(Bloomberg) -- When Mark Walter, founder of investment firm Guggenheim Partners, bought the bankrupt Los Angeles Dodgers in 2012, many thought he’d overpaid. The $2.1 billion was almost double what anyone had ever spent for a sports team, and he had to outbid billionaire hedge funder Steve Cohen to get it.
Few would quibble with the price now. That amount has since been eclipsed nine times in deals for sports franchises, including the $2.4 billion Cohen paid for the New York Mets in 2020, while the Dodgers have gone on to become Major League Baseball’s most perennially competitive team.
The Dodgers purchase was “a forerunner in financial engineering and institutional money being put into sports team ownership,” said Marc Ganis, co-founder of consulting firm Sportscorp.
Of the deals since completed at a higher price than the Dodgers, six were led by individuals with a background in finance as sports teams have become one of the hottest investments around.
The resulting surge in values — the Dodgers are now worth $6.3 billion, according to a valuation by Sportico — helped power Walter to a personal fortune of $12.1 billion, according to the Bloomberg Billionaires Index. The 64-year-old’s sports portfolio includes stakes in the Premier League’s Chelsea football club, the Los Angeles Lakers and Los Angeles Sparks basketball teams, auto racing groups and the Women’s Professional Hockey League, which together total more than $3.7 billion, according to the index.
A representative for Walter confirmed his wealth was at least $12 billion.
Biggest Asset
His biggest asset remains Guggenheim Partners, the $335 billion investment adviser that was a pioneer in raising permanent capital through insurance relationships. Walter founded the firm in 1999 along with partners including Peter Lawson-Johnston II, a descendent of mining magnate Meyer Guggenheim.
Walter, who is Guggenheim’s chief executive officer, also controls nine insurers with total adjusted capital of more than $4.7 billion at the end of 2023. His economic stake in them is worth roughly $900 million, according to Bloomberg’s wealth index.
His financial resources have put the major-market New York Yankees — who face off against the Dodgers in baseball’s World Series starting Friday — in the unfamiliar position of underdogs. This marks the fourth time the Dodgers are in the Series since Walter bought the team, while it’s the first appearance by the Yankees in that span.
To be sure, these Yankees are no longer the same dominant team that went to the playoffs 13 straight years in the 1990s and 2000s and won five championships. With their willingness to pay for talent in a way that’s straight out of the Yankees’ playbook, the Dodgers have supplanted them as the league’s most well-resourced club, with the Mets also making a case for that title.
The Yankees had the major league’s highest payroll for more than a decade leading up to the Dodgers changing hands in 2012. Since 2013, they haven’t been in the top position once, while the Dodgers have led baseball eight times, according to sports research group Spotrac and the Baseball Cube.
“The Dodgers have arguably been the best managed team in baseball under the Mark Walter ownership regime,” Ganis said. “They’ve been doing almost everything right.”
The Dodgers’ recent success may feel familiar to long-time Yankees fans. The late George Steinbrenner, who bought the American League team in 1973 for roughly $10 million, was seen as a pioneer of free-agency big spending when he signed stars like Reggie Jackson and James “Catfish” Hunter. They helped lead the Yankees to two championships soon after Steinbrenner took control.
George’s son Hal has controlled the team since 2008. As payrolls have ballooned across the league, boosted by the Dodgers and more recently the Mets willingness to open their checkbooks, he’s sounded a note of caution.
“Payrolls at the levels we’re at right now are simply not sustainable for us financially,” Steinbrenner said at an owners meeting in May. “It wouldn’t be sustainable for the vast majority of ownership, given the luxury tax we have to pay.”
Financial Alchemy
The Dodgers’ active-roster payroll this year is $172 million, according to Spotrac, well below the Yankees’ $260 million. But that includes a healthy dose of financial alchemy.
When the Dodgers signed this year’s presumptive most valuable player Shohei Ohtani to a $700 million contract, it was structured so the Japanese superstar would get just $2 million a year until the end of 2034, then $68 million annually for 10 years.
It’s just the latest example of creative front-office accounting by the Dodgers, which was on display soon after Walter took control.
In 2013 the team secured a 25-year, $7 billion television rights deal that helped the ownership group quickly pay down debt associated with the team purchase, including at insurers that were controlled by Guggenheim.
“What Walter did was a very creative, unprecedented capital structure, using institutional capital that they controlled, to outbid everybody else for the Dodgers,” Ganis said.
(Updates Walter’s net worth and adds value of sports portfolio in fifth paragraph.)
©2024 Bloomberg L.P.