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The Dodgers Sale from a Bay Area Perspective

During the Warriors most recent loss to the Lakers, with Dubs co-owner Peter Guber on the sideline, it was announced that MLB had chosen a winning bid for the Los Angeles Dodgers.While the wheels of a Dodgers sale have been in motion for months, the unexpected news was in regards to the ownership group. Individuals of note in this group are Magic Johnson, Stan Kasten, and Guber.

The noteworthy news is not that Guber bought part of the Dodgers. He has a stake in many sports teams, albeit mostly at the minor league levels. No, the noteworthy part of this is the price tag. Johnson, Guber, Kasten and Co. paid $2.15 billion for the Dodgers. BILLION.

That’s a lot of capital. Hell, some may even say it’s too much. Consider that the Chicago Cubs were sold three years ago in the mid-$800 million range. Are the Dodgers really valued at $1.3 billion (roughly) more than the Cubs? It seems hard to believe, and begs the question: Where’s the difference? The answer is in the land.

This wasn’t just the sale of a baseball team. This was an acquisition. The Johnson/Guber/Kasten group bought not just the baseball team and stadium, but about 250 acres of land around it. It’s been reported that the property was acquired for about $150 million on top of the $2 billion cost of the team.

Seems like $150 million for 250 acres around Dodger Stadium, an area known as Chavez Ravine, is a little low-ball, no?

This was a calculated move. Valuing the team at $2 billion and throwing in the surrounding land for $150 million accomplishes two things; it skirts property taxes, and it increases the value of all other sports teams.

“Throwing in” the property of Chavez Ravine at a reduced rate is a smart business move, and proves the savvy of Johnson, Guber, and Kasten. By valuing the 250 acres at $600,000 per acre, the Johnson/Guber/Kasten group save millions in property tax. Not only that, but the land is largely undeveloped. Once the new owners develop that land and have bars and restaurants to rent out, the value of the land only skyrockets. Think back to when the Giants first moved to AT&T Park (Pac Bell Park at the time) and even slightly before. The area around the park was not nearly as developed as it is today. Now, there are high-end apartments, restaurants, and bars for blocks around the ballpark. AT&T Park literally rejuvenated an entire area of San Francisco. It only makes sense that the new Dodgers ownership group has similar plans for Chavez Ravine.

The second point is even more interesting, and one that was made quite clear in reactions to the sale on twitter. Variations of this question came up quite a bit: “If the Dodgers are worth $2 billion, how much are the Yankees or Red Sox worth?” Scary thought. In addition, think about the giddiness at the NFL ownership meetings currently being held in Palm Beach, FL. The NFL is the big daddy of the professional sports leagues in the US, followed by MLB, the NBA, and the NHL. If a team in MLB is valued at $2 billion, how much is a NFL team worth? More. Possibly much more. Much, much more.

Magic Johnson, Stan Kasten, and Peter Guber just endeared themselves to all present and future owners of sports franchises. Some may say they overpaid for the Dodgers now, but what they’ve really done is set a vastly higher benchmark for all future sports franchise sales. The questions are already being asked about the value of the Yankees, Red Sox, and franchises in other sports. Forbes magazine tackles this question on a yearly basis only Forbes may have been off by a few million dollars. Actually, more like $1.2 billion from Forbes’ 2011 valuation, Forbes valued the Dodgers at $800 million for 2011, and the Yankees at $1.7 billion. Extrapolate the Forbes numbers and the Yankees are worth over $4 billion. If I was Hal Steinbrenner, I’d want to plant a big wet kiss on the lips of Johnson, Guber and Kasten.

For Giants fans, this is a scary proposition. There’s no doubt the new Dodgers ownership group invests such a large amount of money without plans for a new stadium and a team overhaul. The Dodgers have nice young players in Matt Kemp, Andre Ethier, and Clayton Kershaw, the latter of whom is a Giant killer. But homegrown talent isn’t where Giants fans should be worried; it should be free agency. LA is already a place where star players want to play (just think back as recently as Albert Pujols). It’s an area that has cache, panache, even superstar magnetism. And in the near future, it’ll likely be even more of a destination because the new owners are going to be willing and able to pay top free agents at a dollar amount Giants fans can only mention to local sports talk radio stations.

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