VOL. 6 | NO. 48 | Saturday, November 23, 2013
By DON WADE and BILL DRIES
The key players, from Memphis Mayor A C Wharton Jr. to St. Louis Cardinals chairman and CEO Bill DeWitt Jr., grabbed the microphone at an invitation-only rally held on the club level of AutoZone Park and made their best pitches.
Deal would have the Cardinals purchasing the Redbirds, the city taking over ownership of AutoZone Park and the Cardinals leasing the ballpark from the city.
(Memphis News File/Lance Murphey)
Former Redbirds general manager Allie Prescott even acted as the event’s “closer.” Prescott, wearing a St. Louis Cardinals tie, told assembled members of the local corporate community on Tuesday, Nov. 19, that the situation is the same as it was when the Redbirds moved to Memphis for the 1998 season and when AutoZone Park opened in 2000.
“This is not going to happen without your help,” he said.
“This” is a deal routinely described as “complicated.” It’s a deal that would have the Cardinals purchasing the Redbirds, the city taking over ownership of AutoZone Park, and the Cardinals leasing the ballpark from the city. None of the parties have disclosed the financial terms and many of the details are being held close, like so many signs flashed by a third-base coach that only the players on his side know.
More information will emerge with a presentation at a Dec. 3 City Council meeting, and there seems to be widespread agreement outside City Hall that there is a real deadline of getting the deal done by the end of the year. Council approval is required.
The construction of the stadium was funded by $72 million in bonds. In 2009, the Redbirds Foundation defaulted on a bond payment. Local management group Blues City Baseball was dispatched in favor of Global Spectrum, a Philadelphia-based company. In 2010, Fundamental Advisors, a New York-based private equity firm, bought the bonds at a discount, a reported $24 million.
St. Louis Cardinals CEO Bill DeWitt Jr. speaks to the media about the Cardinals buying the Redbirds and the city buying AutoZone Park.
(Memphis News/Andrew J. Breig)
“We’ve gotten assurances, and we’re finalizing this now, that this will not be something that the taxpayers will have to end up footing the bill for,” Wharton said at the rally, later telling media: “I am anxious to get a package that I can start sitting down with council members one-on-one. Right now, I do not have anything other than an agreement in principle and I don’t have anything in terms of a copy of it, but the folks that are negotiating tell me they’re close to terms and they’ll get them to me real soon.”
When he gets the details and takes them to the council, Wharton will almost certainly get a frosty reception. One reason is the St. Louis Cardinals press release that announced it as a done deal. The other is Wharton’s habit of taking such projects to the council on short notice.
“I hate being rushed and pushing into a position where we have to make a decision without fully vetting it. That seems to be the case a lot of times in these matters,” said council member Harold Collins.
Incoming council Chairman Jim Strickland said he understands the need to have a deal by year’s end. But he’s not sympathetic in other regards.
“It’s really hard for me to use precious resources of the city for sporting venues,” he said. “I will say that FedExForum has turned out to be a successful model where the revenue streams pay in total the amount government invested in it. So it’s break even. I’ve got to balance those two. Until I see the details, I’m not going to take a position.”
The Redbirds’ expenses have outpaced their revenues. Foundation treasurer John Pontius in 2012 described the debt as “just in excess of what a Triple-A baseball team could carry.” On paper, more than $57 million of the original stadium debt is still owed.
“This will not be something the taxpayers will have to end up footing the bill for.” –Wharton
(Memphis News/Andrew J. Breig)
Forbes magazine has estimated the Redbirds’ worth at $29 million.
“I don’t think I would base the buying or selling of a sports franchise, especially a Triple-A baseball team, on a Forbes appraisal,” Redbirds Foundation president Ray Pohlman said.
DeWitt rejected the notion that the Cardinals buying the Redbirds is a “financial rescue.” The Cardinals already own other minor-league affiliates, including their Double-A team in Springfield, Mo.
“It’s a financial resolution to some of the problems that occurred after the stadium was built,” DeWitt said. “The last years have been somewhat challenging, but we intend to put in a lot of resources here to make it work.
“Obviously, we need a lease on the ballpark from the city. That’s the way the transaction works. And we need the corporate community to demonstrate their support through sponsorship, ticket sales, etc.”
DeWitt said they have discussed a 17-year lease term, adding that this length of term “ties to the original tax abatement that was on the park to finance it.” He also said the responsibility for upkeep on the ballpark was among the terms of the deal that “remain to be worked out.”
To what degree the corporate community will step up to the plate is not yet certain, but Prescott made it sound like the primary players were at least on deck.
“We’ve had conversations early on with three of our biggest corporate citizens – FedEx, AutoZone and First Tennessee,” he said. “We’re grateful for the early indications of their commitment.”
Talks between the Cardinals and the Redbirds/city are not new. The Cardinals have had at least mild interest in purchasing the team dating back several years. Media reports this past spring made it sound as though a deal was at hand, and then things went quiet.
