Bush-Jeter $1.3b Marlins bid probably isn’t due to subsidies, but go hate Jeff Loria anyway

So it looks like this is probably happening:

A group including [Derek] Jeter and Jeb Bush, the former Florida governor and presidential candidate, has reached a tentative agreement to buy the Miami Marlins, according to two people briefed on the situation who requested anonymity because the deal is not official…

Bloomberg first reported that the Jeter-Bush group was within reach of buying the team. The Miami Herald reported that the sale price would be $1.3 billion.

Aside from all the obvious jokes — Jeter and Bush will get along great, neither can go to his left — the interesting thing for stadium-subsidy watchers is: How much of this $1.3 billion windfall for Jeffrey Loria, who bought the Marlins for $158 million (most of which was funded by his simultaneous sale of the Montreal Expos to MLB) in 2002, is attributable to the nearly billion-dollar public subsidy Loria received for his new stadium, and how much is just that baseball franchises keep appreciating like Brooklyn real estate?

A quick look at the Forbes team value page for the Marlins shows that year-to-year operating income has actually gone down since Marlins Park opened in 2012, which makes sense, since the team has spent (somewhat) more on player payroll since then and Marlins attendance is still pretty lousy. Forbes estimates that the team’s overall value has soared regardless, from $256 million in 2008 to $940 million in 2017 (Forbes values tend to lag a bit behind actual sale prices), but then, the Tampa Bay Rays‘ estimated value leaped from $290 million to $825 million over the same time period without the benefit of a new stadium, so maybe the stadium dough wasn’t that big a help after all, though you can see where you might get a small sale price premium for playing in a new stadium nobody wants to go to instead of an old stadium nobody wants to go to.

If Loria does walk away with $1.3 billion — and Forbes’ Mike Ozanian, citing his own unspecified “sources,” claims that the Jeter-Bush group’s bid is far from formal or finalized, and the Wall Street Journal’s Matthew Futterman and Jared Diamond concur — it might be fair to gripe that he’s walking away with a taxpayer-backed windfall. But it’s an equally valid assessment to say that after spending ten years shaking down Florida taxpayers for an $800-million-or-so subsidy for a stadium that didn’t help him or his team at all, Loria is throwing up his hands and selling the Marlins to a new set of suckers — who will probably re-enact this whole scenario in another decade or two. The nice thing about being a rich dude is you don’t have to learn from your mistakes, you can just cash out and walk away.

29 comments on “Bush-Jeter $1.3b Marlins bid probably isn’t due to subsidies, but go hate Jeff Loria anyway

  1. I think the Vikings and possible other teams with new stadiums have a clause that says the owner has to pay back some percentage of money if the team is sold. Is this the case with the Marlins?

  2. This would be an emotional purchase. Apparently previous parties interested in purchasing the Marlins were spoked by tickets sold being 40% of attendance figures.

  3. I don’t understand the economics of these transactions. Normally a business is valued based on its expected cash flows. Is there anything other than the Greater Fool theory at work in the valuation of sports teams?

    • At the moment cash flow is increasing due to to TV deals, but with cord cutting increasing and ESPN needing to keep making deep cuts in staff to stay profitable (or profitable enough to make Disney happy)

      This is likely coming to an end in the next round of TV deals, which I think start coming up for renewal in 2022, it’ll be interesting to see if it continues into the 20’s and 30’s.

      There is also a “fun” factor of owning a team that coupled with the limited supply helps keep the price up since most folks think they can sell it for more then they bought it for.

      • Not to mention the feeling of superiority one uber-rich guy has over another uber-rich guy because he now owns a professional sports team and the other guy doesn’t. Class warfare, of a sort.

    • JM:

      At some point the music will stop, agreed. That said, I’ve been expecting it to stop since Jerry Jones paid the insane sum of $190m for the Cowboys and Texas stadium (?) in 1989. A fool and his money, I remember thinking at the time.

      Really no different than the stock market… everyone believes it is overvalued on average, but no-one wants to say whoa in a horse race. The comforting thing is that when the sports franchise appreciation bubble (or rights fees bubble, depending on your perspective) does burst, there will be no shortage of experts available to talk about how ‘this was always going to happen’… especially those who had just weeks earlier said it couldn’t happen…

      • Meh,

        There are people who call bubbles, and never said “this couldn’t happen”. Certainly some experts will change their tune, but honestly if you actually were reading the economic press (not the real estate press), they were quite clear there was a US real estate bubble in say 2003-2004. There were questions about how widespread it was, and how big a correction there would be. But very few “experts” thought the appreciations were real.

        But you cannot necessarily do a lot with that information because trying to call the top of a bubble is a good to lose tons of money. “The market can remain irrational longer than you can remain solvent”, and all that.

