KPCC's business analyst Mark Lacter says we may not find out everything about the Dodgers' sale. He also tells us that AEG is not only looking to build a football stadium in downtown LA - it may even try to buy a team.
Steve Julian: Mark, when will we find out more specifics about the sale of the Dodgers?
Mark Lacter: Perhaps we’ll know a little more next week when a bankruptcy judge holds a hearing on the deal, though keep in mind this is a transaction between two privately held entities so it’s unclear how much will ultimately be released. Frankly, about all that’s been made public so far is the purchase price of over $2 billion. There’s no information about how much money has been put in by the investment firm Guggenheim Partners or by the chief executive Mark Walter – or by any of the other investors, including Peter Guber, the Hollywood producer, and of course Magic Johnson.
Julian: Is it your assumption that Magic’s share is relatively small?
Lacter: Yeah, that’s the bet. We also don’t know how Guggenheim is financing the purchase. You know, on deals this large, the buyers will typically borrow the money through some sort of leveraged transaction (they just don’t have $2 billion lying around). But it would help to know what the investment return is projected to be. That’s a big deal because it would signal how much money the franchise will have to make each year – and whether they’ll have to raise ticket prices or they’ll have the funds to go after high-priced players, or most importantly, the terms of a new broadcast rights contract, what could become a make-it-or-break-it proposition for the new owners.
Julian: How important is Magic Johnson’s role as investor and front man going to be?
Lacter: Well, Magic has been a very successful businessman (three years ago Forbes estimated his net worth to be $500 million). But most of that success has been based on real estate investments and partnerships with a bunch of other people – and his holdings have included Burger King restaurants and Starbucks locations and the Magic Johnson theaters. Now, there’s nothing wrong about making money as basically a behind-the-scenes investor, but it’s a lot different than handling the day-to-day operations of a highly visible professional sports franchise. Every time the Dodgers raise prices, every time the Dodgers have a crummy season it will be Magic that everyone turns to – and he better have a good explanation for what’s going on.
Julian: Is the downtown LA football stadium in jeopardy?
Lacter: Not according to the folks at Anschutz Entertainment Group. They’ll be releasing a 10,000-page environmental impact report on the proposed stadium later this week. It includes projections on traffic, noise levels, parking requirements, a whole bunch of information that will be used by city officials to make adjustments to the initial stadium plan. That plan includes an overhaul to the L.A. Convention Center, which would be adjacent to the stadium.
Julian: I don’t suppose they’ll include the name of a football team…?
Lacter: That’s the thing. In order to make any of this work you need an actual team, and at this point none of the current owners have shown an interest in L.A., at least not publicly.
Julian: There was a report that said the terms being demanded by the billionaire Anschutz people are not acceptable to the NFL.
Lacter: Yes, they supposedly wanted to buy a minority stake in the team at a discount, and then they wanted to control sponsorships, premium seats, parking, and concessions. That didn’t seem to get them very far, so now you have Tim Leiweke, who is the head of AEG, telling the L.A. Times that Anschutz is willing to buy an entire team, not just a minority position. That might move things alone, but again, nobody seems to be selling.
Julian: And they’re not the only people hoping to build a stadium.
Lacter: Yes, you have billionaire Ed Roski, who wants to have an NFL stadium in the City of Industry, and who knows what the Dodger owners might want to do with the land next to Dodger Stadium. Meantime, league officials aren’t in any hurry committing to L.A., though eventually it’ll probably happen.
Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.