John Malone bought the Atlanta Braves a decade ago — and a lot of folks thought it was just another billionaire showing off. But has run the team like a business, asserts Ian Wyatt, editor of Million Dollar Portfolio.
He took the Liberty Braves Group (BATRA) public back in 2016. Now’s our chance to secure a stake in the company at a discount to its true value.
For one thing, Malone has built a solid ball club by letting people who know baseball run the team. He’s staffed the business office with folks who know, well, the business.
He was also instrumental in securing a deal to build SunTrust Park. That’s the Braves new state-of-the-art stadium. There’s also a growing real estate development around the stadium called Battery Atlanta, which is owned under the Liberty Braves. Since new ballpark opened in 2017, there’s been a big improvement in Liberty Braves financials.
For one thing, the Braves have improved as a team. They won the National League East last season. That’s helped increase attendance by 26%. Meanwhile, ticket prices are up 32%. Higher attendance plus higher ticket costs have pushed gate receipts (the value of ticket sales) up 66%. Sponsorships have also more than doubled, helping to defray costs.
Battery Park, the real estate development associated with the new stadium, has also performed incredibly well. A huge chunk of the 328,000-square-feet of office has been leased.
Ironically, Comcast (CMCSA) leased space there for its Southeast American headquarters. Thyssenkrupp North America has also signed a deal to for its headquarters in Battery Park as well.
Some 88% of the retail space has been leased and a 264-room Omni hotel is up and running. There’s also a live music venue in Battery Park, which hosted nearly 100 events last year.
In the third quarter, the group also sold the residential portion of Battery Atlanta for a $61 million profit. That freed up cash to help fund the development of “Block C,” a 174,000-square-foot mixed-used development, and Three Ballpark Center, a 600,000-square-foot office tower.
That helped swing the Liberty Braves Group into the green in the third quarter. The company posted an operating profit of $45 million. That’s a big change from the third quarter of 2017 when the company lost $9 million.
For the first nine months of the year, the Braves posted an operating profit of $105 million on $410 million in revenue. In the same period in 2017, there was a $49 million profit on $366 million in revenue.
Now that the Braves have turned profitable, so has the stock. At the end of the day, investors are after profits, not pennants. But we see a lot more upside here.
The Braves have improved over the past two years, but there are hints that they’re on the hunt for underdeveloped talent. As they bring new players on, gate receipts should continue growing.
There’s also still a lot of development potential at Battery Park, especially as the two new projects get off the ground in the next couple of years.
Another interesting play here — one the Malone and Liberty haven’t talked about — is that sports betting is now legal, nationwide.
Finally, there’s John Malone. He is clearly very good at what he does, but he never gets married to a business. When a good deal comes along and the price is right, he’s willing to sell.
I’m not sure that Malone and Liberty will sell the Braves Group in the next year or so, because there are some thorny tax issues involved. But the Atlanta Journal Constitution published an interview in November that, true to Malone’s MO, reads a bit like a sales pitch.
For now, I’m happy to just own my own piece of a storied franchise and take whatever gains come my way. The shares are priced at just over $27 right now.
Based on the positive trends of game attendance and profits from the real estate side of the Braves Group, the shares look undervalued. I wouldn’t be surprised if the stock hit $40 within two years. And I’ll bet watching the games will be a lot more exciting when I own a piece of the action.
