Off The Diamond, The Red Sox Are Red Hot
The Boston Red Sox have been delighting baseball traditionalists for years. While teams from Baltimore to San Francisco Bay have erected new fields, the Sox still play in Fenway Park, "which went up when the Titanic went down," quips Sox CEO John L. Harrington. And fans from Boston to Bangor and beyond have been dubbed Red Sox Nation for their undying loyalty to a team that hasn't won the World Series in 82 years.
Suddenly, though, big change is brewing in Beantown. On Oct. 6, Harrington put the controlling interest in the team on the block for the first time since the Great Depression. With Harrington promising to hand the club to the top bidder, "this team will command the highest price yet in baseball," eclipsing the $320 million paid for the Cleveland Indians in 1999, predicts John A. Moag Jr., managing director of Legg Mason Sports Investment Banking.
But if the new owners are to recoup their investment, they'll have to find a way to solve the Sox' most pressing problem: replacing or renovating Fenway, the oldest and smallest park in the majors. Harrington has been pushing an ambitious $665 million scheme to build a new park--the most expensive in baseball--within walking distance of the current Fenway. But with that plan still facing formidable financial and political hurdles, the new owners may be forced back to the drawing board.
The sale of the Sox has been looming for years. Thomas A. Yawkey bought the club for just $1 million in 1933, and after his death in 1976 and the death of his wife, Jean, in 1992, their controlling 53% stake went to the charitable Yawkey Trust, run by Harrington. Since then, says Harrington, "the question has always been when, not whether, to sell."
Prevailing baseball economics suggests that the club should be valued at $320 million to $340 million, figures baseball expert Andrew Zimbalist, an economics professor at Smith College. But Marc Ganis, president of Chicago-based Sportscorp Ltd., says that the huge emotional appeal of owning the Sox is likely "to drive the price far above what any cold-headed analysis suggests it is worth." He predicts that a bidding war could eventually push the price to some $450 million, of which the trust would get about $240 million.
Investment bankers and other observers envision at least four classes of bidders emerging. Boston-based developers--some of whom have land that could be used as a stadium site; companies whose business dovetails with baseball, like Aramark, which operates concessions at Fenway and already has an 18% stake in the team; media buyers out to acquire programming; and dot-com entrepreneurs and other near-billionaires who simply can't resist the ego trip of owning the Sox.
DISTANT DREAM. The first priority of whoever wins the Sox will be replacing Fenway. Harrington hopes they will complete his dream of a new 44,000-seat near-replica of today's park nearby. But in Massachusetts, opposition to public funding of stadiums is among the strongest in the nation, and the legislature has agreed to pony up just $100 million for infrastructure. Boston is supposed to toss in $212 million more for buying land and building a parking garage, but 7 out of 13 city councilors already oppose the deal. Worst of all, even if the city council went along, the Sox would still have to privately finance the $350 million cost of the stadium, plus any overruns. "It gets to be counterproductive," says Moag, since much of the increased revenues generated by the stadium would go to pay off the debt.
The upshot is that the new owners are likely to find a cheaper, less controversial way to replace Fenway--either by renovating the existing field or moving to a less costly site. In turn, that would free up more money to spend on players. And in the end, that may be the only way for the Sox to end the drought that has denied Boston a World Championship since 1918.