Mets Finances -- The Offseason (Bonus: 2014 season content)

[Edgy MD]

I really didn't think it was too much to ask.

[ashie62]

Some time ago Fred Wilpon said that Baseball was basically a breakeven business for the family. I think what Fred meant was whatever happens with the Mets financially will not make us any richer or poorer. a novelty if you will...

This piece appeared in Forbes almost a year ago and I would argue that the Mets are more of an instrument for to make the numbers work for Fred's entire array of holdings. He could jockey the assets around to increase payroll if he wished, players are an asset, but like McCourt seeks to stay afloat and enrich himself...

Not a great way to enrich a brand..


Taking advantage of low interest rates and the escalating value of regional sports networks, the owners of the New York Mets are working with bankers to move debt from their baseball team to their cable network and perhaps pay themselves a hefty dividend in the process, according to the New York Times.

NEW YORK, NY - NOVEMBER 17: Mets Chairman and CEO Fred Wilpon ® and the Mets' mascot Mr. Met attend a press conference at City Hall May 16, 2012 in New York. It was announced that at Citi Field and New York Mets will host Major League Baseball's 2013 All-Star game.

The Mets have lost roughly $100 million over the past two seasons because of falling attendance and high debt payments. The team�s owners, Fred Wilpon and Saul Katz, leveraged the Mets and the cable network they own two-thirds of (Comcast and Time Warner Cable own the remainder), SportsNet New York, to the hilt. For years the two men relied on fake profits from Ponzi schemer Bernie Madoff to backstop their finances. But when Madoff was exposed as a fraud, the Mets lost their ATM.

With revenues falling and no ATM, the team was forced to reduce their payroll by $50 million before this season. It showed on the diamond, as the Mets finished 74-88, 24 games behind the first place Washington Nationals. The Mets only drew 2.24 million fans at Citi Field this season, 17th among MLB�s 30 teams and over 100,000 less than they drew in 2011, despite lowering ticket prices significantly for many seats before the season began.

Wilpon and Katz are looking to refinance the $450 million of debt on SNY to pay down down some of the baseball team�s roughly $330 million of debt, and perhaps pay themselves a dividend with some of the proceeds from the refinancing. The audacity of the owners to pocket money while chopping payroll should not come as a surprise to their fans. Two years ago SNY paid its owners $239 million in dividends. The Mets are also currently in default of baseball�s debt rule, which requires teams not to have debt in excess of 8 times operating income.

The shifting of debt from the team to SNY is a no-brainer. The cable channel�s value is now about $2.5 billion based on 2012 estimated operating income (earnings before interest, taxes and depreciation) of $175 million, and SNY has increased in value the past few years while the value of the Mets, $719 million, fell 4% over the past year. The more valuable asset that is appreciating in value can borrow more at a more favorable interest rate than the less valuable asset that is falling in value.

The real hope for Mets fans is that the team�s owners will not forget their long-suffering fans and also use some of the proceeds from the refinancing to boost payroll and put a better product on the field. If Wilpon and Katz do not boost their investment in the team, then MLB commissioner Bud Selig must tell Mets fans why he forced Frank McCourt to sell the Los Angeles Dodgers because the former owner was sucking cash out of the team for personal uses, while allowing the Mets owners to do the very same thing he accused McCourt of doing.

Fred is dancing on a very slippery slope...

[Ceetar]

Ashie62 wrote: Some time ago Fred Wilpon said that Baseball was basically a breakeven business for the family. I think what Fred meant was whatever happens with the Mets financially will not make us any richer or poorer. a novelty if you will...

I remember hearing this. Had something to do with setting the budget to roughly the revenue. When ends up making the win/lose of it all based on how the Mets actually do. (i.e., they'd set the payroll up to the 85-90 million they expect to make this year or whatever)

Of course, it's whether or not that's changed that's the issue at hand I guess.

[MFS62]

According to Bloomberg Finance, the Mets have the 4th highest value when you include Regional Sports Networks (which make up more than 1/2 of their value).
http://www.bloomberg.com/infographics/2013-10-23/mlb-team-values.html

The graphic indicates that the other Sterling Enterprises businesses are excluded from the analysis.

Later

[batmagadanleadoff]

[fimg=333]http://a1.nyt.com/assets/foundation/20140326-140711/images/logos/nyt-logo-185x26.svg[/fimg]

Baseball|Preview
Looking Adrift at Citi Field, Mets Keep Their Wallet Closed

By RICHARD SANDOMIR and KEN BELSONMARCH 27, 2014


Outfielder Juan Lagares amid swirling trash as the Braves visited Citi Field last May. Attendance has fallen by
32.5 percent since the stadium opened in 2009.

