Renovations, parking lots and TV deals are key to Dodgers bidding
Dodger Stadium turns 50 this year. In 2008, as owner Frank McCourt unveiled plans to revamp the stadium and surrounding area, Vin Scully explained why.
“Few stadiums last even 50 years,” Scully said on a team promotional video. “The truth is, we can’t dream of this one lasting another 50 without a lot of love, care and, yes, investment.
“Without that care and capital, Dodger Stadium might fade away, in disrepair. But that idea just doesn’t fly with Frank McCourt.”
Nor does it fly with the bidders jockeying to buy the Dodgers from McCourt. After all, the new owner will inherit a loan that McCourt has said compels the team to play at Dodger Stadium at least until 2030.
Yet Blackstone Advisory Partners, the investment bank handling the sale for McCourt, has advised bidders that Dodger Stadium does not need major renovation.
The resolution of that issue — and issues involving television rights, team revenues and control of the surrounding parking lots — should go a long way toward determining whether the Dodgers sell for closer to $1.5 billion, as bidders anticipate, or closer to $2 billion, as McCourt and his advisers anticipate.
The 11 remaining bidders have been asked to submit revised offers next week. Although a so-called vanity buyer could overlook financial data and win the team with a blowout bid, such buyers are increasingly scarce as the anticipated price soars above $1 billion, said Marc Ganis, president of Chicago-based SportsCorp Ltd.
“There are a number of very material factors that could swing the price by hundreds of millions of dollars,” Ganis said, “even approaching half a billion.”
Stadium renovations are among those factors.
The Dodgers note that McCourt has put more than $150 million into stadium maintenance and improvements since buying the team in 2004, including the addition of and enhancements to luxury seating, the replacement of every seat in the house, and the expansion of the concourse on the field level.
“Due to the forward-looking nature of these renovations, the stadium requires minimal annual capital expenditures and little to no deferred maintenance costs,” the Dodgers said in a statement.
In 2007, McCourt cited rising ticket sales in pledging to upgrade the concourses on every level. “In order to provide better service and more amenities for this increased fan base, we need to create more space and redesign the concourses,” McCourt said.
The loge and reserved levels, as well as the top deck, still await renovation.
The stadium infrastructure needs improvement, and the parking lots need permanent lighting, according to a person familiar with Dodger Stadium operations but not authorized to discuss them. That person estimated a new owner would face at least $200 million in renovation expenses.
In determining how much to bid, prospective owners also would consider the annual payment on inherited loans — from $32 million to $33.5 million through 2030, according to documents filed this week in U.S. bankruptcy court.
The bidders also would ponder the annual $14-million payment to McCourt for use of the Dodger Stadium parking lots. The sale price might drop by more than $150 million if McCourt insists upon retaining that land rather than using it as a bargaining chip to extract the highest possible sale price, according to people familiar with the sale process.
McCourt says he plans to develop the land and does not intend to sell it, and he could partner with several remaining bidders — on a football stadium with St. Louis Rams owner Stan Kroenke, perhaps, or on shops, restaurants and/or residences with local developers Rick Caruso or Alan Casden. (Caruso has said through a spokesman he wants to buy the team and has no plan to develop the land.)
Blackstone is expected to suggest that groups relatively short on financing consider mergers. Blackstone also has encouraged prospective owners to secure hundreds of millions more to use in bidding by joining forces with Fox Sports or Time Warner Cable — each company desperately wants the Dodgers’ television rights — and with private equity funds that could finance the launch of a regional sports network.
The structure of such an investment would be subject to review by Major League Baseball, which generally prefers television money to be used to better a team rather than finance its purchase. However, with some equity funds interested in the television rights but not in the team, a buyer could separate ownership of the Dodgers from ownership of the regional sports network.
Bidders also must assess how quickly the Dodgers can return to glory on and off the field, a point that could work in McCourt’s favor. The Dodgers made the playoffs four times in McCourt’s first six years of ownership, before his divorce led to hard times for the team.
McCourt nearly doubled the Dodgers’ revenue in relatively short order, from $156 million in 2003 — the final year under News Corp. ownership — to $289 million in 2009, according to records filed in Los Angeles Superior Court. MLB does not release financial data for individual clubs, but Forbes estimates that no club besides the New York Yankees has exceeded $289 million in revenue, at least through the 2010 season.
The Dodgers played before a half-empty stadium last year, as McCourt fought in two courts to retain control of the team. Revenue dropped to $240 million.
By November, the Dodgers were barely more popular than the Baltimore Orioles, a team with an unpopular owner and 14 consecutive losing seasons, according to data from The Marketing Arm, a Dallas-based agency that helps companies determine where to spend their advertising dollars.
The Dodgers should return to prominence fairly soon under new ownership, said Mike Singer, consulting director of sponsorship strategy for The Marketing Arm. In January 2011, even after McCourt’s bruising divorce trial, the Dodgers fared well among local fans, Singer said.
“It spiraled pretty quickly,” he said. “If things were to stabilize — with Joe Torre or Magic Johnson or some other kind of ownership the fans could feel good about, with Matt Kemp putting together another good year, with winning some games in a winnable division — I see it as a quick turnaround.”
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