(Image credit: Getty Images North America via @daylife)
If Frank McCourt's sale of the Los Angeles Dodgers to a group with Magic Johnson as the front-man holds up, he will become the most financially successful owner of a team in Major League Baseball history. The sale must still be approved by a federal bankruptcy court.
McCourt bought the team, Dodger Stadium and about 260 acres of surrounding real estate from News Corp. for an enterprise value of $371 million in February, 2004. In that deal, McCourt paid $330 million for the team, Dodger Stadium and the land under the stadium. He also paid an additional $91 million for 260 acres of land around the stadium, but that purchase included $50 million of cash, so the net cost was $41 million.
Johnson's group is paying $2 billion for the Dodgers and the stadium a (compared to the $330 million McCourt paid News Corp.), yielding McCourt an annualized gain of 25%. Affiliates of Johnson's group will also be forming a joint venture with McCourt for the 260 acres of real estate (Chavez Ravine). In this deal McCourt is kicking in the land and while the affiliates will pay $150 million, valuing the real estate at $300 million. The $2.3 billion valuation for the team, stadium and land (versus the $371 million he paid) gives McCourt a 26% annualized return.
No sale of a baseball team that I have reviewed comes close to yielding as high a return. Even recent deals, enhanced by the increase in value of baseball's local television rights, have generated returns that are paltry compared with McCourt's return.
For example, when Tribune sold the Chicago Cubs, Wrigley Field and a 20% stake in a regional sports network to the Ricketts family for $845 million in 2009, the annualized return for Tribune, who bought the Cubs for $20.5 million in 1981, was 14%.
Drayton McLane got $645 million for his Houston Astros and the teams 45% stake in a new RSN (new owner Jim Crane paid $610 million and MLB kicked in $35 million) in November of last year after paying $103 million towards the end of 1992. The sale generated a 10% compound annual return for McLane.
In July of 2010 Ray Davis and Bob Simpson, with Hall of Famer Nolan Ryan as a minority owner, beat out Dallas Mavericks owner Mark Cuban to acquire the Texas Rangers and lease to Rangers Ballpark in Arlington for $593 million. That deal, completed in a bankruptcy court-led auction, was fueled with knowledge of a new television deal the team was on the cusp of having with Fox but still only generated a 6.4% annual return for seller Tom Hicks.
Older deals compare even worse to McCourt's killing with the Dodgers.
Arturo Moreno bought the Los Angeles Angels of Anaheim from Walt Disney in May, 2003 for $184 million. Disney paid $130 million for the team in a two-stage transaction, obtaining 25% percent and control in 1996, then adding rest after previous owner Gene Autry died in 1998. Disney's annualized return since 1998: 2.5%.
Even the iconic Boston Red Sox returned much less. In early 2002, John Henry paid $700 million to the Jean R. Yawkey Trust for the team, Fenway Park, and 80% of the New England Sports Network. Jean Yawkey led a group that paid $18 million for the team in 1977, generating a 11% annual return.
And just in case you were wondering, McCourt crushed the stock market too. Since February 2004 the S&P 500 has produced a 3% compound annual return.