Keeping a lid on player payrolls in the nation�s top market means different things to the Yankees and the Mets. The Yankees feigned salary restraint for months to avoid a big luxury-tax hit � until they signed Masahiro Tanaka for $155 million. But the Mets are acting with almost as much fiscal restraint as the Oakland Athletics and the Tampa Bay Rays, who lack modern stadiums or their own cable TV networks � factors that should enable the Mets to spend more freely. Instead, their 2014 payroll � somewhere short of $90 million � is not much different from last year�s. Yet the team is approaching this season with significant holes in its lineup that could have been addressed through free-agent acquisitions and might have improved the Mets� long-shot chances to contend for a playoff spot. The payroll modesty continues even as the Mets � and the 29 other major league teams � will receive equal portions of new television contracts whose annual average payments are doubling this season to $1.5 billion from $750 million, and despite the recent refinancing of a $250 million loan, at a lower rate, that removes the pressure the Mets were under to repay it in full later this year. But even as money is looser and banks are no longer huffing and puffing at the door of the Mets co-owner Fred Wilpon, the Mets seem to be staying cautious about spending. A sparse crowd at Citi Field for a game last June. Last week, General Manager Sandy Alderson said the team�s plan was �a consequence of trying to be somewhat prudent about the money we spend.� Later, he added, �Our goal is to spend money and add payroll every year, not just once every so often, as has been the case the last three or four years.� It is understandable that Mets fans are restless and frustrated with this approach. Five consecutive losing seasons followed the revelation that Bernard L. Madoff�s multibillion-dollar swindle had devastated the finances of the Mets� owners. Two years ago, the Mets settled a lawsuit filed by the trustee for Madoff�s victims that had sought as much as $1 billion, accusing Wilpon and others of being willfully blind to warnings that Madoff was engaged in wrongdoing. With that chapter closed, fans expected the Mets to again pursue elite players. Instead, the Mets have continued to stoke suspicions that they remain financially strapped. �When are we going to shake off the Madoff hangover?� Jack Webb, a Mets fan who grew up in the Bronx and lives in Jacksonville, Fla., said at a spring training game last week. �I think they are holding off. They have a fiduciary responsibility to spend money. If it�s about the money, sell the team.� His son, Eamon, added, �How long are you going to be a second-rate team in your own city?� The Mets� front office has inadvertently fueled fan frustration with statements about improved financial health that, in retrospect, seem to have been overly rosy. At spring training last year, Wilpon said that the financial pain of the past was over and that real estate, the basis of his wealth, had turned �zimmo.� Soon enough, he promised, �the payroll will be commensurate with anything we�ve ever done, because we can do it.� Seven months later, Alderson declared that in 2014, �we will have more payroll flexibility than we�ve had since I�ve been here.� But the flexibility that fans have seen amounts to reinvesting about $40 million in contractual obligations that came off their books after last season � the biggest item being the $25.5 million paid last year to the injured left-hander Johan Santana � in three new players. The Mets signed the slugging outfielder Curtis Granderson for $60 million over four years; the 40-year-old starter Bartolo Colon for $20 million over two years; and the veteran outfielder Chris Young for $7.25 million for one year. But that was it, although the roster could clearly use more help. Alderson said: �We�re trying to ladder our obligations so we can be in the market every year.� The Mets would not respond to any specific financial questions. The decision to remain prudent and not risk any of the new national TV money means two gaping holes are left in the infield. By not pursuing a credible free-agent first baseman like James Loney, who ultimately re-signed with the Rays, the Mets have chosen to stick with the underachieving Ike Davis and Lucas Duda. By not signing the free-agent shortstop Stephen Drew, who has evidently priced himself out of the Mets� range, they are left with the disappointing Ruben Tejada. If the Mets appear to have a definable strategy, it is to build around pitching. Wilpon and Alderson envision the rise of a young, inexpensive staff that could be a dominant