Giants sell off a chunk of themselves to help cover investment losses in another area of the business.
It’s been a good start to the week for San Francisco Baseball Associates LLC, which owns the San Francisco Giants (our favorite squadron) and 50% of the Mission Rock real estate development, the neighborhood surrounding Oracle Park. Or, they want us to believe it’s been a good week. I have my doubts.
Yesterday, Susan Slusser wrote an article that examined the Mission Rock project, and opened it by asking the question asked by players and agents from across MLB: “Are [the Giants] a real-estate company or a baseball team?” But if you’ve followed the development of China Basin and the construction of Oracle Park, then you’ve known for a long time — 35 years almost! — that this has always been the goal of ownership: to own a chunk of The City.
But how’s their plan working out?
This is where Slusser’s piece pulls a punch, downplaying COVID’s impact.
Mission Rock took nearly a decade to dream up, but in a way, the timing was just right. Visa signed a lease to move its downtown headquarters to Mission Rock in 2019, roughly a year before construction on the project broke ground. The 300,000-square-foot pre-lease allowed Tishman to continue building, even as financing, particularly for office construction, dried up throughout the city after the start of the COVID-19 pandemic.
I would argue that the timing was not right! Anyway, the tone of the piece is bullish on Mission Rock but also makes clear that the investors see their team and their 50% share of the neighborhood as being separate entities.
[Baer:] “Well, hopefully one day this will be a really strong asset for this organization. It’s a 50% owner(ship) of it. But for now, we’re focused on whatever comes in, goes back into the next phase and into improvements and into retail and the (tenant improvements) and all the different things you have to do to make the project work.”
[…]
The Giants are clear about their real-estate division: No funds are diverted from the team to develop their future 11- to 12-building project at Mission Rock.
“Nothing out of here,” Baer said, gesturing around the Mission Rock site, and then waving at the ballpark, “and nothing out of there.”
Sounds reasonable, especially since Mission Rock is unfinished and revenue is sluggish, so both entities are protected. But Larry Baer also suggests that were Mission Rock to take off, the money from that would not suddenly make the Giants able to run a $300 million payroll:
“As soon as all four phases are stabilized,” Baer said, regarding the timeline for revenue to work back toward the team.
“Stabilized” could mean anything and the completion timetable for Mission Rock is 10 to 12 years. So, “stabilize” might as well mean never. That stinks, because there’s no Mission Rock without the Giants. While there’s no Oracle Park without the investor syndicate, there’s still no investor syndicate without… the Giants.
But this is why the team has had to tighten its belt. The Giants need to cover Mission Rock’s revenue shortfalls. Don’t believe me? Recall how Andrew Baggarly kicked our enthusiasm in the nuts at the start of the offseason when he wrote about the team lowering payroll in 2025 — that’s proved to be the case. The recent trade of Taylor Rogers to save $6 million is another bit of evidence. And still another:
Opening Day payrolls since 2015 (2020 excluded):
2025: $176 million
2024: $208.2 million
2023: $187.9 million
2022: $155.4 million
2021: $149.5 million
2019: $170.2 million
2018: $200.5 million
2017: $180.8 million
2016: $172.1 million
2015: $173.2 million
Source: Cot’s MLB Contracts
For added context, 2021 & 2022 are post-COVID recovery seasons where attendance was down. In 2023, every MLB team received a one-time payment of $30 million thanks to their sale of MLB Advanced Media technology to Disney. That payment looks to have gone into the team’s payroll. 2024 was, perhaps, a leap of faith by the investment group, but more likely a feat of creative accounting. Farhan Zaidi mentioned that he moved around a lot of the Baseball Operations budget to make that number work, so that could explain the sustained payroll across 2023 & 2024.
Still, $1 in 2015 is equivalent to $1.35 today, so you tell me if the Giants have kept up with spending or have simply settled on a number that hasn’t changed in a decade. The New York Times mentions that “The Giants are owned by a syndicate of 35 owners, led by Greg Johnson.” That’s a large number of investor agendas to service.
We can assume a decline in team revenue since at least 2018 (following that disastrous 2017 season). Throw in a world historic pandemic, and the syndicate’s dividends no doubt were on course to take a hit… so it makes sense that the Giants would bear the brunt of that. Revenue would go up simply because of inflation — if the expenditures number stayed the same and was untied to percentage of revenue, you can see how they’d thread the financial needle to hit projected dividends. This might explain why very little of the in-park experience has changed since 2016/2017 (the scoreboard in 2019 being one exception).
