Cubs exploring sale of minority shares for Wrigley renovation

Cubs exploring sale of minority shares for Wrigley renovation
April 3, 2014, 4:15 pm
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The long-running drama at Wrigley Field now has a new twist.

It shouldn’t be as chaotic as Sam Zell’s Tribune Co. takeover, the descent into bankruptcy and a rocky transition to the Ricketts family. But the Cubs are exploring the idea of selling minority ownership shares as a way to help finance the stadium renovation, according to multiple sources within Chicago’s business community.

A Cubs source confirmed the plans, describing those shares as a non-controlling interest while also cautioning that the Ricketts family hasn’t made any final decisions yet. It’s an X-factor for the business/baseball plans at Clark and Addison, and an acknowledgment of the team’s complicated financial reality.

[WATCH: The ramifications of the Cubs possibly selling minority shares

Wrigley Field’s 100th anniversary season kicks off with Friday’s home opener against Ryne Sandberg’s Philadelphia Phillies, so get ready for all the sentimental looks back into the past. But this next chapter will be all about the future in a story that has reverberated from Wall Street to City Hall and all the way to the White House.

Mayor Rahm Emanuel is said to be getting antsy as Cubs chairman Tom Ricketts continues to negotiate with the rooftop owners after already missing one offseason of construction.

Emanuel wants the ribbon-cutting ceremony at the groundbreaking, the image of hard hats, concrete and steel. Ricketts wants assurances the team won’t get sued before green-lighting the $500 million Wrigleyville project, which would also include a new hotel across the street from the iconic marquee. The roofies want their piece of the action, clinging to a revenue-sharing agreement with the team that runs through 2023 and trying to block the Jumbotron.

Moneyball

An industry source predicted the Cubs would be working from the latest Forbes valuation – $1.2 billion – that put the franchise behind only the New York Yankees, Los Angeles Dodgers and Boston Red Sox at a time when commissioner Bud Selig estimated the sport’s revenues could top $9 billion this year.

That’s a 42-percent jump from the $845 million deal that finally closed in October 2009 and included a piece of Comcast SportsNet Chicago. The game’s rising tide hasn’t lifted the Cubs out of fifth place since the Ricketts family entered into that leveraged partnership with Zell’s Tribune Co., which demanded any buyer take on a debt-heavy structure that would create a shelter from huge capital-gains taxes.

The Cubs source said a sale wouldn’t impact the futures of team presidents Crane Kenney and Theo Epstein, who both have long-term contracts and run business and baseball operations without much interference from a hands-off ownership group.

[RELATED: Key points of the Cubs' Wrigley Field Rooftop contract

The Cubs began this season with a major-league payroll around $89 million, which ranked 23rd out of 30 teams, according to an Associated Press salary survey. There’s been a reckoning since the nearly $147 million poured into the 2010 Opening Day roster.

The projection for the actual on-field product this season is closer to $75 million when you factor in the money the Cubs owed the Yankees for the final season of Alfonso Soriano’s win-one-for-the-Tower megadeal.

The Cubs have been writing off major-league seasons, building an elite farm system and collecting seven of Baseball America’s Top 100 prospects. They’re hoping to build a sustainable contender through the draft, trade-deadline deals and the international market, though a restrictive collective bargaining agreement has made it more difficult to acquire amateur talent.

Major League Baseball would need to approve any new investors, though the Cubs source said it hasn’t advanced to that stage yet. Insiders say that as the Ricketts family does estate planning, the intention is to still control the team through at least the next generation.

Whatever happens, team sources suggest the spending restrictions imposed by Zell’s terms will remain in place through the 2019 season. At that point, the Cubs would also be free to start their own cable network, while seeing new revenues from the Wrigley Field renovation, forces that could again make them a big-market power.

The Deal

Raising cash will invite comparisons to the New York Mets selling minority ownership stakes in wake of the Bernie Madoff scandal. The Mets closed those deals in 2012, repaying loans to Major League Baseball and Bank of America, adding investors that included comedian Bill Maher and SportsNet New York, their regional cable partner, trying to erase the stains from that Ponzi scheme.

Even if it creates perception issues – and the Cubs have felt some pressure from the investment banks – this would still in essence be straight from the playbook in professional sports. Jerry Reinsdorf might be one of the most powerful men in baseball behind Selig, and he’s the public face of ownership, but there are multiple investors in the Bulls and White Sox.

The San Francisco Giants list 30 principal owners on their masthead. That franchise has become a model of business/baseball synergy, building AT&T Park, creating an atmosphere around the waterfront stadium and winning World Series titles in 2010 and 2012.

[ALSO: No threat to move, Ricketts looks to close Wrigley deal]

The DeWitt family is one of 15 investors listed in the media guide for the St. Louis Cardinals, perhaps the best-run organization in baseball.

The Cubs are said to be looking at the idea of a small group of investors, who would be buying equity in a marquee franchise in a booming business – and all the Wrigley Field perks and access that would come along with that.

Kenney – the former Tribune Co. lawyer now in his 21st season in the organization and at the center of all these issues – tipped off the plan at Cubs Convention in January.

Inside a Sheraton Chicago Hotel & Towers ballroom, Kenney told fans and reporters that the Cubs generated the fifth-highest revenues in the game last season. Kenney mentioned that Ricketts family “assets” would be used to finance the Wrigley Field project.

That signaled a shift from the convention talking points in 2013, when the Cubs rolled out a new lobbying tactic, asking for the city to ease restrictions and unveiling conceptual designs for a $300 million stadium restoration.

Kenney told reporters the Ricketts family is “prepared to write the whole check themselves” if the Cubs would be treated like the other 29 big-league clubs, allowed to put up advertising signage where they want and given more flexibility to schedule night games.

That reset the PR campaign after a bitter presidential election that put the spotlight on family patriarch Joe Ricketts, the somewhat reclusive TD Ameritrade founder, and his Super PAC’s anti-Obama campaigning.

A story leaked to The New York Times went viral in May 2012 and infuriated Emanuel. Obama’s former chief of staff froze out the team at a time when internal projections had the Cubs potentially getting around $150 million in public funding through the amusement-tax proposal.

The Chicago Way

Outside of this week’s profile on Showtime’s “60 Minutes Sports,” the Ricketts family generally prefers to keep a low profile in the media. There’s been a learning curve for Tom, Laura, Pete and Todd, who convinced their father to push ahead with the Zell deal, an education in the game’s changing economics as well as bare-knuckle ward politics.

Tom Ricketts has tried to stay out of the political fray, knowing he’d have to make his way in Chicago. Associates describe the Cubs chairman as someone who cares about the family’s legacy in the city and has a nice personal touch around the office. While there are more cynical explanations for building a homegrown core, he knows scouts by name, visits minor-league affiliates and shows a genuine interest in player development. The staffers on the ground appreciate being able to put a face to ownership.

[MORE: Patience running thin as Showtime documents Wrigley dispute]

Looking to close in the middle of a financial crisis, the Ricketts family once considered raising around $100 million by selling non-equity stock, as Crain’s Chicago Business reported in April 2009, before the bank lending loosened up again, scrapping that plan.

Privately financing the Wrigley Field renovation will be a massive undertaking. While selling the ballpark’s one-of-a-kind charm, Cubs executives also repeatedly point to the public money used in building U.S. Cellular Field and stadiums all across the country. From an ownership point of view, it would be paying for it either by writing the check or diluting future returns by selling equity shares to third-party investors.

Once again, the biggest stories surrounding the Cubs will have nothing to do with what happens on the field.