If you were away from social media yesterday, you’re waking up to news that the Washington Nationals made public that they are exploring with investment bankers a possible sale of the team but also the possibility of bringing in minority investors. It is a divergence from 2018 when Mark Lerner took over team control from his father and said they had no plans of selling the team. But you win a World Series then can’t really celebrate with a worldwide pandemic followed by an MLB lock-out a year later, and you have to wonder internally, what changed?
This could go terrible and people might actually see what a bad baseball owner is https://t.co/vV5G7Nz3yf
— Nationals Source (@NationalsSource) April 11, 2022
The Lerners gave no reasoning why they would think about selling, and this could be more exploratory to see how close they could come to getting -or- exceeding the $2 billion that Forbes valued the team at. Many owners have sold off chunks of their team to pay off all of their debt, and pocket the rest of it as cashflow for a rainy day. The reminder of what the pandemic caused was the stark reminder to many teams that they were leveraged too much.
There is great pressure on the ownership with issues they can control, and some that they cannot.
- Two consecutive losing seasons going into 2022 as the team rebuilds
- Attendance is down
- The pandemic took its toll
- Juan Soto did not accept the $350 million contract offer, and may not accept the next offer
- DC crime is up
- Questionable long-term contracts for Stephen Strasburg and Patrick Corbin
- MASN is still unresolved going into the second decade of the legal wranglings
- Nats Park turns 15 next season
Two consecutive losing seasons going into 2022 as the team rebuilds
After winning the World Series, the Nationals stumbled and fell in the pandemic shortened 2020 season. While they could have bought at the trade deadline and competed for the division in 2021, they decided to officially going into a “re-tool” as general manager Mike Rizzo called it — but let’s face it, this is a rebuild. It should be a short one if some young players emerge as future stars coupled with Rizzo signing some key free agents, and an extension of Soto’s contract which we called as Priority #1 of the off-season we just emerged from.
Attendance is down
The Nats did not even sell-out on Opening Day. Sure, the weather was horrible as we have seen too often during the Nationals schedule, but still, 35,052 fans with 7,000 no-shows does not give much confidence for the months to come. Attendance hurts the revenues, and the team’s cashflow. They did get 105,000 paid for the entire first series of the season, and merch sales have been strong for the new City Connect jerseys. But the team had zero attendance in 2020, and only an average of 18,319 in 2021 which meant the team averaged less than half-full for the season and ranked 18th in all of baseball.
The pandemic took its toll
The Nats were due a windfall of fortunes after winning the World Series. Instead, the season was played with no fans in the stands, and red ink hit every team in what many projected to average $80 to $100 million per team in losses. For a team like the Nats per Forbes projections, they predict only $322 million for the Nats and a $36 million operating income which sounds great — but for a team like the Nats that carry a high debt-load, interest expenses have to come off of that to get to EBITA. In this high inflation market with interest rates rising, there is increased debt risk, and that could be a reason at the very least for the Lerners to look to bring in some new investors who can pay enough to wipe out their debt on the balance sheet (notes payable).
Juan Soto’s status
The team never got around to extending Trea Turner, and now they are in the same spot they were with Bryce Harper after his 2015 season when the talk was the $400 million contract, and Harper’s retort of “don’t sell me short” and the “sky’s are the limit.” Well, just add another $100 million to Harper’s number but Soto is smart enough to not talk numbers but he did admit he turned down a $350 million contract that would have been the second highest paid contract exceeding Mookie Bett’s deal which has deep deferrals paid out to his 52nd birthday. That deal Soto turned down according to Rizzo’s discussion last week on 106.7 is still ongoing with Soto’s people. Could the outlook of a new owner stop any discussions or would this be smart for the Lerners to lock Soto up as their living legacy to Nats’ baseball fans? Time will tell on this. The Marlins sold-off Giancarlo Stanton‘s contract just after the team was sold from Jeffrey Loria to Bruce Sherman. So yes, Sherman bought it with Stanton’s contract active on the books.
DC violent crime is up around the ballpark area
There are weekly reports in crime near Nats Park and the active shooter outside of the stadium last year during a game was a shocking reminder of how crime is up at levels that will keep some from traveling into Nats Park.
#Breaking At approx 8:40p an MTPD officer at Anacostia Station went to a fight & stabbing in the station. Based on the early information, the suspect armed with a knife reportedly came at the officer at which time the officer discharged their service weapon shooting the suspect. https://t.co/tPlFSgi5KH
— Ryan Sprouse (@RSprouseNews) April 8, 2022
There was not only that incident last week at the Metro station but four people were shot blocks from the stadium after the game. Yes, an arrest was made, but deadly violence is bad for DC and bad for the Nats.
Questionable long-term contracts for Stephen Strasburg and Patrick Corbin
There is still almost $175 million due to Strasburg and nearly $70 million already wasted due to the injuries he’s sustained since he inked that new deal after he opted-out of his previous contract after the World Series. Corbin has about $70 million remaining on his deal with the Nats through the 2024 season. Statistically, Corbin could turn things around but you can’t erase his 2021 season that was one of the main causes of the Nats sudden demise. But it is Strasburg’s deal that runs through 2026 that is a great unknown and at $35 million a year, it could be a huge drain on team cashflow.
MASN lawsuit unresolved
The dispute has continued for over a decade now in the annual rights fees dispute. The Nats are grossly underpaid versus their competition. There seems to be no end in sight and this has been the biggest competitive issue for the Nationals. Washington per reports were being paid $54 million in 2020 against what was ruled to be $77 million that they have not collected. The other issue in the MASN dispute is that whatever the Nats get paid, the Orioles get paid an equal amount. That of course would be a huge overpay to the Orioles and as part-owners of MASN, that would eat into any profits the Nats would receive. It is just a bad deal. DC is the sixth largest metropolitan area, yet they aren’t even paid in the top-10 of regional sports networks due to the MASN deal. Also consider the demographic wealth of DC, and you have one of the most affluent markets in the country exceeding every area except for NYC, LA, and Chicago.
Nationals Park turns 15 next year
While Maryland taxpayers have been funding the Orioles expansion and renovations, Nationals Park has received little from the DC publicly funded stadium. The clock still doesn’t work above the scoreboard and hasn’t for years. Parking around the stadium has disappeared over the years due to all of the building, and you have to wonder about the future of the Nats in DC past the next 15 years.
Run your business into the ground, alienate your fans, get the benefits from a $1.2 billion public investment. https://t.co/kBULNDDqWp
— Craig Calcaterra (@craigcalcaterra) April 11, 2022
Many reasons to sell
There are many reasons to sell, but plenty more not to do it. The Lerner family is growing as Mark, Debra and Marla’s children have grown up as heirs to the Lerner fortune and their involvement with the Washington Nationals, you have to wonder what they all want to do with the future of the team.
Look, nobody is crying for the Lerners. As a family, they were billionaires before they bought the Nationals and have enough money to move forward. What the pandemic might have taught them is that diverse investments is what smart investors look for. The Lerner’s vast holdings in commercial real estate where office buildings and shopping malls went empty just like baseball stadiums during the pandemic put them in a tough spot, and all of that showed that they are not diverse enough in their asset holdings. The only thing worse is if you owned movie theaters and cruise ships.
For what it’s worth, we asked a front office source how this news could affect the player’s side of things, and he said “business as usual.”
Why the Lerners have picked now to explore selling is only known by them. But sometimes when you think about the future, you could do a whole lot worse in ownership. For proof of that — just remember Jack Kent Cooke’s estate sold to Daniel Snyder. Say no more.