Jeff Loria will get Marlins windfall, but probably not because of his $900m stadium subsidy

The New York Times’ Ken Belson ran an article yesterday noting that Miami-Dade County Mayor Carlos Gimenez is annoyed that Miami Marlins owner Jeffrey Loria is set to sell his team for $1.2 billion after getting hundreds of millions of dollars in stadium subsidies from taxpayers:

“I would think he’ll walk away with $500 million in his pocket,” Mr. Gimenez said. “It sticks in my craw.”

The Marlins subsidy — which was for around $500 million in construction costs but which thanks to some terrible loan terms ended up costing taxpayers around $900 million in present-value terms — is worth being annoyed about, absolutely. But is Loria really getting a $500 million windfall as a result?

The numbers available are these:

  • Loria bought the Marlins in 2002 for $158 million, $120 million of which he got as a payment from MLB for the Montreal Expos, which he’d previously owned.
  • The reported sale price for the Marlins today is $1.2 billion, though a buyer hasn’t been settled on yet (and it apparently won’t be Derek Jeter and Jeb Bush after they couldn’t agree on who’d be in control).
  • Belson reports that the Marlins are $400 million in debt, a widely reported number that it isn’t clear whether it’s stadium construction debt, money borrowed to pay payroll, or what.

So let’s say that Loria is set to walk away with $800 million in cash for a team that he spent $158 million on fifteen years ago, for a 406% profit, or an 11.41% annualized return on investment. Is that the result of getting a subsidized new stadium?

One of the difficulties of figuring out what sports teams are “worth” is they’re only sold infrequently, so we can’t exactly say what a normal appreciation of value looks like. There are a few data points, though: The best example we have over a similar time period is the Los Angeles Dodgers, which were sold by NewsCorp to Frank McCourt in 2004 for $430 million; McCourt turned around and sold the team to Magic Johnson and his partners in 2012 for $2 billion, which is an annualized return of 21.16% — all without getting a new stadium.

We can also look to the annual Forbes team value numbers, which are guesstimates at best but at least give us a league-wide baseline. In 2002 the average MLB team, according to the magazine, was worth $286 million. In 2017, with ten teams having opened new stadiums in the interim and 20 still playing in the same venues, that number is $1.54 billion — an annualized return of 11.87%, meaning Loria’s windfall is almost exactly the league average.

Let’s look at one more metric: annual revenue figures, per Forbes, which are much more accurate than the magazine’s team value numbers. (As we know thanks to Marlins financial documents leaked to Deadspin in 2010 that almost exactly matched the Forbes numbers.) Between 2008 and 2017, per Forbes, the Marlins’ annual revenue went from $128 million to $206 million, an increase of 61%. Over the same time, the average team revenue went from $183 million to $292 million, an increase of 60%; hell, even the Marlins’ famously stadium-deprived cross-state rivals the Tampa Bay Rays, meanwhile, saw their annual revenue go from $138 million to $205 million, a 49% jump.

The story here, then, is not of a city that threw $900 million at its local baseball team owner and saw him walk away with almost all of it in cash. It’s of a team owner who, despite owning a team that was highly profitable — as proven by those same leaked Deadspin documents — demanded a new stadium from taxpayers, got it, saw his team continue to draw poorly since it turned out the thing that fans wanted wasn’t to see the same below-average players lose games under a giant roof, then walked away with a windfall profit regardless thanks to a combination of the cable bubble and a growing number of billionaires seeking to own a limited number of sports teams.

In short, Marlins Park looks like it wasn’t just a waste of money for Miami taxpayers, but it didn’t even really help Loria, who would have been just as obscenely wealthy even if he’d let the team keep playing at its old stadium. I’m not honestly sure whether being a pointless new toy is more or less appalling than being a scam to get windfall profits, but it’s certainly different.


12 comments on “Jeff Loria will get Marlins windfall, but probably not because of his $900m stadium subsidy

  1. Hmm. Good analysis, but I have to take issue with the last para:

    “In short, Marlins Park looks like it wasn’t just a waste of money for Miami taxpayers, but it didn’t even really help Loria, who would have been just as obscenely wealthy even if he’d let the team keep playing at its old stadium.”

