Earlier this month, just as the Pacific Coast League regular season schedule was getting underway, a flurry of articles appeared. Led by the Wall Street Journal, reports of a potential breakthrough in resolving the ongoing unsettled financial status of the Memphis Redbirds and AutoZone Park caused considerable excitement.
The St. Louis Cardinals had re-engaged in negotiations to purchase their Triple-A franchise and operate it themselves. It would be an extension of the successful model the organization has in place at Double-A Springfield.
In fact, Memphis media personality Rob Fischer tweeted on April 3 that the Cardinals were “close to striking a deal to purchase the Redbirds” and that talks were “moving quickly.”
Yet, nothing visible has occurred since. The reasons appear to be at least two-fold.
First, AutoZone Park is not part of the proposed purchase by St. Louis. The ballpark is source of the problems that got the owner of the club, the non-profit Memphis Redbirds Foundation, into financial trouble. The City of Memphis would need to buy the ballpark and those approvals are not in place.
Second, the majority of the stadium’s 47 luxury suites are on lease agreements that will not be up until the end of the 2014 season, according to the Memphis Daily News. The suites represent a significant revenue stream to a new purchaser.
There is motivation, however.
While the Foundation still owns the team, it continues to fight a losing battle with its finances. Its bond payments are not covered by accrued interest, so its balance due continues to increase annually.
Fundamental Advisors LP, headed by 44-year-old chairman and chief executive Laurence Gottlieb, is in control of the team and ballpark. In late 2010, the private equity firm specializing in distressed debt purchased $58 million in defaulted municipal bonds on AZP for about 42 cents on the dollar, reports the Journal.
For that important reason, Fundamental is front and center in the sale negotiations.
The proposed deal, as explained by the Journal, would be complicated.
To purchase the stadium from the non-profit Foundation, the City would need to issue bonds to borrow money. The proceeds would be used to pay off Fundamental Advisors, which is reportedly looking for a 15 to 20 percent return on its investment.
To pay for the new bonds, the City would collect sales tax from the stadium and lease payments from the new/old tenant, the Cardinals/Redbirds. It is not clear if higher taxes would be required and if so, how much.
While the signals are encouraging, it could require another year or two for this delicate dance to complete. The primary risk would appear to rest with the citizens of Memphis, which means this is far from a done deal.