What Does Forbes Valuation Mean For Houston?

Out of one story, we can glean so much. Astros County did a great job this morning of showing what the new value of the Houston franchise is and what it has been for the past few years. Forbes has been compiling these numbers for years now, annoying the bejesus out of major league baseball in the process. See, baseball's books are closed, so Forbes doesn't know what it's talking about.

Except they kind of do, and baseball's blissful ignorance, pointed out in this excellent article on debt in baseball and in Craig Calcaterra's brief commentary. Since native_astro already discussed lots of potential ramifications of the possible sale of the team by Drayton McLane, let's delve into a couple related money-wise ones.

First, that whole article on debt is pretty frightening for the game of baseball as a whole, but it doesn't really affect the Astros right now. Only six teams have a smaller debt to value ratio than Houston (Yankees, Angels, Braves, Reds, Blue Jays, White Sox) and the Astros brought in an estimated operating income up about 100 percent over 2009 and at levels akin to the two years before that. Basically, the team right now under McLane is pretty healthy financially.

What should concern you is what happens when the team is sold to new owners. We've discussed before how the Astros will most likely not be owned by a single individual and will probably have an ownership group with a CEO or the like being the public face of the franchise. Part of that, though, is raising enough money to buy the team (rumored to be on the block for anywhere from 650-800 million). Both the Mets and the Dodgers cases referenced by the Forbes article happened as new people bought the franchise. Same with Arizona and San Diego, who had to slash payroll to pay down debt service because of recent purchases.

Whoever buys the Astros is going to generate more debt than they have right now, and that's going to affect the team. Some teams manage to win consistently with bigger debt to value ratios. Look at Milwaukee, who has more than double the Astros debt to value ratio and still compete. Although, the Brewers couldn't hold onto CC Sabathia and figure to lose Prince Fielder this offseason, so maybe they're a bad example.

Still, it is possible to build a good team with financials that look different than Houston. My point is, the new ownership group probably won't be able to keep Houston looking as good financially as they do right now. I'll leave it to the economists to say whether that's a good or a bad thing.

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