Joe Ricketts and his wife, the founders of the Ameritrade stock brokerage, set up a trust for their kids. All rich people do this. It’s a way of protecting wealth and setting aside money for future generations of the family. It just so happens that in the case of the Ricketts kids, the trust contained a cool $403 Million worth of TD Ameritrade stock, ready for the purchase of the Chicago Cubs! The deal to buy the Cubs was to be executed partly in equity (cash) and partly in debt. Sam Zell specifically required this. He didn’t want an all cash offer because he did not want the tax liability of getting paid in cash for the sale, as bleedcubbieblue.com reports. The Rickett’s took on $580 Million of debt to pay for the rest of the deal.
Something peculiar to note is that an article published by David Kaplan of CSNChicago detailing the forced payment in debt, somehow disappeared from the internet. It’s also peculiar that CSN Chicago is partly owned by the Ricketts, as part of the Cubs transaction.
The Zell-Ricketts transaction ended up being horrifying complex, to the point that in the summer of 2009, the Ricketts threatened to pull out from the deal. BleedCubbieBlue reports,
“One prospective buyer who quickly withdrew from the process told me “it was the most complex financial transaction he had ever seen,” with another telling me that he wasn’t willing to jump through all of the hoops that the deal required. However, the Ricketts family stayed the course before eventually reaching their breaking point. They told the Tribune and Zell in the summer of 2OO9 to either make a deal or they, too, were going to withdraw from the process. At that point, according to sources, the deal quickly moved towards completion.”
Today, when I walk around Wrigleyville, just about the entirety of the investment in Wrigleyville has paid off handsomely for the Ricketts. Sure, the city will benefit from the tax revenue, but the city actually didn’t take a stake in Wrigley Field, or the Cubs. Too bad for the city, because Forbes tells us that the Rickett’s have already started to sell some of their investment for a huge profit. According to Forbes,
“In 2009, the Ricketts family paid $845 million for the Chicago Cubs, Wrigley Field, 25% of Comcast CMCSA -1.19% SportsNet Chicago and a small parcel of land outside the stadium. The owners recently raised a total of $150 million of equity to help fund the renovation of their ballpark by selling minority interests of the same assets to six investors, plus a tiny piece of land they subsequently bought for $20 million where there was a McDonald’sMCD +0.89%, for $2.25 billion…”
Furthermore, Forbes tells us that,
“…the Ricketts family earned a 166% return on their investment in less than six years. Perhaps even more incredible is that the Cubs alone were valued at $1.8 billion for the transaction–the highest price ever paid for a non-controlling interest in sports…”
Those numbers are from early 2015. The Cubs went on to win the World Series in 2016, and surely the club is worth even more today. Sam Zell’s loss made the Ricketts family even richer!
Ahhhh, the beauty of capitalism!
Todd Ricketts, the current chairman of the Cubs organization, is a huge Cubs fan. He lived in the Wrigleyville neighborhood in the 1980’s. Which is actually odd. Clearly, he must have not liked the neighborhood, despite being a Cub’s fan. His project to redevelop Wrigleyville, known as Project 1060, has completed decimated Wrigleyville as it once was. The Chicago Reader hits the nail on the head in saying,
“RIP Wrigleyville. Welcome to Rickettsville.”
Rickettsville is bringing suburban, family-friendly, corporatized life to Wrigleyville. Unfortunately, that’s not the Wrigleyville anyone ever wanted, explains Ryan Smith at the Chicago Reader:
“What has made the area surrounding Wrigley unique in recent history was that it wasn’t a totally homogenous Cubbie Disneyland. Baseball fans mixed, sometimes uneasily, with Metro concertgoers, iO comedians, hippie academics at Bookworks, and rockers shopping at the Alley and hanging out at Punkin’ Donuts.”
What made Wrigleyville was the grit and diversity enclosed into four square city blocks. The transformation leads me to believe that the RIcketts could care less about the history of Wrigleyville, or even the history of the Chicago Cubs intertwined with it.
In 2012, when the city of Chicago would not approve the 1060 Project, the Ricketts went so far as to threaten to move the Cubs to the suburbs! Imagine that! Again from the Chicago Reader,
“In 2012, when the city initially balked at giving the Cubs permission to go full-steam ahead with the project, the Rickettses threatened to move the team elsewhere, possibly Rosemont. But instead the family ended up moving the suburbs into Lakeview.”
In my opinion, there is plenty of evidence that despite the rocky relationship between the Ricketts and Rahm Emanuel’s Chicago, the Ricketts plan for Wrigley fits very well into the overall plan to turn Chicago into an international tourist destination. Rickettsville is already just that, a tourist destination, complete with several hotels, including the posh Hotel Zachary, commercial and residential real estate, movie theaters, and a plethora of fancy bars and restaurants made for the tourist experience. The outgoing Mayor Emanuel made it a priority back in 2011 when he was first elected, to get Chicago to 50 million tourists annually by 2020. He dominated that goal, achieving it by 2016, with 54 million visitors. For comparison, NYC had 62 million tourists in 2016. This piece from Bloomberg titled, ‘War-Torn’ Chicago is More Popular With Tourists Than Ever, seems to imply that Chicago’s violent reputation is doing wonders for its tourism ambitions. All evidence suggests they are right.
After the Chicago Cubs won the World Series in 2016, the Ricketts raised ticket prices 19.5%. According to Ryan Smith from the Reader,
“…the team now possesses the third-highest average ticket price in the league at $51.33, according to Team Marketing Report, a publisher of sports marketing and sponsorship information.”
The Ricketts drew criticism from Alderman Ed Burke. He said,
“…the Rickettses would “leave fans behind” by raising ticket prices and possibly—as has been rumored—by exiting WGN in 2019 to create their own regional sports network, potentially forcing fans to pony up for more expensive premium cable packages in order to view games from the comfort of their own homes. ‘[The Rickettses] should keep [in mind] the plight of the working women and men of Chicago who are fans,’ Burke said, ‘as they go ahead with this plan that’s gonna make it tougher for fans watch the Cubs.’”
Of course, this was the plan all along. The Chicago Cubs were a new organization, and with the success of the team came the potential to re-engineer the fan base. It worked. Today, in 2018, the Cubs are still selling out tickets, but to a new, wealthier, and tourist, fanbase. The Ricketts were brilliant in that they invested in the team first, making the Cubs champions, and then invested in the re-engineering of Wrigleyville, paying for it with higher ticket prices and a spike in the value of their original investment (a consequence of the team’s success). Joe Ricketts, the family patriarch, without whom the deal would not have happened, tells us he could care less about baseball. From the Chicago Reader, Ryan Smith states that Joe Ricketts,
“…isn’t a sports fan and wasn’t one when he purchased a 95 percent stake in the Cubs and Wrigley Field (as well as a 25 percent stake in Comcast SportsNet Chicago) from the ailing Tribune Company in 2009 for $845 million. “It’s no secret,” Joe wrote in a post on his personal blog during last year’s World Series, “that while my four children and wife are avid baseball fans who bleed Cubbie blue, I’ve never been a sports buff.”
He’s in it for the money, and no doubt there’s a ton to be made.