Explaining Southern California's economy

Dodgers bidding war: Mark Cuban is out but Magic and the money guys are still in

Dodger Stadium Bleachers

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The bleachers stand empty at Dodger Stadium in Los Angeles, California.

Just a quick update on the sale of the Los Angeles Dodgers. The bids were submitted last week and already a few potential buyers have dropped out. Most prominent among these is Dallas Mavericks owner Mark Cuban, who tried to buy both the Chicago Cubs and the Texas Rangers when they available were (he failed in both cases). 

Magic Johnson, the Lakers superstar and successful regional businessman, is still in the running, however. As are two of the big money guys who've been discussed as prospective owners: East Coast hedge-fund king Steven Cohen; and LA-based private-equity duke Tom Barrack

Additionally, St. Louis Ram's owners Stan Kroenke — a player whom I hadn't written about — made the cut, which was managed by Dodgers owners Frank McCourt in concert with the investment back that's advising him on the sale, Blackstone Advisory Partners. Given that the Rams could be the new LA NFL franchise, depending on how things go with the AEG Downtown stadium project (the project is still in search of a team, and it seems to be down to the Rams and Raiders), I'm not sure how Kroenke could own two sports teams in town. But that's for the NFL and Major League Baseball to sort out.

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Dodgers bidding begins today!

LAPD Takes Over Security At Dodgers Games After Attack On Giants Fan

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There's been plenty of speculation about who might buy the Dodgers out of bankruptcy. But today's the day that the bids are going to start coming in. This is a "soft" deadline, meaning that yet another rich guy who wants to buy the team could still put in a bid. But at this point we have a fair idea of who the major players are likely to be.

The Dodgers could sell for anywhere from $800 billion to $2 billion, based on reported speculation. At the LATimes, Bill Shaikin does the math and concludes that Dodgers owners Frank McCourt is on the hook to various creditors and his impending ex-wife for just north of $1 billion. So a we're probably talking about a sale price of around $1.5 billion. 

Here's how the sale process will work. McCourt and Blackstone Advisory Partners will take the initial bids. They expect 20, and Major League Baseball says it will consider 10. However, given that there's only a few months between now and April 1, when it's anticipated that McCourt will announce a winning buyers, there probably won't be that many.

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Steven Cohen wants to buy the Dodgers, but people who worked for him keep getting arrested

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One of the potential bidders for the Dodgers, due to be sold out of bankruptcy by April 30, is Steven Cohen, a secretive and monumentally successfully hedge fund billionaire. I've already written about how he made his money. I've also speculated on why he might want the Dodgers. What I haven't dealt with is that possibility that he could wind up in jail.

That's probably overstating the case. However, Cohen's firm, SAC Capital Advisors, has seen a number of former employees get in hot water with the Securities and Exchange Commission over insider trading. And the heat just got turned up a few notches. As part of an ongoing investigation into insider trading at hedge funds, the FBI has arrested three SAC Capital alumni (and they aren't the first to face prosecution). This is from CBNC's John Carney:

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Who is Tom Barrack, the latest billionaire to covet the Dodgers?

Bill Shaikin of the LA Times is reporting that Tom Barrack, an LA-based billionaire real-estate investor, has joined the ever-expanding list of potential bidders for the Dodgers. The team was put into bankruptcy by embattled owner Frank McCourt and has to be sold to somebody by April 30.

Prospective somebodies include Rick Caruso and Joe Torre; Magic Johnson; Mark Cuban; and a furtive Connecticut hedge-fund billionaire, Steven Cohen

Barrack ads some new local flavor to the action. I feel obligated, however, to explain how the various Very Rich Men who are interested in owning the team made their money — and what that could tell us about how they'd run the Dodgers.

I've already tackled how Steven Cohen amassed his hedge-fund billions. Now I'll take a look at Barrack.

At base, the guy does real estate. From the helm of his $34-billion private-equity shop, Colony Capital in Santa Monica, Barrack manages this most debt-intensive of investments. His mojo is to zero in on "distressed" assets — properties that could be worth a lot more than their apparent face value and, being real estate, provide an obvious form of collateral to use for leverage — and, to put it simply, fix them up. This is from a New York Magazine profile of Barrack, a 63-year-old USC grad, that appeared in late 2010:

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The Dodgers, dollars, and development

Dodger Stadium Bleachers

pvsbond/Flickr (cc by-nc-nd)

The bleachers stand empty at Dodger Stadium in Los Angeles, California.

AirTalk had a great segment today on the many bidders for the Dodgers, currently in bankruptcy, but in need of a buyer from embattled owner Frank McCourt by April 30. Host Larry Mantle was joined by Bill Shaikin of the LA Times and KPCC's own Nick Roman to assess the suitors.

To me, it boils down to money guys versus sports guys, with the recently announced Rick Caruso-Joe Torre partnership as the best of both worlds. That said, McCourt controls the sale, as Shaikin pointed out. And so it may be that the team winds up going to the highest bidder.

I don't think anyone can outbid hedge-fund billionaire Steven Cohen. He has enough money to buy the team two or three times. 

But Nick made a strong case for developer know-how. Cohen made his bones on Wall Street as an aggressive trader. He rarely owned anything for more than a few days. In some cases, he probably bought and sold huge numbers of assets in a few hours.

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