Explaining Southern California's economy

And so it has ended: The Dodgers are sold

Los Angeles Dodgers v San Diego Padres

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Magic Johnson sits with Frank McCourt during a game between the Los Angeles Dodgers and the San Diego Padres. The Dodgers are finally sold. Now we can move on to the Padres!

Well, our long local nightmare has finally drawn to an anticlimactic close. After a briefly alarming delay last night, the Los Angeles Dodgers are now no longer the property or Frank McCourt but belong instead to Guggenheim Baseball Management, a group made up chiefly of Magic Johnson, Stan Kasten, and Mark Walter, the CEO of Guggenheim Partners. The purchase price was a whopping, record-setting $2.15 billion. 

The thorn in the side of Angelenos who grew to...well, let's just say dislike McCourt over the years will be the former owner's 50-percent stake in the parking lots around Dodger Stadium. GBM will get to collect the parking fees for games, but McCourt will be able to propose development plans — although they'll have to be approved by the new owners.

The press conference is tomorrow. Don't know where it is yet, nor what time, but rumor has it that Walter will be in attendance.

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What's the right price for the San Diego Padres?

San Diego Padres v Colorado Rockies

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Starting pitcher Anthony Bass #45 of the San Diego Padres delivers against the Colorado Rockies at Coors Field on April 17, 2012 in Denver, Colorado.

Guggenheim Baseball Management (GBM), fronted by Magic Johnson and financed by the $125-billion Guggenheim Partners investment firm, is buying the Los Angeles Dodgers for a record $2.15 billion. But there's another Southern California professional baseball franchise for sale. Maybe not as storied. But still worth some potentially very big bucks. Will the San Diego Padres see their price rise now that Dodgers have hit a grand slam for their sale?

Quite possibly. But you have to take a few factors into account, as well as assess the probable structure of a future deal. First, let's look at how much of a premium the Dodgers' new owners paid on the team's current revenues. It's steep: in 2010, the team did $246 million, so GBM is paying almost 9 times revenue. That figure will drop somewhat when you factor in a potential $5-billion broadcast deal, to be negotiated in about a year. 

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Andrew Ross Sorkin asks some tough questions about the Dodgers deal

Dodger Stadium

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Is this whole thing just a toy for some rich men playing with other people's money?

I'm glad that some really big questions about the Dodgers deal are finally being asked by one of the biggest names in financial journalism. Andrew Ross Sorkin, in his DealBook column at the New York Times, admits that for the past few weeks, he's been "puzzled" by the terms of the sale, with Guggenheim Baseball Partners — Magic Johnson, Stan Kasten, Peter Guber, and Guggenheim Partners — shelling out $2.15 billion for the team, a record price.

Welcome to the club.

Here's Sorkin:

The winning bid was led by Mark Walter and his firm, Guggenheim Partners, which most people in sports — and frankly, even on Wall Street — know very little about. (Peter Guber, the film producer behind “Rain Man” as well as Stan Kasten, the former president of the Atlanta Braves, are also involved.)

A quick background check and some back-of-the-envelope math raises an obvious red flag: how on earth can this group of individuals afford to pay $2 billion in cash?

The answer is that they probably can’t — at least, not by themselves.

Mr. Walter, along with his colleague Todd Boehly, Guggenheim’s president, appear to be living out a childhood fantasy using other people’s money, some of whom may not even realize it.

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Dodgers sale: Are there cracks in the deal?

Los Angeles Dodgers v San Diego Padres

Denis Poroy/Getty Images

SAN DIEGO, CA - APRIL 5 : Magic Johnson (L) sits with Frank McCourt during the game between the Los Angeles Dodgers and the San Diego Padres in the home opener at Petco Park on April 5, 2012 in San Diego, California. (Photo by Denis Poroy/Getty Images)

The Dodgers and the organization's creditors began filing documents with the bankruptcy court in Delaware that's overseeing the team's sale. We didn't learn a whole lot beyond the known value of the deal: $2.15 billion, consisting of a cash offer, the assumption of the team's existing debt, and a side deal with outgoing owner Frank McCourt for the real estate around the stadium, currently blanketed with parking lots.

What we want to know is where the money that Guggenheim Baseball Management (GBM) — the entity that consists of Magic Johnson, Stan Kasten, Peter Guber, and financier Mark Walter of Guggenheim Partners — has brought to the deal is coming from. Remember, the final sale was conducted preemptively, without the anticipated auction that McCourt was going to conduct among the three final bidders. And the final sale price came in over half a billion higher than the initial bid than Major League Baseball approved from Guggenheim.

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Dodgers sale: The deal now heads to bankruptcy court

Los Angeles Dodgers v San Diego Padres

Denis Poroy/Getty Images

Magic Johnson sits with Frank McCourt during the game between the Los Angeles Dodgers and the San Diego Padres in the home opener at Petco Park on April 5, 2012 in San Diego, California.

Ahead of an April 13 hearing in the Los Angeles Dodgers' bankruptcy case, the team's soon-to-be-new-owners-if-all-goes-well and the team's debtholders are filing court documents. This may or may not shed light on the structure of the deal, but it will certainly provide a bit more transparency on the $2.15 billion purchase price Guggenheim Baseball Management agreed on with Frank McCourt than we've had so far. 

I have access to the court documents but may have to take some time to sort through them. So stay posted.

At the L.A. Times, Bill Shaikin summarizes the story up to this point. He's also tweeting his way through the documents at @BillShaikin. Worth a follow for sure!

UPDATE: The official purchase price is $1.59 billion. Then there's the debt Guggenheim Baseball Management (GBM) is taking on, a bit more than $412 million. There's your $2 billion price tag. The parking lots side deal, remember, is $150 million for GBM, with McCourt providing the other $150 million. Total deal size is really $2.3 billion.

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