A Modest Suggestion Regarding the Sale of Wrigley Field

By JCB on Sunday, January 6, 2008

Shawon Dunston Worst Defense Award: To attorney Michael Guinan, who, in a futile attempt to explain away federal income tax charges, said he spent nothing for food on several long yacht trips in the Bahamas because he “speared fish and trapped lobsters and traded with the natives for bread and vegetables.”

  —from an article I ran across in researching this piece, published in the Chicago Tribune Business section titled “End-of-Year Accounting,” December 31, 1985.



* * *


Did you know that Wrigley Field was the first ballpark to let crowd members keep foul balls?

It’s true, at least as reported in a book about the park I got my father a few years ago I browsed while visiting at my parents’ house for Christmas. Of course, it was also the last ballpark to install lights, but then again the first to have an organ, all of which among other characteristics creates something of a paradox—a ballpark at times both the most and least innovative in the league.

It’s easy to reconcile this particular paradox, though: Not all innovations are good for their own sake, and as a ballpark like Wrigley Field assumes its place in American history, its evolution acquires new significance. Greater significance, as so many of us have invested so much of ourselves into that mystic space. The stewards of Wrigley Field, one might argue, have a responsibility not only to the fans, or the bottom line, but also to the space itself.

All of this is on the front of our minds again as word came along that Sam Zell’s offer to acquire the Tribune Corporation is going to go through. Part of Zell’s strategy is to sell the Cubs, presumably to reduce TribCo’s huge debt. The TribCo SEC filing from last November says as much: “The Company currently intends to dispose of an interest in the Chicago Cubs and the Company’s 25% equity interest in Comcast SportsNet Chicago. The Company currently expects that proceeds from such dispositions will be used to pay down Company debt.”

To that end, it may come to be that Zell, via his influence as TribCo’s new controlling director, sells—or tries to sell—Wrigley Field separately from the Cubs in order to collect as much money as possible. Further to that end, Zell may put naming rights to Wrigley Field up for sale to a sponsor as well. While it’s easy to get lost in the complications of the TribCo merger—amounting to a buyout—at the end of it all, Zell and his people have to figure out how to make TribCo profitable again, and how to pay down its debt as quickly as it can. That's how he stands to make (a whole lot of) money from it all.

Where those goals intersect with the Cubs, all of this has got a lot of us more than a little bit nervous.

* * *

The book I was browsing is called Wrigley Field: A Celebration of the Friendly Confines, text by Mark Jacob and photos by Stephen Green (McGraw Hill 2003). It’s a good book. The photos are the kind that normally exist only in our mind, capturing more closely than normal the panoramic quality of the Wrigley Field experience. The writing is, at times, quite good as well. On the matter of the paradoxes of Wrigley Field:
It is a delightful contradiction. On the one hand, it is a time capsule, infused with history. On the other hand, it maintains an everyday familiarity and a willingness to change at a moment’s notice. Wrigley Field is both a celebrity and a good friend. It is priceless jewelry that you can wear.”
That gets pretty close, I think, but there’s more than a circular relationship at work here: Wrigley Field is a celebrity because it has been a good friend first; it’s priceless because it has been worn by so many. Its value is not intrinsic. Its value is entwined with but also owed to its soul, the crowd returning every April and staying until October.

I’ve gotten the sense at times that some people forget Wrigley Field has never been home to a World Champion. I suppose without giving it much thought, people figure that it’s ancient, and so are the Cubs, so a century ago, before any of us were born, when the Cubs last won a Series, it must have been while in residence at Wrigley. In fact, Wrigley opened in 1914, and became home to the Cubs in 1916. It was witness to one of the most timeless moments in Series history, the Called Shot, but it has never witnessed its team, the Cubs, winning it all.

It certainly would be a shame if Wrigley Field never does.

* * *

Anyone who read Connie Bruck’s essay profiling Sam Zell for the New Yorker a couple months ago would not be surprised that he would try to maximize the value of TribCo’s assets by a novel strategy, such as separating Wrigley Field from the Cubs. The article recalls how Zell helped engineer a transformation in the use of Real Estate Investment Trusts decades ago: “They decided that they would use real-estate investment trusts, or REITs, created by Congress in 1960 to allow small speculators to invest in real estate. The trusts would be reconfigured as real-estate companies that distributed at least ninety per cent of their taxable income in dividends to their shareholders, and their shares would trade on major stock exchanges.” Ultimately, the plan worked.

