The Ricketts have not calmed or put out the flames of last week's stories about how the family may seek minority investors for the team. The reason given by their PR people is that such a minority stake would help pay for the Wrigley renovation.
As previously posted, I don't think that would be the case in the conventional sense on how most people understand "Wrigley renovation."
To most people, Wrigley renovation means capital improvements to Wrigley Field itself. That means concourse reconstruction, new locker rooms, new public bathrooms, and the signage inside the ball park.
But the Ricketts lump their outside the ball park real estate project as part of "Wrigley Renovation." The zoning petition put together Wrigley signage and repairs, the triangle parcel and the new commercial development across the street in one package. Each one of those land developments is owned by a separate legal entity controlled by the Ricketts family.
Looking at the story from an investment viewpoint, the Ricketts out-of-pocket investment in the Cubs was about $100 million. The rest of the purchase was financed by debt as demanded by Zell and the Tribune. If Forbes valuation of the Cubs is right at $1.2 billion (and many people dispute the calculation and assumptions), if the Ricketts sell a 10% stake in the team for $120 million, they would be getting a 20 percent return on their investment.
It would get the family back its cash investment with a profit. It also would further put the Cubs baseball team on its own financial ledge. It is doubtful that the Ricketts personally guaranteed any of the existing Cub debt because of the unique collateral pledged in the deal. So the family has pulled its money out and now can wait for the team to generate dividends in the future.
Since the majority of the "renovation plan" is outside of Wrigley Field proper, this means that in order to go forward, the Ricketts would need to invest their own money in those projects (as commercial banks will not lend more than 75% of the construction value of any project). The payroll savings from the past few seasons from the Cubs could pay for the interior Wrigley Field repairs and construction projects. The new signage with sponsors should pay for themselves.
So the ability to get $120 million in cash out of the Cubs investment so the Ricketts can put that into the outside the ball park real estate projects may be the key to understanding what may be going on. For $100 million could meet the thresholds to borrow to build the triangle building, and hotel-commercial-parking structure across the street. In other words, Ricketts plan may be to move its existing investment in the Cubs to their new real estate venture. And this may be why the Ricketts are gun shy to do any work until they get everything they want from the city and neighborhood. They don't want to give up any equity in the Cubs unless they have to in order to fund their real estate projects.
Over the weekend, one potential investor was named by the media: Warren Buffett. The Oracle of Omaha is his generation's prudent investor. The Ricketts are also from Omaha. Buffett likes to say he will only buy companies that he understands, and that he always looks for a good return on his investment. Owning a baseball team is more a luxurious hobby than a prudent investment. It is an entertainment product with a growing feisty fan base. Buffett has recently dabbled in some risky businesses such as buying chains of newspapers (and winding up closing several papers because they were not profitable). Buffett taking a stake in a baseball team would be another odd divergence from his normal investment philosophy.
But adding an investor-celebrity like Buffett would give the Cubs management the aura that "they must know what they are doing" since a man like Buffett has bought in to their business model. But at this point, a business model that relies mostly on public relations and marketing is soon to fail when the actual business to build an entertaining and championship caliber baseball team.