The Giants are valuable to the syndicate so long as it provides them with money for their lifestyles and other investments — like a neighborhood in San Francisco. That “somewhat break even” which made Greg Johnson briefly infamous, to me, always read as “break even after we distribute payouts.” It wouldn’t make sense to me otherwise. Indeed, investor agreements typically have guarantees built into them. We watch sports for fun, but owners are there to make money from the team’s economic activity.
And it looks like the Giants are hitting a wall in the moneymaking business. That’s where private equity looks to save the day, allowing stagnated investors a chance to cash out.
It was 15 years ago that Matt Taibbi described investment bank Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” (I’m aware of the current state of Matt Taibbi’s brain, but it’s not like this comment has lost its punch in the years since it was published.) Private equity is known for buying up prominent brands and businesses and stripping them for parts until all that’s left is the name (which can then be sold to a sucker). But the point is that people make a lot of money by sucking the life out of a money-creating entity.
Though the total amount of investment has not been disclosed, Forbes estimates the Giants to be valued at $3.8 billion by a group of 35 owners at the start of the 2024 season. The cash infusion will primarily be used to pay for upgrades at Oracle Park, a facility that turns 26 years old this season. The funds will also be used for the Mission Rock real estate development across McCovey Cove, as well as on the team’s facility in Scottsdale, Ariz.
Money’s going to Mission Rock? What happened to “nothing out of there,” Larry Baer?
“This is our first significant investment in three decades,” Giants president and CEO Larry Baer said in a statement announcing the deal. “And Greg Johnson and our ownership group are thrilled that Sixth Street believes, just as we do, in our strategic vision for our future as one of the world’s leading sports and entertainment franchises, as well as the important role our organization plays in uplifting San Francisco and the entire Bay Area.”
So, this is an infusion of cash to bailout some investors who got cold feet and yesterday’s press was about making people feel good about the state of Mission Rock. I’m suspicious of how much will go into the Scottsdale facility and if it’s an actual upgrade or simply a needed refurbishment for wear-and-tear. For their part, it’s clear Sixth Street smells blood in the water and sees an opportunity to expand its reach into sports.
From their own announcement concerning today’s reporting:
Sixth Street’s investment will allow the Giants to invest for the future in every aspect of the organization. This includes continuing to elevate and expand the Giants’ commitment to delivering a best-in-class experience in and around Oracle Park. It also provides the opportunity to continue to create and deliver memorable moments for fans through baseball and other entertainment events and experiences.
In 2021, they bought a 20% stake in the San Antonio Spurs, becoming the second-largest shareholder of the franchise and were, like they are now with the Giants, named a “strategic partner.” From their own announcement at that time:
Sixth Street’s investing approach is built around using its long-term, flexible capital base, cross-platform team culture, and data-enabled capabilities to offer solutions to companies across all stages of growth. Select current and past representative Sixth Street investments include Airbnb, AirTrunk, Caris Life Sciences, Legends, and Spotify.
In 2022, they made dual investments in Real Madrid for stadium improvements and in FC Barcelona for media rights and the improvement of the team’s “financial resources and competitive positioning.”
In 2023, Sixth Street co-founded Bay FC in the National Women’s Soccer League, described as “the largest institutional investment ever made in women’s professional sports franchise.”
In 2024, they hired Josh Empson to expand the firm’s Sports, Media, and Entertainment Investing Platform.
“The scale and flexibility of Sixth Street’s capital, the depth and expertise of the team, and the caliber of the firm’s long-term partnerships underscore why I am so excited to join Sixth Street,” said Mr. Empson. “As one of the few firms positioned to provide flexible capital at scale to the world’s leading sports, media, and entertainment companies, I’m tremendously excited about the future of our franchise.”
Bloomberg News interviewed Empson last week and Sixth Street posted it to their LinkedIn:
Interviewer: As we look at sports as an asset class, how does it differ from other alternative asset investing?
Empson: You know nobody’s ever asked me that. It’s a great question. I think one thing that’s really different about sports as an asset class versus other forms of alternatives is the multiple layers of partnership.
So when you invest in a sports franchise in the US, you have a partner Who is gonna be the control owner. And that’s a person who has needs and ambitions that you’re trying to support. You also exist within the framework of a league That has very particular rules and has its objectives and its goals.
