Cubs might be looking for a home equity loan

It was recently confirmed that the Cubs are exploring selling non-controlling minority  shares of the team to fund the upcoming $5oo million Wrigley renovation. Ricketts said, “Most teams are owned by dozens of investors. It’s unusual for anyone to own 95% of the team. We’ll look at whether or not that fits for us.” (George Steinbrenner started with about 50% of the Yankees and eventually got to 70%)

Cue the internet muscle flexing. (I made these up, but you get the idea.)

“They’re running this franchise in to the ground!”
“Can’t the greedy billionaires just pay for it themselves?” 

Put simply, no. They can’t. I won’t dig in to debt load, EBITDA or the Tribune ownership transfer details. There are more business savvy sources for that information.

Here’s an analogy that works in my head. Tom owns a historic home valued at $120,000 (Cubs are worth $1.2 billion according to Forbes). He owns 95% of the home and 5% is still financed with his bank. Excluding other debt, Tom’s net worth is $114,000. He’s doing alright.

Suddenly, the furnace quits, there’s a leak in the roof, and the neighbors are stealing his cable. It was a bad week for Tom. He figures while he’s fixing all that he might as well add another bathroom and a guest bedroom. All that is going to cost $50,000. Tom is “worth” more than twice that much, so why doesn’t he just pay for it himself? Because he’s only got $20,000 in cash. He needs to get the other $30,000 from somewhere else. So, he heads to the bank for a home equity loan. The goal is to pull the $30k he doesn’t have out of the value of the house to put back in to the house.

At the end of the day Tom now owns 70% of his house. He’s still calling the shots. The bank doesn’t care what kind of furnace he buys or who he hires to fix his roof. They aren’t going to tell him what color to paint his walls. Their only interest is in making a little money off of Tom.

This is just a surface level analogy, but my point is to illustrate that this is not a sign that the Ricketts’ are losing it or that they don’t know how to run their business. They’re just exploring every possible avenue to get the renovations financed and underway.

 

Kurt

Kurt Tucker is the greenest Cubs fan of Ivy Envy. Always a follower, but not a diehard until ’98. He’s been all in since those days at Illinois State University watching the playoff push surrounded by Cubs fans.

Outside of Ivy Envy, Kurt is a graphic designer and has way too many hobbies. Brewing beer, playing banjo, golf, motorcycles, makin’ stuff. But the truth is all the hobbies get set aside when it’s time to play trains with his son.

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