Forbes 2010 List of Baseball Franchise Valuations

[rok]

The list came out a couple of days ago, though I didn't see anything posted here. We are ranked 5th, but now have the 4th highest Debt/Value ratio. That is troubling, though the Rickettses seem serious about paying that down by finding new revenue sources. Still are 5th in Revenues and 8th in Net Income.

http://www.forbes.com/lists/2010/33/baseba...seball_Rank.htm

[Coldneck]

I'm surpirsed the Yankees have such a high debt ratio. They have the 2nd highest debt ration behind the Rangers, who are upside down. If this is correct the Steinbrennars owe $1.4 billion. The lowest payroll teams seems to me earning the most money relative to investment. The most profitable team in baseball last year was the Marlins, with the lowest overall payroll. How is that not a problem?

[Butcher]

<!--quoteo(post=87366:date=Apr 9 2010, 09:47 AM:name=Coldneck)-->QUOTE (Coldneck @ Apr 9 2010, 09:47 AM) <{POST_SNAPBACK}><!--quotec-->I'm surpirsed the Yankees have such a high debt ratio. They have the 2nd highest debt ration behind the Rangers, who are upside down. If this is correct the Steinbrennars owe $1.4 billion. The lowest payroll teams seems to me earning the most money relative to investment. The most profitable team in baseball last year was the Marlins, with the lowest overall payroll. How is that not a problem?<!--QuoteEnd--><!--QuoteEEnd-->
Yeah -- there's a serious problem there. What is the incentive for the Marlins' owner to spend money on their team? And are they benefiting from the Yankees/Red Sox luxury tax?

[rok]

<!--quoteo(post=87366:date=Apr 9 2010, 09:47 AM:name=Coldneck)-->QUOTE (Coldneck @ Apr 9 2010, 09:47 AM) <{POST_SNAPBACK}><!--quotec-->I'm surpirsed the Yankees have such a high debt ratio. They have the 2nd highest debt ration behind the Rangers, who are upside down. If this is correct the Steinbrennars owe $1.4 billion. The lowest payroll teams seems to me earning the most money relative to investment. The most profitable team in baseball last year was the Marlins, with the lowest overall payroll. How is that not a problem?<!--QuoteEnd--><!--QuoteEEnd-->
They're definitely gaming the system by breaking even or even reporting a small loss ex-revenue sharing. I would imagine that their share of the luxury tax pool gets them into the black, bigtime.

[Coldneck]

The players association threatened a lawsuit against the Marlins in the offseason. Then they kept Uggla and signed Josh Johnson to a long term deal and it was dropped.

[1060Ivy]

A couple of items:

- The Cubs were just sold to Ricketts for $845 MM last year. Forbes should have at least included an asterisk to say that the market value is another $119 MM. In addition that would change the Debt/Value ratio to 69% rather than 80%

- Why assume that debt cannot be paid down from Operating Income? Ricketts will find new revenue streams but I don't believe that he has to create these streams in order to service the debt.

[rok]

<!--quoteo(post=87373:date=Apr 9 2010, 09:57 AM:name=1060Ivy)-->QUOTE (1060Ivy @ Apr 9 2010, 09:57 AM) <{POST_SNAPBACK}><!--quotec-->A couple of items:

- The Cubs were just sold to Ricketts for $845 MM last year. Forbes should have at least included an asterisk to say that the market value is another $119 MM. In addition that would change the Debt/Value ratio to 69% rather than 80%

- Why assume that debt cannot be paid down from Operating Income? Ricketts will find new revenue streams but I don't believe that he has to create these streams in order to service the debt.<!--QuoteEnd--><!--QuoteEEnd-->
The purchase price was agreed upon almost 2 years ago. I have a hunch that the overall value has gone down during that time, with the recession and all. If the Rickettses tried to sell the team right now, they couldn't get over $800 mil for it IMO.

