Sun Sentinel Palm Beach Edition
Big payroll awaits next owners
Contract obligations, player arbitration increases could add up
Raising cash for a reported $1.3 billion sale price for the Miami Marlins will be just the start of a hefty financial obligation for Jeb Bush and Derek Jeter, or whoever ends up buying the team from Jeffrey Loria.
If the sale is completed before the end of the season, new ownership will be confronted by a rapidly escalating payroll. The Marlins already have $97.9 million committed to eight players in 2018, which ranks 12th among major league teams.
In addition, four key players will be entering their first year of salary arbitration eligibility, including J.T. Realmuto and Justin Bour, and seven others will be in their second arbitration year or later.
The ability not only to purchase the club but to make it competitively viable will be key considerations in the process of approving a sale, Major League Baseball commissioner Rob Manfred said this past week.
After reports surfaced Tuesday that a group headlined by Jeter and Bush had an agreement in principle to buy the Marlins from Loria — which a source confirmed to the Sun Sentinel — Manfred told the Associated Press that multiple groups remain interested in buying the team.
The Marlins declined comment, and the Jeter and Bush camps have not responded to inquiries.
MLB must approve the structure of any deal, and ultimately at least 75 percent of
teams must vote in favor of it. Fox Business reported that Jeter and Bush still needed to raise about $1 billion from outside investors to complete their bid.
Manfred, speaking at a Pirates-Cubs game, pointed to MLB’s debt service rule which requires that more than half of the winning bid to purchase the team involve cash.
“You can rest assured that the acquiring group, whoever it turns out to be, will have a financial structure — meaning some debt and the rest equity — that is consistent with the rules that we have, most notably the debt service rule,” Manfred told the AP. “And more important than complying with the rules, [that] puts the franchise in a position that it can operate effectively. That’s really the commissioner’s office’s job in terms of approving any potential bidding group, and we are really focused on that issue with respect to the Marlins.”
Limited financial resources held the Marlins back throughout the ownership of Loria, who lacked the wealth of owners such as the Dolphins’ Steve Ross and the Heat’s Micky Arison and the vast resources and revenue of major league teams such as the Yankees, Dodgers and Red Sox.
This year’s Marlins Opening Day payroll of $115.4 million is the highest in Loria’s 16 seasons as owner and ranks 20th among major league teams. In seven of those seasons the total ranked last or second-to-last among the 30 teams.
The highest the Marlins’ payroll has ranked during the Loria years was 10th in 2012 when they opened Marlins Park in Little Havana with a payroll of $101.628 million.
That brief bump above the $100 million mark was short-lived. When the team struggled during the first half of the season, Loria began shedding payroll with Hanley Ramirez, their highest-paid player ($15 million that season), among the first to go.
The infamous selloff at the conclusion of the first season in the new publicly funded ballpark, which alienated fans and cemented widespread disdain for Loria, culminated in a 12-player trade with the Toronto Blue Jays.
The Marlins’ Opening Day payroll dropped all the way to just over $38 million in 2013 — they had to send an additional $12.5 million to the Blue Jays and eat $4 million owed to defrocked closer Heath Bell — and Miami went on to lose 100 games.
Even in their best years, Loria’s Marlins have operated on a relative shoestring. Their payroll was 25th when they won the World Series in 2003, a bargain at $49.05 million. The Yankees, who they defeated in six games for their second championship, topped all teams that year at $152 million.
The Marlins have always struggled to generate revenue streams competitive with other teams, particularly while saddled with an unfavorable lease in the previous stadium. Since moving to Marlins Park, they have been unable to secure a naming rights deal, remain under one of the least lucrative local television deals and have been unable to boost attendance to desired levels.
All of which would seem to make it surprising that multiple groups were in competition for an underachieving franchise with an asking price of well over $1 billion.
The underachieving factor may explain the motivation, according to Steve Greenberg, managing director of Allen & Company, who has represented numerous buyers and sellers in sales of pro sports teams, including five MLB clubs.
“You have to operate well. That’s really the secret sauce,” said Greenberg, former deputy commissioner of MLB and the son of Hall of Famer Hank Greenberg. “If you look at the successful teams in sports, whether it’s the [Dallas] Cowboys, the St. Louis Cardinals, San Francisco Giants, they’re really doing it on operations. They just run good franchises year after year.
“You’ve got to work every day to sell more tickets and increase your advertising and sponsorships and get your TV ratings up so the next time the deal comes around you do better.”
The Marlins’ regional TV deal with Fox Sports Florida expires in 2020. New ownership would have the opportunity to negotiate the next one and pursue naming rights for the ballpark. They would also benefit from the latest national TV contract and MLB revenue generators in advanced media and video streaming that are driving up the value of all teams.
But, as Greenberg suggested, the next owners would need to do a better job of running the franchise to make their investment pay off.
Major league salaries topped $4 billion for the first time this season. The Marlins had the biggest increase in Opening Day payroll, up 55.2 percent from 2016, as Loria presumably sought to make one more run at ending a long postseason drought before cashing out.
“Somebody coming to buy the team now would anticipate that they have a couple of years to turn the franchise around and sign a new [local] TV deal and be able to get a nice naming rights deal,” said Andrew Zimbalist, a prominent sports economist.
“Miami is not a bad market. I think it’s got potential. It just needs to be run well.”