Mark Walter and his investment partners, including Magic Johnson, bought the Dodgers on April 30 for $2 billion. That seemed exorbitant, but Walter said that was the price he had to pay for a life-changing opportunity.
“I don't want to realize a return on investment on buying the Dodgers,” he told the New York Times.
If that was his goal, he's off to a brilliant start. Forbes today estimates that the Dodgers are worth just $1.4 billion. That's a return on investment of negative 30 percent in just 11 weeks.
Forbes doesn't explain exactly why they think Walter overpaid Frank McCourt by $600 million.
They do note that the owners expect to cash in big-time when the TV contract comes up for renewal. That's true enough, but even with that factored in, the other bidders were not willing to go much beyond $1.5 billion. So either Walter sees value that nobody else can see, or he overpaid.
Presumably he intends to unlock value by developing the parking lots — though, being from Chicago, perhaps he underestimates just how difficult it can be to build anything in California. He'll also have to split the proceeds with Frank McCourt, who managed to cling to half-ownership of the parking lots in what has to be the greatest real estate deal since Harry Chandler bought up the San Fernando Valley.
Asked to respond to the Forbes estimate, Dodgers spokesman Joe Jareck said, “We have no comment.”
Irwin Raij, who advised the buyers on the transaction, did shed some light on the process in an interview with Forbes last week (posted below). Raij said it took his team several months to sort through the whole thing, and the last month was a dead sprint to meet the closing deadline.
“The last two weeks we were working 22 hours a day in a conference room in Los Angeles, barely eating, and trying to enjoy the moment, but really it's stressful,” Raij said. “It was a nonstop event. So it was challenging. I will say at the end it was pretty emotional.”
Why emotional? Buyers' remorse?
“To be a part of the largest sports transaction in the history of sports, it's something special,” Raij said. “It's something my team is proud of, my firm is proud of. We really were emotional.”
If their fee was a percentage of the deal, you can see why they would start to well up.
So why $2 billion?
“For us it was based on facts, information we could gather on the franchise, and what we believed the future of the franchise would be,” Raij said.
So that clears that up. Watch: