk about civic pride, another to have the means to act on it.
Forbes came out with their annual overview of The Business of Baseball, and if you’ve followed this site or other sports economics sites much you won’t be surprised by the results. The A’s, stuck in limbo, have the lowest valuation of any of the 30 MLB franchises at $321 million. The figure hasn’t quite caught up with Forbes’ pre-downturn, 2008 valuation of $323 million (which may have factored in a future in Fremont). Despite this, the number is up 5% over last year. Some other numbers and extrapolations:
- The Yankees are worth the most at $1.85 billion, followed by the Dodgers at $1.4 billion (based on current franchise bids).
- The Angels ($656 million) and Giants ($643 million) follow the Dodgers as most valuable on the West Coast.
- Aggregate value of all franchises is $18.1 billion. The A’s account for only 1.77% of this total currently.
- A’s revenue is estimated at $160 million, roughly in line with last year’s amount. This includes revenue sharing, if you’re asking. (I assume that Lew Wolff may quibble with the figure a bit.)
- Player expenses for the A’s are listed at $81 million, slightly more than the 50% “salary cap” that we frequently discuss here.
- The blurb on the A’s page questions what team president Michael Crowley does. Besides saying no, I wonder that myself sometimes.
A closer look at how the valuations for the Giants and A’s breaks down yields some additional insight.
The big takeaway is that for the first time, the Giants are considered twice as valuable as the A’s. It’s reflective of the constraints the A’s are under, as well as the team’s lack of promotion within the market(s). To their credit, the A’s have a much more permanent media presence than they had in the last 20 years. It’s still a long climb out of the cellar. The team’s stadium value would probably be double in a sold out new ballpark, and the brand value could see a similar increase. Sport would see a drop due to less reliance on revenue sharing. Market’s a tougher question. Clearly, that number could double if the A’s were allowed to build in San Jose, but it should also go up appreciably if they built something new in Oakland. Some back-of-the-napkin math has me estimating the team’s value in a new ballpark in Oakland at $400 million, San Jose at $450 million.