PLAN ‘KIND OF CRAZY’ | Trib chief not sold on maverick financing deal
May 13, 2008
BY FRAN SPIELMAN AND DAVID ROEDER Staff Reporters
Tribune Co. Chairman Sam Zell has rejected former Gov. James Thompson’s secret plan to acquire and renovate Wrigley Field for at least $400 million without raising taxes and now plans to package the Cubs and their landmark stadium in a private transaction, sources said Monday.
Together, the Cubs and their real estate could command $1 billion, based on recent sales of professional teams. Zell opened talks with Thompson, chairman of the Illinois Sports Facilities Authority, in hopes that selling Wrigley to the state would make the team more valuable.
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But sources said Zell has rejected the state’s proposed terms because it relies on a novel and untested financing plan: the sale of individual seats at Wrigley as if they were condominiums. The idea is called equity seat rights and has been advanced by Chicago area business executive Lou Weisbach, who has applied for patent rights on it.
Zell, Cubs Chairman Crane Kenney and their advisers have concluded that the equity plan and its tax ramifications would violate both the Internal Revenue Service code and the rules of Major League Baseball, the sources said.
They said Thompson’s plan called for selling several thousand seats to raise money for ballpark renovations. The purchase of the ballpark could have been covered by state bonds backed by future ticket revenue.
But the plan could have driven away potential buyers of the franchise. The next Cubs owner could have been denied revenue from the best seats in the house.
“It’s not a matter of, is there enough money in it for the Tribune Co. This plan violates so many rules that the parties have to live under, it doesn’t even get to first base. It doesn’t even have a chance to succeed,” said a source familiar with Thompson’s plan.
Another person close to a bidding group for the team said, “From what I understand, the state’s offer was getting kind of crazy. It was creating complications for the next owner of the team.”
Zell needs to sell the franchise to help him retire about $13 billion in debt left from his buyout of the company last year. He has less pressure to sell the Cubs quickly because he’s agreed to a $650 million sale of Tribune’s Newsday newspaper serving Long Island, N.Y.
Equity seating requires fans to sign a long-term contract to buy a specific seat for a price that’s either fixed or rises in an agreed-upon way, much like a fixed- or adjustable-rate mortgage.
The sports facilities authority, which owns the home of the Chicago White Sox, could have used the cash up front for renovating Wrigley. A Sun-Times analysis based on season-ticket prices showed that the sale of about 8,000 seats, or 20 percent of the total, could raise more than $300 million, about what Zell has told insiders the ballpark needs in improvements.
Fans love the scoreboard, the ivy and the views into the neighborhood, but they carp about outmoded concessions and restrooms. Any owner would want to add skyboxes to the upper deck.
The financial books on the Cubs are being reviewed by the office of baseball Commissioner Bud Selig. If Major League Baseball approves the offering, it will forward it to groups it has approved for bidding. One said to have the inside track is a partnership headed by John Canning Jr., chairman of Madison Dearborn Partners LLC and a Selig friend.
Competing bidders include Dallas Mavericks owner Mark Cuban and J. Joseph Ricketts, founder of TD Ameritrade.
Thompson said Monday he was still waiting for a formal response to his no-tax plan and would have nothing to say until he gets it. A spokeswoman for Zell declined to comment, and Selig’s office did not return calls.
The former governor dropped a plan to use sales-tax revenue to finance the ballpark purchase. The idea had support from Tribune executives but drew widespread public criticism as a tax-subsidized gift for Zell.