THE BIG PICTURE

When former Dodgers owner Frank McCourt litigated the demise of his ownership with Major League Baseball, the general public got a brief glimpse of the structure of a modern baseball organization. McCourt had a vast array of separate legal entities that owned pieces and aspects of the overall Dodger franchise. He had the team, then another company for concessions, another company for parking lots, another company for property management, etc. High wealth individuals and businesses do create a cadre of independent legal organizations to help shield liability, to increase tax relief, and to funnel off additional personal income or benefits (as MLB alleged in its pleadings).

The Ricketts are no different. In the zoning materials for the Wrigley Field renovations, it was disclosed that the Ricketts have various legal entitles owning different properties in and around Wrigley Field. There is nothing wrong with organizing one's properties or assets in this manner. But as I have discussed previously, depending on the language and cross-entity contracts, the "baseball" revenue may not totally go to the baseball team operations.

A simple diagram may help the discussion.

The Cubs baseball franchise is a separate corporation from the entity that owns Wrigley Field. The Cubs are merely a tenant renting Wrigley Field. Depending on what the lease terms state, the Cubs could have to pay for all the maintenance, insurance, taxes, etc. for the facility in exchange for all ticket sales, field advertising revenue and concessions. But that may not be the case. Wrigley Field company could have kept the concessions and/or advertising revenue for itself. If you go to Wrigley, you will see various food service companies operating during games. This could mean that Wrigley Field company could have "subleased" those concessions to those vendors, with or without giving the Cubs a cut of that revenue.

The Ricketts have invested more resources into building new bars and restaurants inside Wrigley Field. Again, those new business operations can be separately owned (with different investors or partners). As such, the Cubs may not share in any of those revenue streams, especially if the new bars stay open when the Cubs do not play games.

In the zoning package, the Triangle parcel next to Wrigley Field is owned by a third separate entity. The plan denoted a large building along Waveland and a forest of advertising obelisks in the plaza. The proposed bridge between the building and the McDonald's block was to flow into various building terraces which would then connect to Wrigley Field. The whole purpose of these walkways was to funnel hotel customers directly into Ricketts owned bars, restaurants and then into Wrigley Field for the game. If they did not reach street level, they would not spend their money in any of the neighborhood competitors bars or food joints. The Triangle building under Tribune ownership was supposed to be a parking, museum, retail and club offices. But now it looks like it will be set up as a large bar/restaurant complex. Since these will be separate business operations, the Cubs will probably not share any revenue from this new development.

The same will be true for the development of the McDonald's block. This will be owned by a fourth separate legal entity. Various aspects of the building will be leased out to a hotel operator, a fitness club, and the McDonald's. The Cubs will not share any of those business revenues.

Even the parking lot will probably be owned by a separate entity (just as the current season ticket lot is owned by another separate company.) If it is owned by a separate entity, the money would not flow back to the baseball team (as shown in the McCourt matter - - - the parking revenues went directly to him.)

The only things that the Cubs baseball operation can count on for revenue is ticket sales, broadcast fees and some of the concession sales. All the new revenue streams, including the Jumbotron, are all tied to different legal owners than the Cubs baseball team. That is why Cubs management refused to respond to repeated reporter questions of when the Cubs would see some of this new revenue streams and how much. The Ricketts will have to borrow more money to build the McDonald's block and Triangle Annex as well as the improvements to Wrigley Field. That new debt service will have first priority in any new revenue stream. That is why the Cubs should now be looked as just one tenant in a shopping mall.  The Cubs are going to sink or swim on the baseball team's own traditional resources. With the heavy purchase debt burden, the Cubs are going to be run like a small market team. The last two seasons prove that point.