By: Holly Horning
What’s the most obvious way to calm and reassure the potentially unsettled thoughts of the fans? It would be to contact the local journalists with stories that flood all the papers at the same time.
Which is why we’ve been inundated over the weekend with a whopping 5 stories from just 2 newspapers about how much Chris Ilitch loves the Tigers. Loves them too much to sell. Even a feeble argument explaining that he won’t sell because he volunteers for his son’s baseball team. That is supposed to be proof of his love for the game and a big reason why he won’t sell the Tigers. Then again, maybe he’s just being a great dad.
Interviews that covered the heartfelt and warm stories but lobbed nothing beyond softballs about his plans.
But here’s the deal. Chris is a smart, savvy, accomplished businessman. He’s got an MBA and years of experience helping to run the family businesses. He’s not going to keep one of the biggest chunks of the family industry based solely upon sentiment. He’s going to make a thorough, informed decision. That’s the family m.o. and the biggest reason why the Ilitch family is worth as much as they are.
First, let’s understand why these stories are being lobbed out to the public more than a coach assigned to pitch batting practice.
It’s only natural that when a long-time owner passes, fans and others alike start to wonder what changes will be made. They wonder about whether the team’s performance will slip. They wonder if the Tigers are headed into another dreaded era of bad play. They wonder whether they should renew their ticket packages. And they wonder if they should attend as many games this year as they did in 2016.
And that’s the primary goal of all these stories. Calm the masses. Reassure the public. Keep a steady hand on the attendance. Practice a “business as usual” or “all is well” policy. All because change is hard for most to handle. One whiff of rumor is enough to send some people running away.
But the message being sent isn’t solely for the fans. It’s for the entire Tigers’ organization, too. It’s important to keep the players focused on this year instead of allowing them to contemplate their potentially changing futures. A stable organization, with minimal change, is the best way to convince employees and players alike to stay happy and focused on the prize. And it’s a smart move by the family. The journalists are just the medium to get the message across.
So what will Chris do? Let’s start with what we know.
It appears that Marian is now highly unlikely to sell her casinos, esp. given that profits in this industry are soaring and owners are expanding, not selling. And estate taxes are only avoidable if the team is left to the spouse. This is why the team was put into a trust which became viable upon Mr. I’s passing. Done to help mitigate as much of the estate tax bill as possible because Marian cannot and does not want to inherit the team. However, she can still be the beneficiary.
The Tigers are now 1 of 3 teams in MLB owned by a trust. Technically, the Ilitch family no longer owns the team, however Chris is the lead trustee. He has the power to run the team as long as the majority of trustees side with him.
The next big hurdle will be the IRS’s valuation report which will put a price on the Tigers. That valuation, usually a sticking point with most owners of sports teams, is based, in part, upon the value of the team when it was put into trust (date unknown) and allows the family to be shielded from some of the tax assessed. It’s not an easy process and most families battle the IRS for quite some time over the final figures. Should the estimate be viewed as excessive, selling the team will get the family out from under.
Estate taxes generally take 40% of the estimated value of a team. However, given that the Tigers were placed in a trust, that figure will be lower. Unfortunately, the initial offer to buy the lowly Marlins by the Kushner family will not work in the Tigers’ favor. As the second from the bottom in MLB team values, the Marlins had a bid of $1.6 billion. Expect the Tigers’ valuation to be much, much higher as a result. Way more than the value Forbes placed on them and as such, the tax bill may be eye-popping.
Combine that with the increasingly visible relationship the Ilitch family has with Tom Gores. He’s now a business partner in the new arena. And within the past year, he hired a sports attorney who specializes in the selling and buying of professional sports teams. The same attorney who has close ties to the Ilitch family. Also within this time frame, Steve Greenberg (Hank’s son and former MLB Deputy Commissioner and now top dealmaker specializing in sports and media), was hired to oversee the financials of a big project. Greenberg had very close ties with Mike Ilitch.
So given all of this, how likely will a sale of the team be on the horizon? If you are like me, you may resort to that infamous two-column approach to see just how much support there is for each argument.
REASONS FOR CHRIS TO KEEP THE TEAM
1. As a tribute or promise to his father
2. Tigers still considered as one of the better teams in MLB
3. Team has been viable in the standings
4. Possible favorable estate tax ruling
5. Downtown centralization of all Ilitch holdings
6. Rejuvenation of downtown area resulting in more traffic (District Detroit)
7. TV contract set to renew in 2018
8. Possible development of an independent media broadcast company between Tigers, Pistons, Red Wings and new soccer team.
9. Healthy attendance
10. A feeder for all the other Ilitch companies.
REASONS FOR CHRIS TO SELL THE TEAM
1. Focus on new Red Wings arena
2. Interviews, lifelong hockey player (including amateur team) and youth hockey program proving this sport is his first love
3. Significant cost overruns on new projects
4. Needed capital to finance new and existing projects and loans
5. Aging Tigers team expected to drop in performance in coming years
6. Trade pipeline being cut off due to trends showing teams are not trading top prospects and pouring money into their farm systems instead
7. A farm system that may take years to rebuild
8. Partnership with Gores and his hiring of Ilitch advisors
9. Unfavorable ruling by IRS re estate taxes with selling as the only answer
10. Historic trend of families selling the team upon the passing of an owner
11. Some of the biggest contracts that will make aging players untradeable
12. Possible development of an independent media broadcast company between Tigers, Pistons, Red Wings and new soccer team which would still include profits to be made since they own the Red Wings.
13. A downturn in 2017 in the performance of the team including failure to make the playoffs
14. Buy low, sell high. Have the Tigers reached their peak performance and attendance?
15. A Gores partnership that will still allow the Ilitch family to profit from food and service deals
16. New and existing yet incomplete projects that will take up too much time.
17. Payroll that continues to exceed revenue. (In 2015, there was only $11 million income from $268 million revenue due to high payroll.)
18. It is a seller’s market.
Can you add to these lists?
There are hints that something is in the works. But is Chris sold on selling the team? If so, is there a timeline? Or is he taking a wait-and-see approach? Whatever the case, this is not going to be a fast or easy project. Big deals take a good amount of time, especially when you factor in the legalities associated with the IRS.
But one thing is certain. Don’t expect a sale to happen during the baseball season. This is best played out after the last pitch has been thrown.
If you’re not following us on Twitter (@totallytigersbb), here’s just some of what you missed the past couple days:
Ian Kinsler’s argument for retiring #1 and #3
Miggy is the team leader for Venezuela in the WBC
JV’s fastball is still there in MPH
A Michigan family who just may be interested in buying the team down the road
The Dodgers interest in Kinsler and JV and why it didn’t happen
Miggy’s impressive work ethic
And stats, rankings, radio interviews and video! We’ve rounded it all up to keep fans informed!
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