New Money Enters the Fold as Twins Secure First of Two Limited Partners

[Cody Christie]

The Minnesota Twins entered the offseason navigating a unique organizational crossroads. After spending much of the past year evaluating a potential sale, the Pohlads abruptly pulled the franchise off the market in August. Instead of changing principal ownership, the club pivoted to bringing in two new minority partners. Reports said that one group would be based locally and the other led by an investor family from the East Coast. Now, the first half of that picture is finally coming into focus.

Charley Walters of the Pioneer Press reported the development earlier this week, writing, “Look for Minneapolis based Varde Partners, a worldwide multi billion dollar credit investment corporation, to be announced soon as a limited partner with the Minnesota Twins. The firm is one of at least two limited partners expected to assist in diminishing the team’s reported 500 million dollar debt.” 

The addition of Varde Partners marks a notable shift in the composition of Twins leadership. Headquartered in Minneapolis, Varde is a global credit and investment firm overseeing an estimated $16 to 17 billion in assets with more than 300 employees across the world. The company is led by managing partners Brad Bauer, Francisco Milone, and Tim Mooney, all of whom bring deep experience in large scale financial strategy and corporate development.

Given their background, it is difficult to imagine that Varde Partners will be anything less than a stabilizing force for a franchise navigating a sizable debt load. Their presence alone signals that the Twins are looking for more structured, more sophisticated financial guidance than the current iteration of the Pohlad family has typically leaned on. For an organization supposedly carrying around $500 million in debt, a partner with extensive investment acumen is not a small addition.

What remains unclear is how much influence these new partners will wield when it comes to baseball decisions. Minority stakes rarely dictate roster construction, but their involvement does lighten the financial strain on the club. If that reduction in debt eventually leads to more flexibility in retaining talent or supplementing the roster, fans will welcome the impact. At a minimum, the presence of motivated and financially savvy investors should nudge the overall organizational direction toward a more modern and competitive mindset.

With one partner now identified, attention naturally turns to the second expected minority owner from the East Coast. If the timing of this first announcement is any indication, that reveal may not be far behind. As the Twins navigate a pivotal offseason, the business side of the franchise is reshaping itself in a way that could have long term implications for the organization’s stability and ambition.

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[DJL44]

Expect Varde Partners to act like any private equity group: extreme cost cuts while you drain every last dollar out of the organization and then sell the brand (which is all that is left) to some other company.

[thelanges5]

No one else is reporting this and the link takes me to a article about the Vikings?

[Vanimal46]

Are we ever going to learn our lesson not to take Charley Walters seriously? 

[Parfigliano]

23 minutes ago, DJL44 said:

Expect Varde Partners to act like any private equity group: extreme cost cuts while you drain every last dollar out of the organization and then sell the brand (which is all that is left) to some other company.

Private equity = locusts on a field crop 

[tony&rodney]

Trying to think of a positive response ... perhaps someone within a new organization has ideas about responsible spending.

OTOH, private equity almost always cuts to the bone and takes out money before reselling. Northwest Airlines, etc.

[bunsen82]

So how the heck does debt grow from $350 million to $425 million to now $500 million?  

As an accountant the math just doesn't add up.    Like at all.   Thats saying the Twins from operations lost 40 million and then added on another 30 million of interest.   

With $500 million of debt how could the Twins ever expect to get around 2 Billion - its just idiocy.   

Now - I do think Verde will be a significant addition.  Ability to help finance any remaining debt at better options.  But with that being said - they will want to be fiscally responsible - so I don't see a scenario where we will be operating above budget.   So where the revenue lies and budget for players will be, will be very interesting.  

[bunsen82]

54 minutes ago, Vanimal46 said:

Are we ever going to learn our lesson not to take Charley Walters seriously? 

This is pretty specific information.   I don't think even Cody would throw a name out of a venture party without it being confirmed by multiple sources.  

[amjgt]

1 hour ago, DJL44 said:

Expect Varde Partners to act like any private equity group: extreme cost cuts while you drain every last dollar out of the organization and then sell the brand (which is all that is left) to some other company.

Counterpoint:

Unlike a typical business, a MLB organization's value is tied largely to its brand and scarcity, not assets. 

It seems to me that a savvy businessperson would've evaluated the situation at the end of 2023 and done things very differently. Most everything the Pohlads have done since the Twins were eliminated by Houston devalued the brand and made them a less desirable asset, which is of course the last thing you want to do right before you're going to sell something who's value is so strongly linked to it's brand.

An additional $80M spent the last two seasons (total) probably would have more than paid for itself in franchise value as well as interest from potential new owners. I suspect if the last two seasons had playoff appearances the Pohlads would have no problem finding new ownership groups willing to pay their 1.7B+ asking price. 