[1060Ivy]

<!--quoteo(post=87379:date=Apr 9 2010, 10:02 AM:name=rok)-->QUOTE (rok @ Apr 9 2010, 10:02 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87373:date=Apr 9 2010, 09:57 AM:name=1060Ivy)--><div class='quotetop'>QUOTE (1060Ivy @ Apr 9 2010, 09:57 AM) <{POST_SNAPBACK}><!--quotec-->A couple of items:

- The Cubs were just sold to Ricketts for $845 MM last year. Forbes should have at least included an asterisk to say that the market value is another $119 MM. In addition that would change the Debt/Value ratio to 69% rather than 80%

- Why assume that debt cannot be paid down from Operating Income? Ricketts will find new revenue streams but I don't believe that he has to create these streams in order to service the debt.<!--QuoteEnd--><!--QuoteEEnd-->
The purchase price was agreed upon almost 2 years ago. I have a hunch that the overall value has gone down during that time, with the recession and all. If the Rickettses tried to sell the team right now, they couldn't get over $800 mil for it IMO.
<!--QuoteEnd--></div><!--QuoteEEnd-->

The purchase price may have been agreed to years ago but the market price occurs at the time of ownership transfer. Have a hard time believing that there was a 16% decrease in value in a matter of months.

My understanding is Forbes' does it's annual valuation based on public information for each team which explains the discrepancy. My issue is that they should have added an asterisk and explained why their valuations is off 16% compared to the recent sale price.

BTW, the article points out that values increased for most teams in the last year - due to new stadiums and premium seating e.g. CBOE seats at Wrigley.

[rok]

<!--quoteo(post=87389:date=Apr 9 2010, 10:21 AM:name=1060Ivy)-->QUOTE (1060Ivy @ Apr 9 2010, 10:21 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87379:date=Apr 9 2010, 10:02 AM:name=rok)--><div class='quotetop'>QUOTE (rok @ Apr 9 2010, 10:02 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87373:date=Apr 9 2010, 09:57 AM:name=1060Ivy)--><div class='quotetop'>QUOTE (1060Ivy @ Apr 9 2010, 09:57 AM) <{POST_SNAPBACK}><!--quotec-->A couple of items:

- The Cubs were just sold to Ricketts for $845 MM last year. Forbes should have at least included an asterisk to say that the market value is another $119 MM. In addition that would change the Debt/Value ratio to 69% rather than 80%

- Why assume that debt cannot be paid down from Operating Income? Ricketts will find new revenue streams but I don't believe that he has to create these streams in order to service the debt.<!--QuoteEnd--><!--QuoteEEnd-->
The purchase price was agreed upon almost 2 years ago. I have a hunch that the overall value has gone down during that time, with the recession and all. If the Rickettses tried to sell the team right now, they couldn't get over $800 mil for it IMO.
<!--QuoteEnd--></div><!--QuoteEEnd-->

The purchase price may have been agreed to years ago but the market price occurs at the time of ownership transfer. Have a hard time believing that there was a 16% decrease in value in a matter of months.
<!--QuoteEnd--></div><!--QuoteEEnd-->
Tell that to someone who bought a home 2 years ago or a any stock and then get back to me. Sorry, but you are wrong. The time lag is critical.

And let me add that it isn't that the franchise has lost value, just that the Rickettses overpaid.

[1060Ivy]

<!--quoteo(post=87390:date=Apr 9 2010, 10:23 AM:name=rok)-->QUOTE (rok @ Apr 9 2010, 10:23 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87389:date=Apr 9 2010, 10:21 AM:name=1060Ivy)--><div class='quotetop'>QUOTE (1060Ivy @ Apr 9 2010, 10:21 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87379:date=Apr 9 2010, 10:02 AM:name=rok)--><div class='quotetop'>QUOTE (rok @ Apr 9 2010, 10:02 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87373:date=Apr 9 2010, 09:57 AM:name=1060Ivy)--><div class='quotetop'>QUOTE (1060Ivy @ Apr 9 2010, 09:57 AM) <{POST_SNAPBACK}><!--quotec-->A couple of items:

