Category: Miami Marlins

Remember how, when Miami agreed to give a squillion dollars to Marlins owner Jeffrey Loria for a new stadium and in exchange was promised a share of the profits if Loria ever sold the team? Yeah, that’s not gonna happen:

The 2008 county agreement that had Miami-Dade fund the bulk of the $515 million government-owned stadium in Little Havana gave Miami-Dade and Miami the right to 5 percent of any profits Loria and partners might reap if they sold the team within 10 years. But Loria could deduct team debt, certain expenses and taxes tied to a sale, and county officials and team executives privately predicted Loria wouldn’t agree to give up any of his revenue from the October sale to Derek Jeter and partners…
In a brief report sent by Loria’s lawyers, his organization said the terms of the deal resulted in a profit-sharing calculation of zero. The reason? About $280 million in debt that lowered the profits from the $1.2 billion sale, plus an agreed-to underlying value of the franchise of about $625 million, based on it getting more valuable each year. Add in nearly $300 million in taxes tied to the sale by Loria and partners, and Loria’s accountants claim the sale amounted to a loss of $141 million. Loria also deducted the $30 million fee paid to the financial advisors hired to negotiate the deal.

So on the one hand, Loria does have a case here that his windfall profits from selling the team weren’t mostly because of the new stadium, as we’ve covered before. On the other, “Sure I sold my team for a 650% profit, but inflation, and also taxes, so sorry you can’t have any even though I promised” is a spectacular display of chutzpah. Loria may have just cinched his membership in the Evil League of Evil.

I may have just written an article for Vice Sports on how Miami Marlins owner Jeffrey Loria’s windfall from selling the team isn’t really the result of the stadium subsidies he got — those stadium subsidies look to have just gone down a hole, huzzah! — but that doesn’t mean I can’t appreciate and agree with this lede from Miami New Times’s Tim Elfrink:

Tens of thousands of baseball fans, officials, and journalists have arrived in Miami today for one reason: to see the worst owner in professional sports for themselves.

(Though when I mentioned this, I did have one person ask me: “What, James Dolan is visiting Florida?”)

As good as that opening line is, the main point of the article is even better: Loria, not content with suing his fans for canceling their season tickets to his terrible team, is now trying to seize a commercial building owned by one fan as compensation:

Loria’s team is suing a fan named Kenneth Sack in Broward County to take a $725,000 building he owns in Oakland Park — all as part of the same ugly dispute that has led the team to sue at least nine season ticketholders and luxury-suite owners since 2003…

In January, the team won a judgment against Sack for the full $97,200, but his attorney appealed because the lawyer had missed key hearings and filings after suffering a heart attack and spending months in the hospital. That civil case remains open.

But in the meantime, the team has used that judgment to try to nab a building owned by Sack. On March 12, the Marlins initiated a foreclosure proceeding for a commercial building Sack owns in Oakland Park, arguing that they can seize the property to fulfill the $97,200 he owes them; they ask the judge to appoint a receiver so they can begin collecting rent from the location. (Oddly, county property appraisers say the building at 5090 N. Dixie Hwy. is actually worth $725,000.)

Concludes Elfrink: “The Marlins have so deeply ruined the relationship with their fans that it’s a fair question whether professional baseball can ever recover in Miami. For now, be warned: Don’t sign any contracts with the Fish unless you’re ready for them to come after your property if things go sour.” Have fun with your new $1.2 billion toy, next billionaire in line to own the Marlins!

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.

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.