Public-Private RE Partnerships Driving American Association Club Revenues, Valuations

Public-Private RE Partnerships Driving American Association Club Revenues, Valuations

Back in April, we highlighted the trend of secondary and tertiary markets investing billions of dollars in affiliated MiLB stadiums and adjacent mixed-use construction projects. 

The American Association of Professional Baseball, an MLB partner league, is experiencing a development renaissance of its own.

“We've had four [stadium-related] projects announced over the last 12 months,” Joshua Schaub (commissioner, American Association of Professional Baseball) said. Phase one in “Blaine, Minnesota [is] $100 million [project that] will likely exceed a billion dollars in development [before it is completed]. Waco, Texas is a $2 billion development. Jersey Village, which is a suburb of Houston, and Clarksville, Tennessee [are the others].”

There are four more new venues, some at the center of broader entertainment districts, said to be in the works too.

“So, there is clearly a growth pattern [within the league],” Schaub added.

But unlike the affiliated projects referenced, the American Association has largely done it without taxpayer funding.

“We cracked the code on how [to] approach cities that we want to be in, that are crucial for us as an entity [to be in], and [on how to] bring together the developer, the operator, the city, and the league to [get] a ballpark [district built] utilizing private dollars,” Schaub said.

The blueprint has led to an influx of new ownership groups, meaningful revenue growth, and rising valuations across the league.

“All 12 of our teams, in aggregate, are [now] profitable and have growing asset values,” former Phoenix Coyotes, AEG Sports, Chivas USA president, and current Chicago Dogs owner Shawn Hunter said. 

The AA club owner is now working to purchase a second league team and construct a new stadium as part of a 40-acre mixed-use real estate development project in the market.

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The American Association of Professional Baseball used to be known as one of professional baseball’s ‘independent’ leagues. It was not affiliated with Major League Baseball or any of its clubs prior to 2020.   

In the past, the league waited for a city “to issue general obligation bonds to build a [new] stadium, [often] on the outskirts of town on some very cheap land, and [it would] hope for development [around the venue],” Schaub said. 

But that changed a half decade ago when the league hired its current commissioner. Schaub came in intent on generating revenue and creating enterprise value. 

“Instead of waiting for cities to take action, [we said we’re going to take] the initiative to identify markets and locations within markets, bringing the developer, the operator, and financing tools, and create our own marketplaces,” Schaub said. 

The American Association has placed two teams in new venues in Milwaukee, one in Dallas-Fort Worth, and one in Chicago within the last six years.

The success of the Battery in Atlanta and Titletown Village in Green Bay are among the projects credited with kickstarting the stadium adjacent mixed-use development trend. 

But it was the construction of Milwaukee’s Ballpark Commons in 2019 that got the movement rolling within the American Association. 

“Once [Wave owner Mike Zimmerman] unlocked that [project] and it had such great success, all of a sudden [people] said we can do that too,” Schaub said.

The projects completed over the last five years have all been structured as public-private partnerships.

The stadium piece is a combination. 

“In terms of the debt repayment, [it is the team’s] lease and then the recapture of property and sales taxes on the entertainment district; the hotels, restaurants, and movie theatres around [the venue],” Hunter said.

Should the tax increment financing falls short, the investors pick up the balance; not the taxpayer. 

And “all the ancillary development around the stadium is funded by private money,” Schaub said.  

The league’s aggressive development model has helped it to attract a host of new club owners. Eight ownership groups have bought in over the last six years.

“They [like that they can now] not only control the teams, but the whole live-work-play development themselves,” Schaub explained.

“It’s helped that we can go into some ‘A’ markets [where affiliated baseball] can’t go in,” he added.

It’s fair to wonder why major league cities would need minor league sports or want to contribute to a public-private partnership. But American Association baseball is not competing with MLB. They’re different products.

Hunter noted that Chicago, which has two big league clubs, still manages to lead the AA in attendance and across almost every other revenue stream, a list that includes sponsorships, tickets, merchandise, food and beverage, and non-baseball programming. 

“Most of our teams are [now] programming facilities year-round with winter festivals, concerts, and that sort of thing,” he said.

The Christmas lights show held at Impact Field in Chicago, home of the Dogs, is believed to be among the most profitable in America.

The new venues and emphasis on non-baseball programming has boosted top lines across the league. In aggregate, club revenues are up 80% since ’21 (to $85mm). 

For context, WNBA teams (which are now on a different trajectory) generated just ~$60mm as recently as 2022.

Becoming an MLB ‘partner league’ has been a boon to the AA too.

While American Association clubs do not receive subsidies from Major League Baseball, its ability to tout the affiliation and existence within ‘One Baseball’ “is a big deal to investors and sponsors,” Schaub said. 

The latter is particularly noteworthy considering broadcast and sponsorship are the two main levers the commissioner has to pull to drive revenues.

“The sponsorship portfolio we’re building out has never been done at this level,” Schaub said. 

The league’s incoming partnership dollars are up +1000% since ’19. 

The American Association does not currently charge fans to watch games on its owned and operated streaming platform (AABaseball.tv). 

“We are the only professional league that has dropped the paywall to [all] of [its live] games,” Schaub said. 

However, the platform still manages to be profitable (think: six-figures) and the league also collects some broadcast-related revenues from its local (Gray Media) and national (Unbeaten) distribution partners.

The AA expects to be able to better monetize its rights in the half-decade ahead.

While the pool of available dollars may be shrinking and more of what remains is expected to flow towards properties at the top of the value chain, everyone other than Bally’s “needs content,” Schaub said. “Especially in the summer, so [we anticipate] there are [still going to be] some dollars out there.”

Time will tell if he’s correct.

But the growth achieved to date has lifted valuations beyond what anyone thought was possible for independent league baseball clubs just a few years ago.

“If you look across the landscape of minor league sports, these teams trade at 8-12x cash flow,” Hunter said. “That would make my franchise worth in the $30mm range.”

It’s not clear how high American Association club valuations can go. But logic suggests we’re not at the top yet. 

“What we're seeing in affiliated baseball, but more so at the major league level, [is that these new venues] are true assets that can cashflow and it's unlocking the work live play environment and the non-baseball revenue [for owners],” Schaub said.

It’s worth noting that the St. Paul Saints, who were once unaffiliated, sold to Diamond Baseball Holdings in March of 2023. The club was rumored to have been valued at ~$90mm in that transaction. 

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