I'm sure that a private equity group, who's main goal is to maximize asset value can see this. If Varde Partners wants to grown their investment, then tanking payroll spending, and with it team success, isn't the way to do that. 

[SF Twins Fan]

1 hour ago, Vanimal46 said:

Are we ever going to learn our lesson not to take Charley Walters seriously? 

I did see a post on Twitter claiming Darren Wolfson mentioned there would be clarity on one of the buyers by the end of this week.  That poster didn't mention a name; however I didn't actually see the tweet by Darren Wolfson and couldn't find it in a brief search through his feed.  It could have been him responding in the comments of one of his other posts, but I feel like he's much more credible than Walters.

So, however, we will have more clarity by the end of the week.  There could be a lot to talk about by the end of the week with the draft lottery and GM meetings going on this week.

[DJL44]

30 minutes ago, amjgt said:

Counterpoint:

Unlike a typical business, a MLB organization's value is tied largely to its brand and scarcity, not assets. 

Which makes it hard to lower the team's value below what they're paying right now. Suck cash out until you get your ROI and flip it for what you paid for it.

Has a venture capital firm every dreamed about winning the World Series? No - only billionaire owners who grew up as a fan have that dream. A VC firm will spend the bare minimum.

[DJL44]

1 hour ago, bunsen82 said:

So how the heck does debt grow from $350 million to $425 million to now $500 million?  

As an accountant the math just doesn't add up.    Like at all.   Thats saying the Twins from operations lost 40 million and then added on another 30 million of interest.   

With $500 million of debt how could the Twins ever expect to get around 2 Billion - its just idiocy.   

It can't be operational losses. That would mean the Twins would have to run a payroll below $80M to break even and a payroll below $50M to handle the debt service.

[bunsen82]

Just now, DJL44 said:

It can't be operational losses. That would mean the Twins would have to run a payroll below $80M to break even and a payroll below $50M to handle the debt service.

If you remove the debt - it should remove the interest.  The issue is revenue has to be projected to be lower next year.  Do we think 80% attendance vs last year, with significant ticket deals. Thats a big hit.   

[tony&rodney]

2 minutes ago, DJL44 said:

It can't be operational losses. That would mean the Twins would have to run a payroll below $80M to break even and a payroll below $50M to handle the debt service.

Cue my tongue in cheek GM Tool roster named; Pohlad Savings Plan. 

[DJL44]

42 minutes ago, bunsen82 said:

Do we think 80% attendance vs last year, with significant ticket deals. Thats a big hit.   

That's about 350,000 tickets. How much is each fan worth? Let's go with $200 (which seems like a high estimate, I've never spent $200 per person at a game). The Twins keep 52% of that money and the other 48% goes to the league. That means dropping 350,000 in attendance = losing $36.4M in revenue. That is a bottom 5 attendance level, below even the Pirates.

 

[Major League Ready]

23 minutes ago, DJL44 said:

That's about 350,000 tickets. How much is each fan worth? Let's go with $200 (which seems like a high estimate, I've never spent $200 per person at a game). The Twins keep 52% of that money and the other 48% goes to the league. That means dropping 350,000 in attendance = losing $36.4M in revenue. That is a bottom 5 attendance level, below even the Pirates.

 

I Googled how much does the average fan spend at a MLB game and got a lot of different answers but your estimated average spend is double the highest estimates I found.   

[ziggy]

Quote

How much is each fan worth? Let's go with $200 (which seems like a high estimate, I've never spent $200 per person at a game).

I can attest if you take the grandkids and go to the Twins store for a souvenir not counting parking but with lower level behind the infield seats $200 is close to my amount spent per ticket.

[DJL44]

13 minutes ago, Major League Ready said:

I Googled how much does the average fan spend at a MLB game and got a lot of different answers but your estimated average spend is double the highest estimates I found.   

It would mean they keep $150M of the $300M they make off their current 1.4M attendance which is obviously too high. $200M revenue from 1.4M fans ($140/fan) seems more reasonable. That means losing 300,000 fans costs the team $21M.

[nicksaviking]

2 hours ago, DJL44 said:

Which makes it hard to lower the team's value below what they're paying right now. Suck cash out until you get your ROI and flip it for what you paid for it.

Has a venture capital firm every dreamed about winning the World Series? No - only billionaire owners who grew up as a fan have that dream. A VC firm will spend the bare minimum.

Right, calling a private equity firm the local buyer, is like referring to Bed Bath and Beyond as a local store. Uh, yeah, I guess they have a presence here, but their interests are with the investors, and the non-local investors are going to decide what becomes of the 'local' store.

