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Cubs send out Financial Books to Prospective Owners

Thursday, June 12, 2008

From my office window, I can look down 28 stories and across the Chicago River to see the private deck just outside of Sam Zell's office. I rarely see anyone on the deck, and used to think it would be a great place to eat lunch in the midday sunshine. Now that I know it Zell's territory... I think it would be a great place to picket. :^) Anyhow...

From Paul Sullivan in the Chicago Tribune: Link

Cubs Chairman Crane Kenney confirmed that Tribune Co. had sent out the financial books on the franchise to prospective ownership groups Tuesday.

Tribune Chairman Sam Zell recently said Major League Baseball had preapproved nine potential groups and that Tribune Co. would retain a minority interest of about 5 percent of the team. The groups bidding on the Cubs will have a month to study the financial data and make their preliminary bids. The sale is not expected to be completed until after the season.

This is a relief for Cubs fans who are already tired of the Sam Zell era. I'd sure love to get my hands on one of those books just to see all of the areas where the Cubs are finding revenues, and the expenses that I don't tend to think about when I visit Wrigley.

On Monday, we received another batch of good news as the State of Illinois and the Cubs are apparently at an impasse in the talks to have the ISFA purchase Wrigley Field. The key quote in the article is as follows:

From the state's viewpoint, Tribune Co. was unwilling to accept a plan that wasn't backed by tax dollars.

Tribune Co. believes the acquisition "requires either the transfer of future sales and amusement tax revenue from transactions at Wrigley Field for the next 30 years, or the imposition of new taxes, or the transfer of existing ISFA funds now pledged to projects at U.S. Cellular," Thompson said in a statement Monday afternoon.

Essentially, the reason the two groups couldn't come together was that the "value" of public financing wasn't great enough to outweigh the destruction of value that occurs when you saddle the Cubs with rent. Prospective club owners are all unanimous in their desire to own the stadium as well as the team, so a bid for only the club would result in a lower value than the value of the club in a bid that included the stadium as well.

Even though the State could finance the deal less expensively than private individuals, Sam Zell was really only interested in adding money to the system. The only way that he could create enough extra value was if the state subsidized the Wrigley acquisition with taxpayer dollars and then passed along those savings in terms of inexpensive rent to the Cubs. This would have introduced a new revenue stream into the picture, thus increasing the value of the club to prospective owners, and letting Sam Zell take a chunk of that for himself.

Posted by Byron at June 12, 2008 10:07 AM | |

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