Levine: Should Ricketts Family Sell Soon?
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By Bruce Levine-
(CBS) With the declaration of pursuing minority ownership, the Ricketts family could be one step closer to selling the Cubs in the near future. Chairman Tom Ricketts and his family have seen their original investment of $855 million blossom into a $1.2 billion enterprise in four and a half years.
This large increase in value, which is roughly 40 percent, comes despite attendance dropping 700,000 since purchasing the team in 2009. Another amazing aspect of the Ricketts’ good fortune has been the local television rights explosion. A Cub source told 670 The Score that the local TV rights package for the team in 2020 should move to $4 billion-$5 billion over 25 years (about $200 million per season). That alone would likely increase the value of the team to well over $2 billion by that juncture.
That the Cubs are having short-term economic problems is no surprise. The baseball department has been told to dump any short-term high-dollar obligations in order to help pay bills for now. Going after Masahiro Tanaka this past offseason was only possible because of back loading and deferred payments. Those caveats would have have been a key element of a long-term deal. A source said that the franchise had some problems paying vendors this offseason.
Bringing in investors for short-term cash flow problems makes good sense. Selling the whole team makes a heck of a lot more sense from a business perspective. The Cubs already have a minority owner. His name is Sam Zell. Yes, that is the same Sam Zell who sold the team to the Ricketts family in 2009.
An MLB source confirmed that the Cubs grossed $302 million in 2013. They project $323 million in gross revenues in 2014, and Forbes in 2013 listed the Cubs as the most profitable franchise in baseball. All that aside, the Cubs can’t use money from outside of the general revenues until after the covenant of the sale to Zell expires after 2018. That is why short-time investors would be a logical way of bringing in some cash flow to get the ballpark renovation money.
The Rickettses are nice people and smart business sorts. They must pay $35 million a year for the $450 million loan they took out to buy the Cubs. Being cash poor is a short-term problem. Dealing with rooftop partners and a five-year renovation of ancient Wrigley Field is a monumental task that is hardly worth the time and agony.
The original problem may have been the messed-up version of the sale transfer from Zell (he retained 5 percent ownership to avoid a huge capital gains loss).
The practical solution for Tom Ricketts and his family is make a call to Mark Cuban and sell the whole team. There has to be a better way to spend your time than hitting it against the 100-year-old walls of Wrigley Field.
Bruce Levine covers the Cubs and White Sox for 670 The Score and CBSChicago.com. Follow him on Twitter @MLBBruceLevine.