- The Cubs were just sold to Ricketts for $845 MM last year. Forbes should have at least included an asterisk to say that the market value is another $119 MM. In addition that would change the Debt/Value ratio to 69% rather than 80%

- Why assume that debt cannot be paid down from Operating Income? Ricketts will find new revenue streams but I don't believe that he has to create these streams in order to service the debt.<!--QuoteEnd--><!--QuoteEEnd-->
The purchase price was agreed upon almost 2 years ago. I have a hunch that the overall value has gone down during that time, with the recession and all. If the Rickettses tried to sell the team right now, they couldn't get over $800 mil for it IMO.
<!--QuoteEnd--></div><!--QuoteEEnd-->

The purchase price may have been agreed to years ago but the market price occurs at the time of ownership transfer. Have a hard time believing that there was a 16% decrease in value in a matter of months.
<!--QuoteEnd--></div><!--QuoteEEnd-->
Tell that to someone who bought a home 2 years ago or a any stock and then get back to me. Sorry, but you are wrong. The time lag is critical.
<!--QuoteEnd--></div><!--QuoteEEnd-->

So in 2007 if you signed a contract to purchase a home in 2009 but the home was worth significantly less in 2009a, you still take title to the property?

You might consider walking away from the deal or offering a lower price for the property.

If your brokers did their job, the contract should have been written so you could walk away without losing more than earnest money.

The sale of the Cubs was more complex but have a difficult time believing that Ricketts just said thought, "It's just $119 MM, I'm OK with it. Where are the keys?"

[rok]

<!--quoteo(post=87391:date=Apr 9 2010, 10:44 AM:name=1060Ivy)-->QUOTE (1060Ivy @ Apr 9 2010, 10:44 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87390:date=Apr 9 2010, 10:23 AM:name=rok)--><div class='quotetop'>QUOTE (rok @ Apr 9 2010, 10:23 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87389:date=Apr 9 2010, 10:21 AM:name=1060Ivy)--><div class='quotetop'>QUOTE (1060Ivy @ Apr 9 2010, 10:21 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87379:date=Apr 9 2010, 10:02 AM:name=rok)--><div class='quotetop'>QUOTE (rok @ Apr 9 2010, 10:02 AM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87373:date=Apr 9 2010, 09:57 AM:name=1060Ivy)--><div class='quotetop'>QUOTE (1060Ivy @ Apr 9 2010, 09:57 AM) <{POST_SNAPBACK}><!--quotec-->A couple of items:

- The Cubs were just sold to Ricketts for $845 MM last year. Forbes should have at least included an asterisk to say that the market value is another $119 MM. In addition that would change the Debt/Value ratio to 69% rather than 80%

- Why assume that debt cannot be paid down from Operating Income? Ricketts will find new revenue streams but I don't believe that he has to create these streams in order to service the debt.<!--QuoteEnd--><!--QuoteEEnd-->
The purchase price was agreed upon almost 2 years ago. I have a hunch that the overall value has gone down during that time, with the recession and all. If the Rickettses tried to sell the team right now, they couldn't get over $800 mil for it IMO.
<!--QuoteEnd--></div><!--QuoteEEnd-->

The purchase price may have been agreed to years ago but the market price occurs at the time of ownership transfer. Have a hard time believing that there was a 16% decrease in value in a matter of months.
<!--QuoteEnd--></div><!--QuoteEEnd-->
Tell that to someone who bought a home 2 years ago or a any stock and then get back to me. Sorry, but you are wrong. The time lag is critical.
<!--QuoteEnd--></div><!--QuoteEEnd-->

So in 2007 if you signed a contract to purchase a home in 2009 but the home was worth significantly less in 2009a, you still take title to the property?

You might consider walking away from the deal or offering a lower price for the property.

If your brokers did their job, the contract should have been written so you could walk away without losing more than earnest money.

