Debt Does Memphis In
Ballpark is a gem, but it's also the team's undoing
The Memphis Redbirds make my head hurt.
The Redbirds have been one of the minor leagues' flagship franchises since joining the Pacific Coast League in 1998. For their first few seasons they battled the Sacramento River Cats for minor league attendance supremacy, and while they eventually surrendered that battle, AutoZone Park remains unchallenged as the gem of minor league ballparks.
Unfortunately it also remains unchallenged as the most expensive minor league ballpark, more than a decade after its completion. And this is where the complicated part comes in. The Redbirds are owned by the non-profit Memphis Redbirds Foundation, which also owns the ballpark. The franchise was operated by an entity called Blues City Baseball, which was run by team founder Dean Jernigan, a local Memphis businessman.
Blues City Baseball had a contract to run the team for $1 a year, and it took any profits from the team and gave them to the foundation, which used the money to pay for sports programs for children that might not otherwise have them.
Then throw into the mix the various entities that hold the $72 million in bonds used to build the ballpark. While they don't technically have a management role in the franchise, when things go bad the bondholders become the most influential group in determining the direction of the franchise.
And things have gone bad in Memphis.
The Cost Of Success
Jernigan, who spearheaded the dream that became the Redbirds, is officially out, and a new management company called Global Spectrum is in.
The change in management came at the request of the bondholders, after the foundation failed to make its March 1 payment of $1.625 million to US Bank, the trustee for the bonds.
It's understandable. The bondholders are still owed an estimated $55 million-$60 million, and the Redbirds have been heading in this direction for some time. But I still don't see a way out of this situation without someone losing an awful lot of money. The franchise's debt service is estimated at more than $5.5 million a year. It was able to make those payments when attendance was at its peak and times were better, but now it seems like a virtual impossibility.
Eventually, the answer seems to be that the franchise and ballpark will have to be sold, so the bondholders can recoup as much of their money as possible. There are buyers who have been interested in the Redbirds—the Cardinals went through extended negotiations to buy the team last year before eventually walking away when the economy went sour—but what's the best case for a purchase price? Whatever your most optimistic prediction, it would seem that anything more than half of the current debt would be a coup.
Global Spectrum probably isn't the future for the Redbirds. Rather, the company will be an intermediary to take an up-close look at the franchise and analyze its value for the bondholders, preparing the franchise to be sold. When that happens, the Redbirds will likely have a much more traditional structure; it also means the franchise's once-grand vision will never be realized.
About That Museum . . .
It's easy to forget now that in addition to the great ballpark and the innovative non-profit structure, Jernigan also wanted to bring a minor league baseball museum to Memphis. That's what brought Dave Chase to Memphis 10 years ago—not the Redbirds.
When the Redbirds first had management problems, Jernigan asked Chase to put the museum project on the back burner and help out the Redbirds. More than seven years later, it was Chase who handed over the keys to the franchise to Global Spectrum.
Any longtime reader of BA knows that Chase is our former publisher (he left us to go to Memphis) and that we have a great personal affection for the man. I knew that Chase was a reluctant franchise leader when he switched gears in Memphis, so at first I was a bit surprised to find out how emotional he was to be stepping aside.
"I have had an incredibly difficult time," he said. "I always said I didn't come here to run a baseball team. But in hindsight because of the people, I'm glad I got the opportunity to do it."
None of the Redbirds' problems are laid at Chase's feet. In fact, he probably helped to forestall what we know see as the inevitable. He still believes in the vision of what the Redbirds are and could have been, and he thinks the non-profit model can work. The crippling debt, however, should serve as a cautionary tale to every minor league franchise that follows.
"I don't think (the non-profit model) is broken, but you do need community help with the ballpark," he said. "The vision here was huge, but you needed a perfect world for 30 years, and that's just not going to happen."