Zell’s adopted another novel transformation in structuring the TribCo deal:
In order to make his acquisition of Tribune financially viable, Zell devised a structure, never before implemented in a deal this large, that would enable the company to pay essentially no taxes. Tribune’s directors were incredulous when Zell first proposed the idea but eventually concluded that it could work. According to his plan, Tribune would buy out the public shareholders and then become a Subchapter S corporation, which pays no corporate income tax but must pass all taxable income through to shareholders. The novelty of the scheme is that the sole shareholder would be an employee-stock-ownership plan, or ESOP, which also pays no taxes. (When employees leave the company or retire, they will pay taxes on their ESOP income.) Thus a large amount of cash, which otherwise would have been used to pay taxes, is freed to pay down debt.
Essentially, Zell is using a corporate structure designed as “legislation to encourage small business growth and entrepreneurship” to help a huge corporation regain its viability. (Quote taken from http://www.s-corp.org/asp/products/product_3_4.asp.)

At least twice, then, Zell has taken a legal creation and extended its design well beyond its intended—or at least original—purpose in the business world. I’m not saying this is a bad thing; or that it’s a good thing. Certainly this is a sort of creativity and entrepreneurialism as well, a way of looking at what’s possible from a different perspective and discovering something like a new entity, and Zell’s imagination may just save TribCo when it’s all said and done, regardless of whether the statutes would have ever been passed had legislators contemplated what Zell’s doing with it. (And, who’s to say they wouldn’t? Although, one wonders whether legislators would like the idea of a big corporation effectively deferring and probably reducing its eventual tax charges.)

On the other hand, when it comes to the Cubs, Zell’s creativity in looking at what’s possible with those particular assets rubs many of us the wrong way because it affects us directly. Regardless of the fact that the Chicago National League Ball Club, Inc., and Wrigley Field, are wholly owned by the Tribune Company, millions of us feel like we own at least some part of the Cubs, and especially Wrigley Field.

The problem with the idea of selling Wrigley Field separately from the Cubs is that such a sale devalues the ball club. I remember reading something in the Tribune recently about how several prospective owners have said they would be less interested in purchasing the Cubs if they cannot purchase Wrigley Field simultaneously. This becomes a benefit to TribCo, though, if the total sum from the two exceeds selling them together. And, all this week, speculation has persisted about selling Wrigley Field to the Illinois Sports Facilities Authority, an Illinois state agency. Apparently, the idea is that a state agency won’t use its status as owner of Wrigley Field to take advantage of the Cubs by charging high rent, ensuring their lasting residency; at the same time, dividing the assets means Zell can sell the totality of the package for a greater sum. They're trying to find a happy medium.

I’m wondering why Zell isn’t trying something simpler: Why not sell Wrigley Field to... the Chicago Cubs?

* * *

I’m just shooting ideas from the hip right now, but there’s no reason I can think why the Chicago National League Ball Club, Inc., could not become the owner of Wrigley Field. The immediate concern would be that any sale of Wrigley Field by TribCo to CubsCo (my nicknames) would necessarily involve a conflict of interest, creating a potential legal pitfall. That being said, if the Cubs were to pay an objectively fair price, the conflict of interest need not be problematic. Moreover, not only might it be possible, the way I figure it, it might be the best thing for everyone involved. A fair price need not be a low-end price.

Next: a point. I’m not entirely certain whether TribCo owns Wrigley Field, not the Cubs. In an Illinois Supreme Court decision from 1985 upholding the city’s ability to prevent night games at Wrigley Field via ordinance, Justice Ward wrote, “The Chicago National League Ball Club, Inc., is a corporation which owns and operates the Chicago Cubs, the major league baseball team, and the Cubs' home ball park, Wrigley Field.” (Legal citation: 483 N.E.2d 1245.) But, Gary Washburn and Michael Oneal, in the article linked earlier, wrote that “Tribune Co. owns both the stadium and the Chicago Cubs.” I’m assuming Washburn & Oneal got it right; that the Cubs and Wrigley Field are separately owned by TribCo.