The sale of the Cubs was more complex but have a difficult time believing that Ricketts just said thought, "It's just $119 MM, I'm OK with it. Where are the keys?"
<!--QuoteEnd--></div><!--QuoteEEnd-->
In retrospect he overpaid, but at the time it was the market price. This is oversimplifying the issue.

I deal with private equity every day. Private company valuations are marked to "market" every quarter (this is what Forbes is doing). It doesn't mean the valuations are accurate or reflect debt and equity fully. The process of closing on the sale of a baseball franchise has a time lag embedded into it. Ricketts isn't a fool for paying $800 mil for a team that many thought was worth $900 mil to $1 bil at the time. Then the economy collapsed. If you recall, he even tried to renegotiate and got some terms changed, but it was already a signed <b>contract</b>.

What is your point?

[Coldneck]

Both of you are missing a key detail. The $800+ million purchase price included Wrigley and a share in Comcast Sports Chicago. I'm guessing the listed value is for the Chicago National League Ball Club only.

[rok]

<!--quoteo(post=87398:date=Apr 9 2010, 10:59 AM:name=Coldneck)-->QUOTE (Coldneck @ Apr 9 2010, 10:59 AM) <{POST_SNAPBACK}><!--quotec-->Both of you are missing a key detail. The $800+ million purchase price included Wrigley and a share in Comcast Sports Chicago. I'm guessing the listed value is for the Chicago National League Ball Club only.<!--QuoteEnd--><!--QuoteEEnd-->
That may true, but then you would need to strip out the value of real estate and all other miscellaneous assets owned by the team as well. Who knows what these totals include. You think the YES Network and NESN values are completely stripped out of the Yanks and Red Sox franchise valuations? I have no idea.

[Coldneck]

<!--quoteo(post=87399:date=Apr 9 2010, 12:03 PM:name=rok)-->QUOTE (rok @ Apr 9 2010, 12:03 PM) <{POST_SNAPBACK}><!--quotec--><!--quoteo(post=87398:date=Apr 9 2010, 10:59 AM:name=Coldneck)--><div class='quotetop'>QUOTE (Coldneck @ Apr 9 2010, 10:59 AM) <{POST_SNAPBACK}><!--quotec-->Both of you are missing a key detail. The $800+ million purchase price included Wrigley and a share in Comcast Sports Chicago. I'm guessing the listed value is for the Chicago National League Ball Club only.<!--QuoteEnd--><!--QuoteEEnd-->
That is true, but then you would need to strip out the value of real estate and other assets owned by the team as well. Who knows what these totals include. You think the YES Network and NESN values are completely stripped out of the Yanks and Red Sox franchise valuations? I have no idea.
<!--QuoteEnd--></div><!--QuoteEEnd-->
Rok, I would think they are, but obviously don't know for sure. I've heard people say that YES Network is worth about a billion on its own.

[1060Ivy]

<!--quoteo(post=87397:date=Apr 9 2010, 10:57 AM:name=rok)-->QUOTE (rok @ Apr 9 2010, 10:57 AM) <{POST_SNAPBACK}><!--quotec-->In retrospect he overpaid, but at the time it was the market price. This is oversimplifying the issue.

I deal with private equity every day. Private company valuations are marked to "market" every quarter. It doesn't mean the valuations are accurate or reflect debt and equity fully. The process of closing on the sale of a baseball franchise has a time lag embedded into it. Ricketts isn't a fool for paying $800 mil for a team that many thought was worth $900 mil to $1 bil at the time. Then the economy collapsed.

What is your point?<!--QuoteEnd--><!--QuoteEEnd-->

Recall the Tribune was attempting to bring new parties into the Cubs sale as late as last year. If the agreed upon sale price was overvalued, have a hard time believing that the seller would still be attempting to find another a new buyer to purchase at an even greater overvalued price?

It comes down to what's more likely: the Cubs value has decreased by $119 MM or Forbes valuation methodology is faulty?