want to know how MLS is REALLY doing?

The team itself sold for around $25-30 million, check your facts.

 

While I agree with your general thesis (focus on the franchise fees and $ sale price), one has to factor the $$ losses into the equation. That is sunk cost for an owner.

Happily for AEG, those losses (on NYC franchise) only extend back a few years...(since they've only owned it, what, 3 years?) And there is always the tax writeoff bennies..

 

Actually, too...we really can't call it a 'market'. There is no marketplace. However, it is very encouraging to see the gaggle of folks coming out of the woodwork around the country (vs. 3-4 years ago, when seemingly NO ONE was interested in buying any franchise anywhere)

 

Why do you say there is no marketplace? Anyone who wants an expansion team can have one. Anyone who wants to buy the Wizards, or DC United, or (probably) the Chicago Fire, can. It's truly an open market. Drop the coin, and you can have a team, named whatever you want, placed wherever you want. [For reference, see: Checketts, Dave.]

 

It is a inefficient market at best. Limited buyers/limited sellers. That means valuations can fluxuate wildly, and you can't rely so much on one data point, one sale in valuing franchises. It takes months to 'sell' something.

Compare that to a more liquid market (let's say the stock market) in which you can sell from one minute to the next, and get a consistent price (not fluxuating too too wildly in most cases).

 

I am pretty sure you have both numbers wrong.

~$15 million was the buy in for the initial owners.

And the team sold for $~30 million. That accounts for about 7 % growth per year, which probably did not even come close to covering the losses incurred over that time period.


Red Bull is also investing another ~70 million into SUM, the new Stadium and a league wide sponsorship deal.

Andy

 

With analysis like this, I can only assume you are an accountant or financier.

 

Marketplace implies liquidity and rapid transactions...lots of buyers and sellers..

We are mostly into semantics now. I think we all agree that things have gotten better for MLS (financially, and strategically- business plan). The actual $ amount is subject to debate, but the change in direction really isn't.

And just when I got comfortable with that last statement (oh, about 9 weeks... ), in walks Dieter and his drinks..

 

Thats what I though too but I was having a hard time confirming that.

The only 5 million reference I could find after a short google run was the 5 million that the USSF "loaned" to MLS to help it get off the ground in the early days.

And sadly, before I even finished typing this part, one now have to give serious wonder how much Red Bull is going to invest in a stadium with the latest rumor of them pulling out of Harrison.

Andy

 

I can't imagine that their 50% stake in the stadium isn't contractual. I assume they could pull out, but in doing so, breach their investment agreement.

I think the entire $100m investment shows the value than an MLS team can create. Yes, it does represent an interest in the stadium and the naming rights, but would the stadium and the naming rights exist independently of the MLS team? (note: this is a different question of whether SSSs could exist independently of MLS-- here, the question is whether they'd have been built in the first place...)

 

Hmm 250-300% return in 10 years ILL take it

 

as would anyone if that were the true return.

Once you factor in the millions and millions of $'s the Metros lost in their first decade, you would be lucky to break even which after 10 years of investing is akin to a terrible failure.

Andy

 

Actually, many of you are talking about the value for half the team. Remember AEG only sold 50% share. So to find the value of the team, double what Red Bull paid. Even if they paid 30 million, the total team value would be about 60 million. Many of you are talking as if AEG has no stake in the team anymore.

 

I think that the original poster was more right than any of us suspect. Yes the deal included the stadium deal which is still a lot of moving parts, and yes there have been losses for the past decade, but how is that different from the NFL or MLB. Those owners claim huge losses every year (for a nifty write-off), continually beat up their municipal partner, watch league sponsorship/advertising dollars climb and then sell it all off at a huge profit to some other guy who thinks its a bargain.

And for the record, "market" or "marketplace" does not imply liquidity or quick transactions. For those of us working in real estate, the market can be fickle, either slow or fast, climbing, dropping or flat. Just because your commodity doesn't have a ready buyer at your price, 24/7 doesn't mean there is no market. MLS will outgrow the single entity when the market dictates, and the investors that get in sooner than later will make a killing. These stadiums are just real estate plays with tenants that are more stable than they were in 1996.

 

There's been other big deals; Checketts franchise fee, deal with Addidas, transfer fees for players like Ralph, Bocanegra, Convey, Beasley, etc., Toronto expansion fee

 

Wait until St. Louis or Cleveland join in 2008. $15 million expansion fee. Toronto only had to pay $10 mil. I'd better get my winning lottery ticket soon so I can still afford a team for myself!