If You Build It It May Crumbleby
Not everyone is in a funk over the Major League Baseball strike. Suddenly, minor-league teams are getting the kind of attention usually reserved for multimillion-dollar power sluggers. And no one could be more pleased than Robert A. Hilliard. Talk about needing a hit.
Like the Kevin Costner character in Field of Dreams, the corporate dropout-turned-entrepreneur built a baseball diamond in a onetime cornfield, and a team did come to play: a St. Louis Cardinals' farm club that was drawing big crowds even before the strike.
But Hilliard's diamonds-are-forever dream has turned into something of a business nightmare. Little more than two weeks before the June 16 season opener, Hilliard's publicly traded Skylands Park Management Inc. filed for Chapter 11 bankruptcy. Fans who come to see the Class A New Jersey Cardinals at Skylands Park in rural Sussex County, N.J., are often amazed to see building materials strewn about the site, portable toilets, and unfinished luxury boxes boarded up with plywood. "Before you walk through the gates, it's essentially a construction site," says Robert E. Nies, an attorney with Wolff & Samson, which represents Skylands.
PSYCHIC INCOME. Hilliard, who as president of Skylands hasn't drawn a salary this year, lacks the $2.3 million he needs to put the finishing touches on his dream. The company, with debts and liabilities of $5 million, has lost more than $500,000 since its inception. Skylands stock, traded on NASDAQ's small-cap market, is currently at $2.13 a share, down from a peak of $3.88 in mid-February. Now, Hilliard is hoping to coax existing warrant holders into dishing out $14.2 million for more stock to bail Skylands out of bankruptcy.
What kind of investors would have the stomach for such a risky proposition? Hilliard and his colleagues may be hoping that baseball diehards will look past potential monetary rewards for the more psychic income of having a stake in the great American pastime. "A lot of people want the thrill of owning a baseball team," says Barry J. Gordon, who heads investor groups that own the New Jersey Cardinals and the Class AA Albany-Colonie (N.Y.) Yankees.
Wishful thinking when your team is behind in the ninth with two outs and a pair of strikes? Hilliard, not surprisingly, doesn't think so. A former marketing executive for consultant Booz, Allen & Hamilton Inc., he has long been a rabid baseball fan. When the chance came to have his own team in early 1991, he joined a group of investors to buy the Hamilton (Ont.) Redbirds for $746,000.
His plan was to move the team to a new stadium not far from his home in Vernon, N.J., about 45 miles northwest of New York City. The sports complex he envisioned would provide plenty of entertainment in an area where there was virtually none.
Rather than get entangled in the politics of arranging public financing for the 4,200-seat complex, he chose to make it the only shareholder-owned stadium in the minors, raising $5.7 million in a public offering in September, 1993. Hilliard also lined up a commitment for a $3.5 million loan from a consortium of banks.
Last October, Skylands Park bought 28 acres of farmland in Frankford Township and began clearing the property. An exceptionally bad winter, however, caused construction delays and cost overruns that led the banks to withdraw their loan commitment. Skylands ran out of money, and by early April, the contractors had walked off the job.
To save his season opener, Hilliard sold his stake in the team and lent Skylands $100,000 to pay for construction work. Two other principal owners of the team sank in an additional $250,000. Skylands Chairman Fred Voight borrowed $200,000 from his mother and stepfather. But the cash couldn't keep Skylands from declaring bankruptcy.
WRONG TURN. Did Hilliard's gung ho enthusiasm get in the way of good business sense? He insists not. But he concedes that he had reached a preliminary agreement to raise $4 million from state Economic Development Authority bonds when he took the company public. He chose to go with the bank loan because Skylands wouldn't have to pay any interest charges until the loan was drawn down. In retrospect, Hilliard says, it was the wrong decision. The bank loan had 75 different terms attached to it. The bonds could have been money in the bank. "We've had some problems," he says. "We've made some mistakes."
Hilliard notes that the Cardinals' average draw is more than 4,100 fans a game, the best attendance record in the New York-Penn League, and the strike is filling more of the stands. The team, moreover, is at the top of its 14-team division. And to generate more stadium revenue, Hilliard is also booking concerts and wrestling matches, as well as high school and college baseball games. Hopeful that the upcoming sale of warrants will be successful, attorney Nies believes Skylands can emerge from bankruptcy by yearend.
Maybe. But this is one Field of Dreams that will have to hustle for a Hollywood ending.