A source close to the process told The Daily News that the New York Mets may have approached Fundamental Advisors about purchasing the team/AutoZone Park and that in turn may have resulted in pressure for the Cardinals to move ahead with a purchase of the Redbirds and for a lease between the city and the Cardinals. DeWitt repeatedly spoke of the Cardinals’ buying the Redbirds providing “certainty” they would remain in the Memphis market. He also said that a “fair-market lease was a critical part of the transaction.”
The Mets’ working agreement with their current Triple-A affiliate in Las Vegas expires after next season and over the last decade or so the Mets have had their Triple-A affiliate in Buffalo, N.Y., Norfolk, Va., and New Orleans. While there has never been any indication the Cardinals and Redbirds were not going to maintain their working agreement, a serious potential buyer could have changed things.
“We’re putting all our energy into making sure this transaction consummates as we all expect it will,” Laurence Gottlieb, Fundamental Advisors chairman and CEO, said of the Redbirds/Cardinals/city transaction. “There are suitors, there were suitors, and there will always be suitors for terrific properties.”
Gottlieb declined comment on what might happen next, should the Dec. 31 deadline for this deal come and go.
It’s a question council members will almost certainly ask next month.
“How do you expect for the council to make an informed decision when we realistically may not get this material until 25 days before the end of the year, knowing full well the holiday season shrinks the month even further?” Collins said. “I’m not real sure if the council is going to be forthcoming on the end of the month. The hedge fund people are running out of time on this. It might be in our favor to hold up just a little bit. We could get it at a cheaper price.”
Roundly heralded as the best ballpark below the major-league level when it opened and for years afterward, Cardinals general manager John Mozeliak says they envision elevating AutoZone Park’s game.
“Our hope is that we can inject some energy, some dollars,” he said.
At the rally, guests saw renderings of possible improvements (projected for 2015 and beyond) including outdoor restaurant-style seating on the club level, a hand-operated scoreboard at the back of the bluff in left field, a bar in an outfield seating area, and grass berms in the left- and-right field corners that would replace seating that often goes unfilled. Announced attendance climbed 4 percent in 2013, to an average of 7,223 per game.
Another former Redbirds general manager, Dave Chase, who is president of Chase Baseball Consultants, believes the impending deal is everyone’s best option. Certainly, fans figure to like the announcement that the National League champion Cardinals will be playing the Redbirds in an exhibition here on March 28.
“It’s the only opportunity that really gives the Redbirds and the city a chance to catch their breath and get stable,” Chase said of the proposed deals. “Global Spectrum has brought some stabilization, but not a lot of forward thinking. And that’s not a knock against them – that was their job, to bring some economic stability.”
The 15-year agreements on the stadium’s suites, which were leased at $40,000 and $45,000 per year, expire after next season. New lease agreements figure to be shorter.
“Five to 10 years would be ideal,” Pontius said. “I’d love to have them staggered so they don’t all expire at the same time.”
Chase says AutoZone Park’s naming rights payments were front-loaded, the Toyota naming rights already have expired, and the Redbirds were fortunate to get a soft drink contract with Coca-Cola years ago that he called “probably the best in minor-league baseball.”
The economic climate has changed a lot in the last 15-plus years. So has Memphis.
“You’ve got to remember what our market was like in 1998,” Chase said. “We didn’t have the Grizzlies. The University (of Memphis) sports programs were dismal. This was an effort to revitalize. … I don’t remember what Downtown was like before AutoZone Park.”
Chase said it may not be realistic for commitment from the corporate community to return to the levels of the late 1990s.
“But there is room for improvement,” he said. “The business community has stepped up for the Redbirds; it’s stepped up for the Grizzlies. And I fully expect it will step up for this.”
But first, loose strings between the respective parties must be tied together and then the City Council must give its blessing.
“You negotiate right down to the wire,” Wharton said. “Not that anybody is acting in bad faith; this is an extremely complicated transaction.”
Pohlman, the Redbirds Foundation’s president, is optimistic.
“I feel confident,” he said, “when the City Council hears all the details that they will agree with the Foundation that this is the best possible outcome for AutoZone Park and the Triple-A franchise.”
The ballpark plan arrives at City Hall at a busy time for the relationship between the mayor and the council.
Also on the council agenda next month is an overhaul of city sanitation services that includes a proposed retirement supplement for sanitation workers. The council is also expected to hear soon from Wharton on a budget shift estimated at $60 million to $80 million to more fully fund the city’s unfunded pension liability or face the real prospect of state officials ordering the city to do it and ordering the city how to do it.
“We do have to eventually deal with the pension,” said outgoing council Chairman Edmund Ford Jr. “However, if this is a longitudinal investment that will reap dividends that will not affect that, then let’s look at that as a great investment just like what Green Bay has done with their football team.”