force for years. But for that to happen, Matt Harvey has to make a successful return from Tommy John surgery in 2015; Zack Wheeler has to build on his impressive rookie season; and the very promising minor leaguers Noah Syndergaard and Rafael Montero must show they can excel in the majors. Until then, the mainstays will be the ancient Colon, the young veteran Dillon Gee and the effective, but fragile, Jon Niese. Perhaps Wilpon will not resume the aggressive spending of past years � the Mets� payroll peaked at nearly $150 million in 2009 � until the pitching staff becomes an attraction that makes the team a contender and brings fans and revenue back to Citi Field. The banks that are refinancing the $250 million loan will probably appreciate the Mets� safe spending. Banks routinely refinance loans to sports teams that are seeking lower rates or additional money, and the Mets got the better rate from a syndicate of banks that was larger than the previous one � an indication that the team�s financial state has improved. In recent years, the Mets needed short-term bridge loans to finance losses and to provide working capital; the owners then had to sell shares to limited partners to raise money to repay the bridge loans and some of its longer-term debt. Brad Rangell, a former managing director of Citi Private Bank�s sports finance and advisory practice, said that when lenders assess whether to refinance a team�s loan, they look at the �overall credit quality of the team, the owners, and the track record of ownership actually doing what they said they were going to do: Have they met projections? How do they react when things go wrong?� According to two people briefed on the terms of the Mets� refinancing, the responsibility for making sure it is repaid will shift from a Mets holding company to Wilpon and Saul Katz, a co-owner and Wilpon�s brother-in-law. The banks required that they put up more collateral, provide personal guarantees of repayment and sign an ownership support agreement that compels them to use whatever assets are necessary to make sure the loan is paid. Ownership support agreements have become more widespread in baseball since the recession and the bankruptcy of the Texas Rangers. The banks did not impose a salary cap on the Mets as a condition of the refinancing, but, as a practical matter, they did not have to. Raising payroll sharply to lure expensive free agents before attendance recovers is a formula to generate the sort of steep losses that peaked at $70 million for the Mets in 2011. Meanwhile, the drop in average attendance at Citi Field to 26,366 last season � it has fallen by 32.5 percent since the stadium opened in 2009 � has created a predictable downward spiral of ticket, parking and concession revenue. There are no public profit-and-loss statements available for the Mets that would show the impact of selling fewer and fewer seats at the 42,000-seat ballpark. But a partial snapshot of Citi Field business � which excludes revenue from more than 30,000 seats and player payroll � is available in reports that the team files annually because the ballpark�s tax-exempt bonds were issued by New York City. Those documents show that revenue from the stadium�s 10,635 most expensive seats has fallen 58 percent, to $41.8 million from $99.3 million in 2009. In that period, concession sales have decreased 29 percent and parking revenue has dropped 20 percent. Luxury suite revenue inched up a bit to $8.9 million in 2013, but about 10 of the 49 suites � which initially rented for as much as $500,000 a season but cost more each season � are essentially out of circulation; they were given to the limited partners whose investments in 2012 helped repay some debt. The Mets could be hurt by not being able to rent those suites if the team�s fortunes turn positive, and also by any loss of suite holders who did not renew their rentals after their leases expired last season. (Lease lengths vary.) Jodi Hecht, an analyst for Standard & Poor�s, said she had projected a drop in the 2014 cash flow earmarked to make the annual debt payments of about $43 million. The rating agency reaffirmed its BB rating � two levels below junk � of Citi Field bonds last December. But the agency lifted its formerly negative outlook on the bonds, based on the belief that cash flow will eventually stabilize. In the stands, a negative assessment may persist. The Mets have won no more than 79 games in any of the past five years. �They can�t spend enough,� Steve Attias, a Mets fan from Syosset, said during a game at Port St. Lucie last week. �You can�t expect to be on the back pages in New York if you�re not spending.�

