McCourt to Give Land to Fox
Frank McCourt is poised to hand over 24 acres of Boston land to Fox to settle a $145-million loan tied to his purchase of the Dodgers, according to sources familiar with the situation.
With an announcement possible this week, it is the latest step in a closely watched transaction that allowed McCourt to acquire one of sport’s most revered franchises with little money down, using his Boston parking lots as collateral.
Surrendering the land to News Corp.'s Fox Entertainment Group erases considerable debt from the Dodger ledger -- leaving the franchise with about $250 million due to other lenders over the next 25 years -- and severs one of McCourt’s major business connections to his hometown.
But it does not fully resolve a question that has swirled around the Dodgers since McCourt’s name first surfaced as a buyer: Can he afford to field a competitive team over the long haul?
The transaction -- expected to be announced as a sale, though Fox sources call it a foreclosure -- also sheds new light on just how badly Fox wanted out of the baseball-ownership business after six years with the Dodgers.
“Desperately,” said a top baseball official, speaking on condition of anonymity because of policies barring discussion of club finances.
Fox bought the team from the O’Malley family in 1998 for $311 million, allowing the entertainment media giant to thwart a plan by a powerful rival, Disney-owned ESPN, to establish a regional cable sports network in Southern California.
Otherwise, the Fox years were disastrous, marked by overspending on free agents, poor performances on the field, the unpopular trade of catcher and team icon Mike Piazza and huge operating losses.
Two years ago, Fox sold the Dodgers, Dodger Stadium and surrounding Chavez Ravine acreage, plus other team properties to McCourt for $421 million.
The deal included rebates of $50 million -- in effect cutting the sale price by that amount -- as well as the $145-million loan, due in two years.
“He’s the king of leverage; he’s brilliant with other people’s money,” said a Boston city hall veteran who has clashed with McCourt, acknowledging the businessman’s financial acumen. “Now he owns a baseball team in Los Angeles and 300 acres of land in California. You have to respect that.”
Sources close to McCourt said neither the $145-million loan, as it is described in public documents, nor its pending settlement, have any bearing on the club’s ability to sign talent or to maintain and improve Dodger Stadium.
The loan required no monthly payment by McCourt; the reported $4 million in annual parking revenue generated by the property mostly went to cover costs.
Dodger and Fox officials declined to speak on the record, citing a confidentiality agreement.
However, there had been signs that McCourt would have preferred to hold onto the harbor-area property, which he bought in 1977 for $8.5 million.
Last year he held discussions with Related Cos., a major New York development firm, about establishing a joint development venture, but no deal was reached and talks broke off.
As a result, Fox is due to receive undeveloped real estate laden with debt: After forgiving the $145-million loan to McCourt, Fox will be liable for an additional $58 million in previously unreported obligations.
Revealed in public records filed with the Suffolk County Registry of Deeds, those obligations are a $36-million loan to McCourt from Sovereign Bank of Philadelphia, and an agreement he made with the state of Massachusetts to buy a nearby parcel for $22 million.
A Fox source acknowledged that the media company will be on the hook for the $36-million loan and the $22-million state obligation. Fox will sell the entire parcel at some point to recoup the money, the source said, but it is not clear how much the land is actually worth.
Estimates have ranged from $115 million -- which is what a similarly sized property nearby sold for -- to more than $200 million. A price at the lower end of this range means Fox would lose millions on the land; a price topping $200 million would allow the company to break even, or even make a profit.
“It’s a premier property,” a Fox source said. “Over time, we and the city will work together to make it an attractive destination.”
For decades, few in Boston expected McCourt to part with his parking lots. Some remain skeptical.
“There’s a feeling that somehow he’ll resurface,” said one Boston city hall politician who has locked horns with McCourt over the years. “No one really believes that he’s going to give up this land and go away.”
But McCourt has shifted his business focus, as well as his primary residence, to Los Angeles. He and his wife, Jamie, the team president, own two homes in Holmby Hills, and in recent months Frank McCourt has relocated his real estate development business to Los Angeles.
McCourt, whose family figured prominently in Boston construction and development circles dating back a century, has declined to discuss his and Jamie’s personal wealth, saying it is unrelated to Dodger fortunes.
After boosting revenue by securing a more lucrative television contract, adding in-stadium advertising and creating premium seating, McCourt has said the Dodgers no longer lose money, after the club reportedly dropped up to $40 million a year during Fox’s ownership.
Under McCourt, the Dodgers won their first division title in almost a decade in 2004, but collapsed in 2005, finishing 20 games below .500. Manager Jim Tracy and the club parted ways; soon afterward McCourt fired his youthful general manager, Paul DePodesta, whose roster moves sometimes left fans and critics howling.
With a new manager, Grady Little, and general manager, Ned Colletti, and a player payroll once again approaching $100 million after it dipped to $85 million last year, officials say the team is on the rebound.
The organization has nearly completed its second face-lift of Dodger Stadium in two years, replacing all 56,000 seats and adding field-level boxes.
In the end, one expert said, the Dodgers’ financial strength will be determined by how they perform on the field.
“If his team bumbles again on the field and the Angels continue to do well, he’ll continue to see a reduction in his fan base,” said Andrew Zimbalist, a Smith College economist who later this month will publish “In the Best Interests of Baseball?” a book about the economics of the sport. “If he can put a decent team on the field and get over his credibility problems in L.A., he ought to be able to run the team in the black.”
Fox, for its part, isn’t hurting, Zimbalist added.
“They got the long-term media rights to the Dodgers, which is what [News Corp. Chairman] Rupert Murdoch really wanted,” the economist said. “He got control over the regional sports market. ... So News Corp. isn’t worrying about whether McCourt underpaid by $40 million or $50 million.”
Times staff writer Sallie Hofmeister contributed to this report.