[Twinsrtheworst]

I was going to venture a guess $200 per person spent at a game felt light.  I must be doing it wrong.  Heck even when I get free tickets I'm prone to spend additional on merch and food.

[tony&rodney]

12 minutes ago, se7799 said:

I was going to venture a guess $200 per person spent at a game felt light.  I must be doing it wrong.  Heck even when I get free tickets I'm prone to spend additional on merch and food.

The variance is pretty high. The comp tickets and standing room only are about $20. I have walked out of games spending way, way too much and have also escaped spending $20, including free parking.

[Major League Ready]

1 hour ago, DJL44 said:

It would mean they keep $150M of the $300M they make off their current 1.4M attendance which is obviously too high. $200M revenue from 1.4M fans ($140/fan) seems more reasonable. That means losing 300,000 fans costs the team $21M.

I can't find any source that suggests the average spend per fan is $140.  I have seen a low of $52 and a high of $84.  This article on the average cost for all MLB teams lists the costs for the Twins at $171 for a family of 4 which is only $35/person.  Even if we use an estimate of $100 Fan which is almost triple the cost according to this article ...

300,000 Fans X $100 = $30M X .52 = $15.6M

[DJL44]

21 minutes ago, Major League Ready said:

I can't find any source that suggests the average spend per fan is $140.  I have seen a low of $52 and a high of $84.  This article on the average cost for all MLB teams lists the costs for the Twins at $171 for a family of 4 which is only $35/person.  Even if we use an estimate of $100 Fan which is almost triple the cost according to this article ...

300,000 Fans X $100 = $30M X .52 = $15.6M

The Twins average ticket price is $35, so that's the absolute floor. A dog and a beer is $15. It's hard to believe $52 is right.

$15M is little less than 5% of their yearly revenue.

[LewFordLives]

As I suspected, the investors are just Wall Street types looking for a place to stash money.

[Major League Ready]

42 minutes ago, DJL44 said:

The Twins average ticket price is $35, so that's the absolute floor. A dog and a beer is $15. It's hard to believe $52 is right.

$15M is little less than 5% of their yearly revenue.

If we use $35 for the average ticket price, I doubt the average fan spends $100 on concessions.  This article on concession revenue estimates $56 on concessions.  That would be $91 so the $100 estimate seems pretty reasonable. 

[howeda7]

While a private equity firm isn't going to say "go spend $200 million YOLO", I also don't think they will say, "trade all your stars, cut payroll to $50 million and drive your attendance and TV ratings to an all-time low!". That will not increase the value of the asset. 

[howeda7]

5 hours ago, bunsen82 said:

So how the heck does debt grow from $350 million to $425 million to now $500 million?  

As an accountant the math just doesn't add up.    Like at all.   Thats saying the Twins from operations lost 40 million and then added on another 30 million of interest.   

With $500 million of debt how could the Twins ever expect to get around 2 Billion - its just idiocy.   

Now - I do think Verde will be a significant addition.  Ability to help finance any remaining debt at better options.  But with that being said - they will want to be fiscally responsible - so I don't see a scenario where we will be operating above budget.   So where the revenue lies and budget for players will be, will be very interesting.  

The majority of that debt cannot be operating losses. It's either Target Field debt they never paid off and kept rolling over, or it's unrelated to the Twins. It's probably some combination of all 3. 

[tony&rodney]

35 minutes ago, howeda7 said:

The majority of that debt cannot be operating losses. It's either Target Field debt they never paid off and kept rolling over, or it's unrelated to the Twins. It's probably some combination of all 3. 

Sounds like the Twins are in need of a financial analyst. Too bad I'm retired, I could easily fix their books for $100K per year and four tickets on the field. Save them millions and millions, maybe $500+M.

[Woof Bronzer]

45 minutes ago, howeda7 said:

While a private equity firm isn't going to say "go spend $200 million YOLO", I also don't think they will say, "trade all your stars, cut payroll to $50 million and drive your attendance and TV ratings to an all-time low!". That will not increase the value of the asset. 

That is absolutely what private equity does.  Slash costs to a bare minimum, squeeze out as much short term profit as possible, and then when they've bled it dry, sell or write off the asset.  It's their whole business model.  

[DJL44]

7 hours ago, Cody Christie said:

Minneapolis based Varde Partners, a worldwide multi billion dollar credit investment corporation

To me this sounds like "I'll pay off your debt in exchange for equity, but I want a guaranteed return on my equity".

In 10 years we'll be remembering the Pohlads with fondness for their generosity.