http://www.nytimes.com/2014/03/28/sports/baseball/looking-adrift-at-citi-field-mets-keep-their-wallet-closed.html?_r=0

[Vic Sage]

while i agree with the basic premise (that the Mets payroll is not consistent with a team playing in the largest media market, that owns a regional sports network and a new stadium, and is largely due to their continuing sketchy solvency post-Madoff *), there is so much that is stupid here.

The Wilpons don't have a fiduciary obligation to "spend"; their obligation is to do their best to field a team that has a chance to win. We have seen too many examples of teams that have spent and failed (including here), and teams that have kept budgets down and won. So spending is a means, a tool, not an end in and of itself.

And the notion that buying mediocre players like Loney and Drew would have been the difference between the Mets being a championship-caliber team this year and not, or even that such signings would have won back their fans, is just laughable. As is the notion that they can't "win the back pages in NY without spending." You win the back page by winning. And winning the back page should not be the goal; it's a side effect.

And you don't usually win by overpaying mediocrities; you win by having more talent on your roster, in its prime, than the other teams... and you use whatever resources you have to acquire such talent [draft picks, prospects, international scouting, FAs, trades]. The smarter you are about allocating those resources, the longer you can keep your roster filled with that talent. While i trust Sandy to allocate the resources, i don't think he has as much at his disposal as he should, and i blame that directly on Freddie and his borderline dealings with suspect investments which have drained the team of revenues it would otherwise have had.

* a franchise that is valued in the top 10, with a payroll in the bottom 10, is the very definition of this problem

[Ceetar]

Also it's almost always wiser to spend in increments than all at once. This is the criticism the Blue Jays and Marlins caught recently.

tpgmets wrote: The payroll of the Mets' active roster peaked at around $42M last year. That's the most they had on the field.

They're going to top that on Opening Day. They HAVE spent. Not saying they don't still have plenty of financial issues and that one year of Ervin Santana or Stephen Drew at a crazy price (if that was ever on the table) wouldn't help, but just because you can start spending again doesn't mean you should definitely give Drew a 3-4 year deal at an overvalued cost, particularly given the current state of the team.

The pictures in that post annoy me. "Hey look, garbage! what am I trying to say here?" and "Let me cherry pick a section or two to really make the attendance look bad" I mean, plenty of people in that picture have jackets on, and we had some cold and rainy nights in June. Is that representative of the average Mets crowd? no.

[ashie62]

Vic Sage wrote: while i agree with the basic premise (that the Mets payroll is not consistent with a team playing in the largest media market, that owns a regional sports network and a new stadium, and is largely due to their continuing sketchy solvency post-Madoff *), there is so much that is stupid here. The Wilpons don't have a fiduciary obligation to "spend"; their obligation is to do their best to field a team that has a chance to win. We have seen too many examples of teams that have spent and failed (including here), and teams that have kept budgets down and won. So spending is a means, a tool, not an end in and of itself. And the notion that buying mediocre players like Loney and Drew would have been the difference between the Mets being a championship-caliber team this year and not, or even that such signings would have won back their fans, is just laughable. As is the notion that they can't "win the back pages in NY without spending." You win the back page by winning. And winning the back page should not be the goal; it's a side effect. And you don't usually win by overpaying mediocrities; you win by having more talent on your roster, in its prime, than the other teams... and you use whatever resources you have to acquire such talent [draft picks, prospects, international scouting, FAs, trades]. The smarter you are about allocating those resources, the longer you can keep your roster filled with that talent. While i trust Sandy to allocate the resources, i don't think he has as much at his disposal as he should, and i blame that directly on Freddie and his borderline dealings with suspect investments which have drained the team of revenues it would otherwise have had. * a franchise that is valued in the top 10, with a payroll in the bottom 10, is the very definition of this problem

I agree and personally believe not much will change until the team changes hands...

[Edgy MD]

Much of what, though? Much has already changed.

[Guest d'Kong76]

But, knowledge is good!

[ashie62]

Edgy MD wrote: Much of what, though? Much has already changed.

Not an increase in spending and payroll

[ashie62]

d'Kong76 wrote: But, knowledge is good!

Kase... you still have that plate in your head....

[Edgy MD]

Ashie62 wrote: Edgy MD wrote: Much of what, though? Much has already changed. Not an increase in spending and payroll

Well that has changed downward extremely.

But the confusion of spending with success --- why doesn't that change?

[ashie62]

Truthfully.....I don't know...I am used to big is better but the A's win the AL west with regularity...

Tough call...

Later...

[Guest Mets Guy in Michigan]

But there weren't many grade-A free agents this year worth spending on. Overspending to make a point is how we get stuck with crappy players. Is Choo really the kind of guy you and to spend that kind of money on? The Mets spent a ton of money keeping David Wright -- as they should have.

Let the Yankees overspend on a gimpy Jacoby Ellsbury and risk $100 million on a guy who has never thrown a pitch in the Major Leagues.

It seems like Sandy is building the team through the farm system, and we're building a rotation that could be the envy of the league.

[Edgy MD]

metsguyinmichigan wrote: Overspending to make a point is how we get stuck with crappy players.

And crippling budget shortfalls.

Sing it to the rafters.

[ashie62]

Like most things it comes down to investing as wisely as possible... There is more than one way to do it in baseball and it is speculative.

I'm sure the Dodgers, Tigers and Angels would present a case on why they believe these lengthy contracts are in their best investment interest....