(If it’s true that the Cubs used to own Wrigley Field and somehow that ownership transferred to TribCo, that seems like it must have been a shady transaction because I fail to see how that could have been in the best interest of the Cubs independent of their ownership, but this is COMPLETELY speculative. And if it's the case that the Cubs do in fact own Wrigley Field, and TribCo as the Cubs owner is trying to force the Cubs to sell Wrigley separately, the Cubs ought to be able to fight that. More likely is that the judicial opinion simplified the facts in its initial summary, since it was CubsCo that was suing the Governor to get night games, not the TribCo. parent company, in 1984 and 1985.)

The other immediate concern with my idea would be that this would probably saddle the Cubs with some debt, and any such liability on their asset sheet would make them less valuable in a sale. It may even be that the Cubs would have to take out a loan to complete the purchase, something like a mortgage, if the Cubs assets aren’t great enough to pay a fair price for Wrigley Field. But, wouldn’t a ballclub with a mortgaged Wrigley Field be worth more than the ballclub with merely a 20-year lease, which is also a liability, sense the club would have to pay to play somewhere? The value of having the mortgage offsets at least some of the cost of the debt itself. Plus, Wrigley Field is simply a good investment.

Unless my brainstorming calcuations are wrong, this is a win for everyone. Among other reasons: It’s good for the Cubs because in the long run, they own 1060 W Addison St., and they eliminate the risk that an owner of Wrigley Field could someday, somehow force them out, or force them to pay rent that’s too high. Plus, given that they will almost certainly sell out Wrigley Field almost every game for a long time to come, they're an awful good candidate for a favorable loan, if needed. Similarly, it’s good for buyers because it guarantees that the team they are purchasing will not have the risk of losing Wrigley Field down the road, and acquiring the cost of paying off a mortgage is undoubtedly better than the certainty of paying rent, even to the Illinois Sports Facilities Authority. It’s good for TribCo because they get the price of the sale of Wrigley to CubsCo, it makes negotiations with prospective buyers simpler, and they avoid the potential bad press of being the greedy company that screwed up the Cubs tenancy at Wrigley Field. And, I think, if they play it right, this kind of a deal at least won't cost them money, and may in the end be the most profitable route.

Effectively, it’s a lot like forcing a purchaser of the Cubs to purchase Wrigley Field with it, something that the owner would want anyway, but perhaps without having to negotiate the price of Wrigley Field separately by making it a fixed cost to the Cubs.

Somehow I doubt whether Zell and his people have failed to think of this. But on the other hand, I have yet to hear anyone suggest it. Maybe it’s because TribCo is dead set on getting more than fair price for Wrigley Field, or at least what that would amount to in a sale to the Cubs right now. On the other hand, I can’t help but think that if I was getting into a bidding war over the Cubs, I’d expect—and I'd be willing—to pay a lot more for them if they owned Wrigley Field, even with accompanying debt. Certainly if I was thinking in terms of risk, I’d want to eliminate the risk of seeing separate deals go sour. Of course, Zell is not afraid of risk. That being said, though, I can’t help but think that the value of eliminating this risk will end up more profitable than trying to proceed with the sale(s) otherwise; and that when it’s all said and done, I figure TribCo will make at least as much as it would by selling Wrigley to the Cubs and then selling the Cubs than by any other design.

TribCo has said it will sell the Cubs and Wrigley Field. The market is strong for both. Unless I’m missing something, why not ensure you get fair price for the property by selling it to the team? Who loses on this? What am I missing?

* * *

As for the naming rights, well... that’s a tougher one to argue. I guess we’re all just hoping that a sense of what’s sacred will prevail. That the Stewards of Wrigley Field will recognize their responsibility to the space itself.