And then beyond that, and most importantly, you have this universe of fans and they care passionately about their team and they are stakeholders in that equation, just the way the league and the owner is. And there is that implicit compact that if you’re coming in, you’re going to make this better for them as well as for the league and the owners.
And it’s interesting to be in a dynamic where you have those multiple layers of stakeholders and you’re trying to deliver value as an investor for all levels of that. And that feels pretty different from other forms of alternative investment. It’s pretty satisfying when you get it right. But there’s something special about investing in something that you can watch every Sunday that you can come together with your family and and sort of share what you’re trying to do.
One thing seems clear: Sixth Street doesn’t seem to be all that into the sport of baseball.
But that’s okay. Larry Baer & co. just need them for the money. And with a 10% stake, Sixth Street isn’t calling the shots; and this isn’t the only private equity group that owns a piece of the Giants. Arctos “owns around 2%,” according to Sportcal. But that’s how they getcha.
I used the “vampire squid” line because private equity is a “gentlemanly” term for hostile takeovers. They’re pirates in suits. Here’s a list of their retail takeovers — which, fine, if you’re anti-big chain retailers on principle, here’s another factoid about them:
In 2023, private equity portfolio companies accounted for 16% of all US bankruptcy filings. Across all sectors, private equity-owned companies are twice as likely to go bankrupt compared to public companies
They’re also quite good at hollowing out pensions. Suspicion is a reasonable instinct.
Major League Baseball has rules about this, of course (a single firm can hold up to 15% stake in the club and a club can offer up a maximum of 30% of control to private equity), but it’s the 21st century, baby! If there’s more money to be made through private equity, why wouldn’t the owners vote to change that rule? Besides, if all 30 teams wind up selling 30% of their teams to private equity, then suddenly, private equity owns 30% of your sport.
The Giants’ older shareholders have hit a wall for the first time in 30 years, and in their… let’s not say panic, let’s say concern… they’re turning to a money source they don’t fully understand. Perhaps they believe that MLB rule will protect them from a hostile takeover, and they might be right. But they’ll be making changes regardless because they’re invested.
Buster Posey wants to bring the human element back into the organization, but the team just sold 10% of itself to a firm that believes in swapping out people for data. Just how committed will ownership be to Buster’s vision, especially as the size of the ownership syndicate begins to shrink? One day soon, Posey might find himself on a conference call defending his decisions to an investor AI.
And then there’s the Giants’ commitment to San Francisco itself. How deep does that go?
Alan Waxman, Sixth Street’s co-founder and chief executive, added […]
“We believe in Larry and the leadership team’s vision for this exciting new era, and we’re proud to be partnering with them as they execute the next chapter of San Francisco Giants success.”
But it was just two weeks ago the Supreme Court of the United States ruled in City and County of San Francisco vs. EPA [Environmental Protection Agency] that it’s okay to dump waste into public waterways, all because the city didn’t want to spend money to follow the Clean Water Act.
If the Giants really feel some sort of civic pride, where’s their condemnation of this ruling? Why not use their local political leverage? Do they not believe in clean water? What’s Larry’s vision, exactly, when McCovey Cove could be filled with turds and needles by the end of the first homestand? Kayakers, jetpackers, and seagulls might want to get cholera vaccines before the season starts.
Giants ownership has had a great month for their portfolios. They’ve got great press for one of their lagging investments and they just got new money for their main one. None of it will help the on-field product, but that’s okay, right? The team exists for profit, and if we fans get some entertainment along the way, that’s just a happy accident and we should feel grateful.
… Right?
Nah. We might be cretinous baseball fans who annoy the Larry Baers of the world, but people like him are making money off our attention, which they bought for a song. We love the Giants and we care about the team more than he does and more than a syndicate could. We don’t have to celebrate sensible decisions to buttress their investments when they have nothing to do with winning baseball games or making memories. We don’t even have to see any of this as good news for the organization. In fact, it feels a little desperate.
How much money do these people need? They’ve taken the “we kept the Giants in San Francisco” reasoning well past the point of a rational person’s guilted-into feeling of “Well, then that means it’s yours to run as you see fit.” This isn’t running the team, it’s pumping the team. When’s the dump coming, and who gets left with the husk?
Best line of that story: “Giants president and CEO Larry Baer called it the “first significant investment in three decades” and said the money would not be spent on players.”
— Craig Calcaterra (@craigcalcaterra.bsky.social) 2025-03-18T20:14:26.341Z
Don’t cheer for a real estate company.