[Guest Mets Guy in Michigan]

Like most things it comes down to investing as wisely as possible... There is more than one way to do it in baseball and it is speculative.

Where there any players available this past offseason who you thought was worthy of a big contract? I sure don't.

[batmagadanleadoff]

Last year, Blomberg said two billion. Last week, Forbes said 800 million.

http://www.forbes.com/teams/new-york-mets/

Profile The Mets had their fifth-consecutive season below .500 in 2013 and have not made the postseason since 2006. The debt-laden team cut its payroll to $87 million last year and attendance fell an average of 1,500 a game at Citi Field to 26,696. The team was stung by the mid-season injury to pitching sensation Matt Harvey that shut him down for the season in August and will likely force him to miss the entire 2014 campaign.

____________________

Forbes: Mets Franchise Value Continues To Decline

Forbes has released their list of franchise values of each Major League Baseball team. The Mets ranked ninth with a value of $800 million, just behind the St. Louis Cardinals ($820 million). The Yankees top the chart, coming in at $2.5 billion. This is the 17th year that Forbes has released this list, and the Yankees have risen in value and topped this list each time. The outlook for the Mets according to Forbes, is not quite as good. Only three teams fell in value over the past year: the New York Mets, Houston Astros and Miami Marlins. The Mets, down 1% to $800 million, are still going through a period of austerity with an $85 million payroll after the Bernie Madoff debacle. Attendance at Citi Field has fallen for five consecutive years. The team refinanced $250 million of debt and is no longer taking on water under the leadership of GM Sandy Alderson. Coming in second, with a value of $2 billion dollars, is the Los Angeles Dodgers. Other billion dollar franchises include the Boston Red Sox, Chicago Cubs and San Francisco Giants.

http://metsmerizedonline.com/2014/03/mets-stock-continues-to-fall.html/

____________

If you ask me, I'd say that I'll know what the Mets are worth when the Wilpons sell.

[ashie62]

metsguyinmichigan wrote: Like most things it comes down to investing as wisely as possible... There is more than one way to do it in baseball and it is speculative. Where there any players available this past offseason who you thought was worthy of a big contract? I sure don't.

Not offhand....

This player was not available..but if the Angels erred with Pujols they took a step forward with the Trout deal....

[Edgy MD]

Last year's prove-you're-at-least-serious guy was Michael Bourn. They walked away, let him sign a two-three year deal at $13 million per, and they instead got pretty much most of what Bourn offers out of Eric Young in a trade that was almost a waiver claim.

All this ink is spilled over and over, but it seems easy to see what's going on strategically: hold the line as much as possible on spending until they can build a good enough product to get in the black. They start being able to pay down organizational debts without cutting into the principle, then spending more aggressively will become more viable.

It's not money lost on Madoff investments that's ever been the issue. It's the end of the lie of false income from those investments that they've always believed was covering reckless investments. They've got to spend honestly now and when they spend more, they'll have to spend that honestly too. It's refreshing in it's own stupid way.

I'm just not sure how many other ways there is to honestly write it up. It's maddingly boring how folks have made this ongoing Waiting for Godot sequel out of it.

[ashie62]

A nice start by the Mets that rolls along will bury this thread to about where it belongs....

[batmagadanleadoff]

Mets Finances are in Tip-Top Shape. Nothing to see here.

Bud Selig is not at all worried about the Mets� finances:

excerpt

I�ve said this repetitively � I have no concerns about the Mets. I have no reason to have any concerns. Why should I have? That�s the whole point . . . I�m very optimistic about what they�re doing. The only people telling me to have concerns are people who don�t know and haven�t seen any facts . . . I don�t understand these stories because I have all the economic facts � nothing to support (the team is hemorrhaging money). Major League Baseball has all the economic information. This idea that I should have reason to be concerned is just wrong.�

[Ceetar]

I know people want to believe the narratives but he's right, he knows more about the finances than anyone else that's written about them.

[batmagadanleadoff]

Ceetar wrote: I know people want to believe the narratives but he's right, he knows more about the finances than anyone else that's written about them.

[fimg=444]http://img139.imageshack.us/img139/4944/omgwtfeyes.gif[/fimg]

[Ceetar]

although most of the public information also confirms that they're not hemorrhaging money anyway.

[Guest d'Kong76]

[fimg=444:fgl75wpu]http://img139.imageshack.us/img139/4944/omgwtfeyes.gif[/fimg:fgl75wpu]
I just tried a couple of times staring at this over and
over. Longest time I could go without laughing was 16
seconds. She's a keeper.