That being said, it’s not nearly as big a deal. The name is a mental entity, and in many of our minds it will always be Wrigley Field regardless of any for-sale technicality. In my mind, the best reason not to sell naming rights is that the Yankees didn’t sell the rights to their new one, a “bow to tradition” according to an unnamed “executive involved in the planning of the stadium” in a quote on cnn.com. Can the Cubs ownership—whether Tribune or anyone else—really give the Yankees the moral high ground on this?

Although, it’s not like there’s much any of us can do to stop it, and if we look at this honestly, selling the naming rights isn’t going to hit the bottom line—at least in terms of attendance. There’s more money to be made in selling items “branded” by Wrigley Field than by a corporate name, but unless we all promise to go out and buy Wrigley Field t-shirts etc., the money doesn’t lie. Now, I'm not saying I'm OK with selling naming rights; I'm dead-set against it. It's just that it's a matter of principle, an argument of passion and sentiment, and quite frankly, I'm not sure whether Zell will even factor these things in, so I'm taking a hopeful but not optimistic wait-and-see approach.

What could someone do beyond waiting to see? Try to pre-empt, I suppose, kind of like the city did with the night games back in the mid-80s. Maybe some creative legislation or ordinance could somehow protect the name for the public good. But I doubt the argument that a corporate name is a public nuisance will be a winner if the Cubs sought to have such an ordinance or statute thrown out; it'd take a much more ingenious public good argument. Not that I wouldn't love to see it, and love to see it win, of course.

Beyond a legal injunction, then, and an appeal to sentiment, what else is there to stop it from happening? I hate it, but I'm slowly resigning myself to the changing times. Advertising is everything, or at least—and this is our slim hope—almost everything.

Still, if the Yankees are preserving the name of Yankee Stadium... maybe there's more hope after all... although the Yankees don't need the money as much as TribCo, that's for sure.

* * *

Just for fun, that Supreme Court opinion about the lights I quoted earlier upheld the conclusions of an opinion by Judge Curry of the Cook County Circuit Court. In the December 31, 1985 Tribune article I began with, the writers awarded the "Single Least Brilliant Line Of Year Award: To Judge Richard Curry, who, in his Wrigley Field lights decision, told us that, 'Justice is a southpaw, and the Cubs just don’t hit lefties.'"

The full quote—which I can’t find anywhere online to link or cite to other than a quote in a page of The Lawyer’s Guide to Writing Well by Tom Goldstein and Jethro Koller Lieberman, some pages of which one can view via Google Books—goes like this:
Yes, you’re out. O . . . U . . . T. The Cubs are out. The inning is over. The contest is lost. Now it’s time for the box score, summary and the wrap up. Have you ever heard a postmortem on a sporting event when some “intangible” wasn’t cited as an element in the victory or the defeat? Well we have one in this case also. The Cubs lost, of course, for all of the reasons stated above but, in addition thereto, they should have had a better scouting report before coming to Court. Everyone around the courthouse is familiar with “Justice” with her robes flowing, her blindfold and her scales. What the Cubs’ “book” on her failed to note is that she is a southpaw. Justice is a Southpaw and the Cubs just don’t hit lefties!!!
Wow. It’s real, that passage. You could look it up. I suppose I should mention that in Goldstein & Lieberman's book it's an example of bad legal writing, if that isn't obvious from its own qualities (or lack thereof). On that note, I'll call this a post.
Posted Sunday, January 6, 2008 by JCB
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4 Comments

What about selling Wrigley Field to the fans? I'm not really sure how the Packers did it, but how much money could possibly be generated from the sale of stocks in Wrigley Field? Would fans buck up for it to keep the name of Wrigley Field in tact?

Fans (shareholders) own the Packers franchise, but the City of Green Bay actually owns Lambeau Field. I doubt anyone could get a corporate entity in place that could get organized enough in a timely fashion to make a bid for Wrigley Field by the fans.

Here's one alternative...a co-ownership of Wrigley combing fans and the city/state. Comments and/or endorsements are welcome.

