Baltimore Orioles Sold: Questions Still Remain

William Christ

2 years ago

David Rubenstein shocked the sports world when he announced that he reached an agreement with the Angelos family to buy the Baltimore Orioles. Rubenstein, a life-long Orioles fan and the co-founder of the Carlyle Group, bought the Orioles for a $1.725 billion – nearly ten times the amount that Peter Angelos initially paid for the team in 1993. This amount, however, “stunned” other owners and people around Major League Baseball because it was lower than anticipated. They attributed the lower amount to the fact that the Angelos Family did not open the sale to other bidders. [1] Despite this, the sale of the Orioles is the third highest in MLB history – behind the sales of the New York Mets and the Los Angeles Dodgers. And the Orioles’ current sale price may not be final!

If this agreement is approved by twenty-two—or seventy-five percent—of the league’s twenty-nine other owners, Rubenstein will immediately own 40% of the team, while the Angelos family will retain 30% of the team’s ownership. The remaining 30% of the team’s ownership structure will be divided among the team’s minority owners. [2]

This arrangement, however, is not supposed to be permanent. Upon Peter Angelos’s death, Rubenstein will then buy the Angelos’s remaining 30%. The Angelo family advocated purposefully for the two-part sale because it will ease their tax liability. They otherwise would have been obligated to pay hundreds of millions of dollars in capital gains tax if the team was fully sold when Peter Angelos was alive. [3] Until ownership is completely transferred, John Angelos will continue to serve as a senior advisor. [4].

Right now, it is unclear whether the minority owners will retain their ownership interest. As with most ownership groups, the minority owners will either sell to the controlling, majority owner or retain their segment of the team’s ownership interest. Rubenstein will therefore have to determine whether to keep these minority owners in place or buy their segment of the team. [5] Either way, Rubenstein is going to buy more of the Orioles from the Angelos family – and potentially the minority owners, too.

Despite the complex ownership structure, the recently negotiated lease of Camden Yards will remain unaffected. Back in December, the team negotiated and agreed to a thirty year lease with the State of Maryland. [6] This lease included provisions that stated it would continue to be in effect regardless of any ownership changes. The lease also included the potential for the Orioles to establish mixed-use development on the state-owned land around Camden Yards. John Angelos saw this as an opportunity to transform the neighborhood around Camden Yard and earn incredible profit for the team. [7] This “live, work and play” entertainment district is common throughout the MLB as other franchises like the Atlanta Braves (The Battery) and the Texas Ranger (Globe Life Field) have used such projects to add value to their teams. [8]

Although it is possible, the change of ownership is unlikely to complicate the development of this mixed-use entertainment district. The lease contains an “escape provision” in which the team can get out at fifteen years if negotiations over development rights around the stadium are not completed by December 31, 2027. [9] Rubenstein and the new ownership group could use this shorter lease term to negotiate for better benefits and funding from state and local governments. Rubenstein, however, is unlikely to forgo the mixed-use development rights around Camden Yards because the project brings with it too many benefits for him to ignore.

These benefits include adding economic value to the Orioles and the possibility of attracting league-wide events, like the MLB All-Star game. Rubenstein sounded optimistic about developing the land around Camden Yards into a mixed-use facility. Rubenstein said that the project gives “the team [an opportunity] to catalyze development around Camden Yards and in downtown Baltimore [that] will provide generations of fans with lifelong memories and create additional economic opportunities for our community.” [10] Baltimore Orioles fans are right to be optimistic. Both the Orioles and their city look to have a bright future.