        I mean sure the NBC nightly news was not ringing alarm bells, they were part of the corporate media dedicated to getting everyone to spend spend spend. But if you had like an Economist subscription, or listened to Marketplace on MPR regularly there was no question about what was going on with real estate prices.

      • Your assumption about my subscription habits is not correct.

        The point I was making was not that “absolutely everyone” said there was no bubble ten years ago, it’s that many people (particularly those analysts who would more accurately be referred to as touts) did, including a large majority of those paid to make allegedly accurate assessments of the markets. So, sure, saying “everyone” was incorrect. Substitute “Vast Majority” please.

        It is also worth noting that many who did predict same (Schiff, for example) said everyone should put their assets in non-US markets for safety as the US’ position as leader of the global economy was about to end in a massive collapse.

        At least to date, this prediction on the part of the experts has not come true. And “Asia” turned out not to be as immune to the carnage as Schiff claimed… which is odd, given that he runs/ran a Europacific capital fund or two…

    • It may be as simple as the law of supply and demand. MLB teams are good for the ego, make great tax writeoffs and they obviously appreciate in value at a rapid pace. That you never really make money from an MLB team until you sell it (according to the book-cookers) isn’t much of an impediment when you’re buying into a very exclusive fraternity. And people buy YOU drinks at the country club.

      • Ahhh, wish you could edit these. I wanted to add that George Argyros’ ownership of the Mariners in the 80’s is a classic example of how to make owning an MLB team work for you: He buys the Mariners for $16 million in 1981, gets to write his book losses on the team off against his profitable SoCal real estate business for seven years while running the M’s as a loss leader throughout, then sells the team to Jeff Smulyan in 1989 for $80 million. There are reasons George is a billionaire and this is one. Horrible owner from a fan’s standpoint but he sure knew how to milk that golden cow.

        • Excellent point. I suppose people in that financial league need to think not just about how much they “made” on the sports purchase, but what they could have made deploying that capital elsewhere. However, they get publicity and promotional value from sports purchases that transfer to other businesses in a way that’s hard to match.

  4. There are almost two thousand billionaires in the world and infinitely more corps, llcs, and partnerships with at least a billion in equity. There are only 30 MLB teams. They will pay through the nose on these vanity purchases to get their foot in the door of these cartels. Whether their accountant gives them the “ok” or not, rich dudes will get the toy they always wanted, solvency be damned. The taxpayers will always be there.

  5. Jock-sniffing value should be added as a component to team valuations. And consider that if Bush/Jeter buy this team, they inherit the $300 million debt that the still owe Giancarlo Stanton.

    • It’s not really debt, though, more like a prepayment on a future asset. If they ever decide they’d rather cash it out, I’m sure lots of other teams would take Stanton off their hands for that price.

    • Having Beckham would rescue his expansion bid. The demographics for baseball and soccer fans in Miami is like night & day. Not sure how much money Mr. Jeter is putting up ? Its obvious Beckham doesn’t want to put up any of his.

      • But I wonder if Beckham will find it easier to work with Jeter Bush et al, than working with Loria if wants to build near Marlins Park.

        • That land that Marlins park sits on was to be laid out to accommodate a soccer stadium next to the baseball park. Loria made sure that enough land wasn’t left for that to happen. His lawyers also put language in city agreement to make it almost impossible for a soccer team to sell name rights outside & inside that privately built stadium. So working with anyone other than Loria is an improvement.

          • Beckham can’t find investors willing to build him a stadium for the right to hang with him. It would have to be a partnership close to what the Yanks & NYCFC have going. The Marlins get equity in the soccer team in return for a place to play and free rent. At least until Beckham can find investors.

  6. I’d like to think I hate Jeff Loria as much as it is possible for a non-Miami taxpayer to.

    But I’m not sure why we would hate him more for turning a profit on the sale of a team and stadium contract that his partners (co-conspirators?) willingly entered into with his company.

    Whether he benefits from 25 years of subsidy driven profits or chooses to recapitalize that taxpayer largesse through a sale or perhaps even borrowing against the income streams provided… isn’t it still all about the original sin here?

  7. If ownership changes are the Marlins obligated now to stay in Miami or Can they threat to move to get additional subsidies?

    • I believe the contract calls for them to stay for some period, enough to mostly pay off the stadium.

  8. Aside: there was a substantial financial penalty that luria would have had to pay to the city, had he sold before a certain date – and unsurprisingly that time just recently passed.

    searching for information about the sale, a reporter found that there is still a finanical penalty that will be paid. But apparently that will have to be haggled over, because the language is vague and doesn’t call out an amount, or percentage.