VIRTUAL COMMUNITY OF CONCERNED CITIZENS AND CUBS FANS
FOR BENEFICIAL CITIZEN OWNERSHIP OF CUBS PARK

VIRTUAL SOCIAL ENTREPRENEUR AND ICON FOR FAIRNESS
cubfanjoelunchbuckett@gmail.com

An Open Letter to the
BOARD OF DIRECTORS AND MANAGEMENT
OF THE Illinois Sports Facility Authority

Why ISFA Should Include “Joe Lunchbuckett” AS A BENEFICIAL CO-OWNER OF CUB’S PARK WITH ISFA

WE THE UNDERSIGNED Concerned Citizens AND CUB FANS OF GREATER CHICAGO PROPOSE That ISFA Incorporate A STRAGEGY OF BENEFICIAL Citizen (Fan) Ownership in Their Efforts to Acquire Cub’s Park

Benefits For The State of Illinois and IFSA
Thanks to the Green Bay Packers, citizen ownership of professional sports franchises is not without precedent, although possibly fraught with hurdles to jump. But here in Chicago the Cubs are for sale, and the State if Illinois, via the ISFA (Illinois Sports Facility Authority), has been actively exploring the possibility of acquiring the Cub’s Park portion of the deal. But the state has economic challenges of its own which makes financing an issue. That's only one reason why we believe that local fan ownership of Cub’s Park should be seriously considered by the ISFA in its acquisition plans. There are more.

Benefits for the Citizen Owners
There are many models for structuring citizen/fan ownership, the Green Bay Packers model being only one of them. We encourage the IFSA to study these and adopt the best model to ensure legitimate beneficial ownership by Cub Fans who are citizens of Greater Chicago. At the very least, the possibility of issuing Phantom Stock as a reward for fan loyalty, or in some way employing the beneficial ownership concept to benefit the poorest of the poor, would be better than the current way in which ownership is concentrated in the hands of a few.

Benefits for the Neighborhoods, Counties, the City, and State
Handled correctly in future sports property applications, such a citizen ownership strategy could economically stimulate and stabilize citizen owners, their families, and the neighborhoods in which they live, along with the city's, county's, and state’s economy. Furthermore, this kind of economic stimulation and stabilization is accomplished while avoiding band-aid government interventions such as the recent tax rebates or prime interest rate adjustments.

Benefits to the Cubs Franchise
This strategy would provide a greater incentive for citizen owners of Cub’s Park to support the Cubs in all kinds of ways, including attending their games. And increased support would inevitably translate into increased value of the Cubs Franchise for its future owners?

Benefits to Major League Baseball
In the midst of the recent steroid scandal which has tarnished the reputation of MLB in all kinds of ways, implementing a citizen ownership strategy here in Chicago would be wonderful public relations for a league whose owners and players have been placed in a very negative light. MLB can ill afford to continue having fans question the integrity of its players and the reality of its competition. Cheating was anathema to the Black Sox back in 1919, and it's still anathema today. Citizen ownership of Cub’s Park here in Chicago could serve as a potent counter measure to that festering problem.

PROPOSED ACTION BY ISFA
For all these reasons, the Joe Lunchbuckett Community of Concerned Citizens and Cubs Fans urges the ISFA Board and management to make it a policy, and to pass a resolution to include a strategy for beneficial citizen/fan ownership when structuring the acquisition of Cub’s Park. Such a resolution, if adopted, would minimize the growing citizen opposition to, and garner voter support for the ISFA acquiring Cub’s Park.

ENDORSED BY:
Rick Osbourne
Greg Hughes
Aaron Powers
Andrew Ziola
Pam Osbourne
Frank Sprude
Annie Powers
Carol Carlson
John Pimenta
David LaRue
Jim Carlson
Cody Osbourne
Zach Riberdy
Rob Glowacki
John Osbourne
Corey Humes
Dominic Cannata
Judy Osbourne

I'm all for chipping in to help buy the team or Wrigley Field. The only problem is that the team is worth so damn much - rightfully so. I have no idea how this is going to play out. The team will be sold, but we don't know to who. The stadium may or may not be sold separately. Until the state buys it, it's not a done deal. It may not happen. And the naming rights, that could happen or then again maybe no corporation is ready to deal with the backlash of paying $200 Million for Frito Lays Corn Chips Presents Wrigley Field. I could think of better ways to spend my advertising budget that would enrage an entire fan base for years.

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