Originally written on Fangraphs  |  Last updated 11/14/14
The St. Louis Cardinals’ farm system is the envy of the league. ESPN’s Keith Law recently ranked the Cardinals’ minor-league teams Number 1 in his annual farm-system rankings, with Shelby Miller, Trevor Rosenthal and Oscar Tavares all in Law’s Top 100 prospects. Baseball America agreed. But all is not well for the Cardinals’ Triple-A affiliate Memphis Redbirds of the Pacific Coast League. Their story is a warning that, even in a baseball-loving town, it isn’t always true that “if you build it, they will come.” The Redbirds play in AutoZone Park in downtown Memphis. The ballpark, built in 2000, is nestled between high-rise office buildings not far from the Mississippi River. AutoZone Park is considered a jewel among minor-league ballparks. Baseball America named it the 2009 Minor League Ballpark of the Year. There are wide concourses, club seating, luxury suites and open-air party decks. It cost $80 million to build — a high price tag for a minor league ballpark. And now, it’s awash in a sea of debt. The Redbirds are owned by a local non-profit organization called the Memphis Redbirds Foundation. The Foundation was established by Dean Jerrigan, at the time the CEO of Storage USA and his wife. They financed the ballpark’s construction with nearly $80 million in tax-free bonds. The idea was to generate enough revenue to pay the annual debt on the bonds and funnel any remaining profits into inner-city baseball projects. In it’s first season, AutoZone Park welcomed more than 800,000 fans. That was the high water mark. With a downturn in the economy and competition from newly-relocated Memphis Grizzlies of the NBA, corporate sponsorships dried up and attendance declined. The Foundation fell behind on its bills. The low point came in 2009 when the Foundation missed a $1.625 million bond payment. The bond holders ousted the Redbird’s management team from Blues City Baseball — also owned by Jerrigan — and brought in Philadelphia-based Global Spectrum, a venue-management company owned by Comcast. Global Spectrum installed one of their executives, Ben Weiss, as the Redbirds’ general manager. But the changes didn’t come fast enough for the bond holders. In 2010, they sold the bond debt at a deep discount to the New York-based private equity firm Fundamental Advisors. And that’s where the story gets interesting. Over the last few seasons, Weiss has started to turn things around for the Redbirds. He beefed up the sales and promotions team and saw attendance rise. Ticket sales topped 500,000 in 2011 for the first time in years and rose again in 2012. Fundamental Advisors — the bond holder — has agreed to forgo debt payments on the bonds while Weiss works to strengthen the Redbirds’ finances. With the team’s finances beginning to stabilize, the Foundation would like to sell the Redbirds. The two most talked-about potential buyers: the Cardinals and the city of Memphis. The Cardinals reportedly looked into purchasing its affiliate but opted against it. That’s not unusual. The Atlanta Braves are the only major-league franchise that owns its Triple-A club, the Gwinnett Braves. All other Triple-A affiliates — and most other minor-league teams — are connected to their major-league franchises through a player development contract. The Cardinals recently renewed its PDC with the Redbirds through the 2014 season. An oft-floated idea — according to the Memphis Commercial Appeal — is for the city of Memphis to create a ballpark authority or similar entity to issue new bonds to finance a purchase of AutoZone Park and the team, under private ownership, would pay rent to the city. As the newspaper notes, that’s “the way many ballparks across the country are operated.” Indeed, it’s also the way for taxpayers to be left holding the short end of the stick. It’s not at all clear, however, that Fundamental Advisors has any intention of selling AutoZone Park anytime soon. Fundamental Advisors is a niche private-equity firm in that it invests entirely in distressed assets financed by municipal bonds — i.e., public-works projects like affordable housing, health-care facilities and stadiums. According to The Deal magazine, Fundamental’s founder and CEO, Laurence Gottlieb, invests in these properties not only to make money, but to restore a public asset for the benefit of the community. Gottlieb told The Deal last September that Autozone Park was still a “needy asset,” suggesting that Fundamental intended to hold onto that investment a while longer. That may be good a very good thing for city of Memphis and Redbirds fans.  
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