    He might have made the same profit on the sale of the team itself, but think of all the increased profits he’s squeezed out of that shiny new stadium in the five seasons since the taxpayers bought it for him. I think the stadium helped him *plenty*.

    • Yes, and isn’t the stadium included in the overall ‘valuation’ of the franchise, such as the one Forbes publishes and companies like Appraisal Economics, Inc. provide as a service in their ‘valuations’?

      • It’s a rather odd case because typically you’d want to own the stadium to increase the value and make it more appealing to buyers. But in this case–at least with some buyers–it probably helps Loria that he DOESN’T own the stadium. The only way that $1.2 billion ever makes any sense is if the team moves to a new home where fans will attend, tune in to watch on TV, etc. And that end goal is far easier to accomplish if the stadium isn’t owned by the team. I’d expect in short order the new owners will end up in some sort of highly-manufactured dispute over the stadium which will “force” them to relocate.

        • There are almost no cases in modern sports where you want to own your stadium, if only because then you have to pay property taxes on it. Far better to own the revenue streams, and let somebody else hold the lease.

          • Neil: What about College Football? Having an on campus stadium beats renting out a facility or sharing one off campus ( like Pitt or Miami ( Florida)). Why? Students are more likely to go to games, which helps attendance and makes it more of a “Home Field.” We have seen what has happened to Pitt football since Piit Stadium has closed. They have been surpassed by Penn State, and not just in football (look at hockey (a sport Penn State has and is successful at, and Pitt does not)). Guess what? Once the Beaver Stadium renovation happens, the distance between the Nittany Lion and Panther programs will only increase.

          • I haven’t looked at college football attendance or revenue figures in detail. I would question, though, whether the boost you get from a new stadium is enough to compensate for the money you have to spend on building one.

          • One thing about College Sports is the fact boosters pick up a lot of the costs (the Pegula Ice Arena @ Penn State is a perfect example of this). Penn State even has a 20 year plan for new or upgraded sports facilities ( Beaver Stadium upgrade included). when they roll out depends on the boosters ( lacrosse is going first because two guys are footing the entire bill). Even @ Schools where capacity is barely a third of sold out Beaver Stadium ( such as TCU) the on campus facilities are getting built. Why? Otherwise they risk being left behind when the next Round of College expansion happens in 5 years.
            The latest example is the University of Kansas: They might have the worst football program of any power 5 Conference School, but they announced plans to renovate Memorial Stadium ( spending over $300m). Why? If the Big XII ends when the Land Grant is over in a few years, they want to be in the Big 10 and do not want to end up in the AAC or Mountain West Conference.

          • Are property taxes really the main concern? Most everybody gets some level of relief on those. I’d say the ongoing cost of maintenance, upgrades, etc. would be the reason to avoid owning a stadium outright. Plus it’s something you can’t just pack up and take with you when the grass looks greener. But if you can own the entire area around the stadium and have complete control like Kroenke is doing in LA it can be very lucrative. And in that case owning it is speeding up the process considerably because it decreases the red tape.

  2. You mention the LA Dodgers ownership as Magic and his partners. I wonder how much skin Magic actually has in the game, relative to Guggenheim and Mark Walter and the other partners. Just curious.

    • Good question. I’ve heard the same thing I imagine everyone else has… that Mr. Johnson’s investment is ‘significant’ in terms of actual dollars, but not a large percentage of the purchase price. The other partners wanted him in as much for promotion value as anything else (which isn’t to say he didn’t put several lifetimes worth of earnings for mere mortals into the partnership).

  3. Interesting comparisons to league averages etc.

    So, if Loria had been unsuccessful in getting dumb politicians to build him a new billion dollar stadium, his revenues might only have increased by the 45-50% or so that Tampa’s has?

    If there were a linear relationship between revenues and sale price (there isn’t), this would mean the Marlins absent the new park might sell for $900m-$1Bn. Cubs level money (albeit a decade later).

    If Sternberg was to sell the Rays for relocation (delayed), what do you think he would get?

    The world is truly broken… but if this gets Loria out of MLB forever, it’s (someone else’s) money well spent in my book.

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