Around baseball, the reaction to the valuation of the Baltimore Orioles at $1.725 billion was one of surprise and in some cases disbelief.

Seven industry analysts and rival officials, granted anonymity in exchange for their candor, all used the same word to describe the price:

“Low.”

The Orioles officially announced the sale of the franchise Wednesday to a group led by David Rubenstein, a Baltimore native who founded private equity firm The Carlyle Group. According to Puck News, which first reported the sale, the Rubenstein group initially will purchase about 40 percent of the club. The group, according to a source briefed on the terms, then will have the option to gain full control after the death of Peter Angelos, pending approval from Major League Baseball.

That approval likely would take months as the league conducts background and financial checks on the members of Rubenstein’s group and reviews the sale through internal committees. People in the sport offered a variety of potential reasons for why Peter’s son, Orioles managing partner John Angelos, accepted the $1.725 billion valuation, even though higher offers might have been available both in the past and future.

Those reasons included John’s possible frustration over the recently included lease negotiations for the Orioles at Camden Yards, cash-flow issues the family might be experiencing and the influence of Georgia Angelos, John’s mother and Peter’s wife. John Angelos has been running the club in the absence of his father, who is 94 and has been incapacitated due to illness since 2018.

A spokesperson for John Angelos declined comment.

Other major-league teams in recent years sold for less than the Orioles. The Miami Marlins went for $1.2 billion in 2017, the Kansas City Royals for $1 billion in 2019. The Cleveland Guardians, under the same type of path-to-control arrangement the Orioles are using, were valued at $1 billion in 2022.

While Miami and Cleveland are bigger media markets than Baltimore, the Orioles are seen as a franchise with greater potential because of the current quality of the team and the passion of their fan base.

Peter Angelos bought the Orioles in 1993 for $173 million. Forbes estimated the Orioles last March to be worth $1.713 billion. That valuation, however, did not include the Mid-Atlantic Sports Network (MASN), in which the team is the majority shareholder in a dual ownership with the Washington Nationals.

MASN is included in the Rubenstein group’s purchase, and some in the industry expect the group to sell the network to Ted Leonsis, the owner of NHL, NBA and WNBA franchises in Washington and a different regional sports network, Monumental, that broadcasts all three teams. Like all regional sports networks in this era of cord-cutting, MASN is not as valuable as it once was. But Leonsis at least might want to purchase the Orioles’ TV rights to enhance his programming on Monumental in the spring, summer and fall.

In late 2022, Leonsis bid for the Nationals with similar intentions, providing perhaps the most relevant data point when asssessing the valuation of the Orioles. Leonsis offered $2.2 billion for the Nationals, according to a source briefed on the discussions. The Lerner family, owners of the Nationals, did not move on the proposal, apparently believing the team was worth more.

Washington is a larger market than Baltimore, but the Nationals became a lesser partner in MASN as a condition of relocating from Montreal to Washington in 2005. So, why would John Angelos, the Orioles’ chairman and CEO in the absence of his father, not hold out for a price similar to the one Leonsis proposed for the Nationals?

The deal between the Orioles and the Rubenstein group seemingly came together quickly, catching Maryland state officials and another group interested in the club by surprise.

A little more than six weeks ago, the Orioles reached agreement with the state on a new long-term lease to remain at Camden Yards. The deal included $600 million in public funds for ballpark upgrades and potential development rights around the ballpark.

“If John (Angelos) can hear me now, it’s deeply disappointing and troubling that you could look your state in the eye and outright lie to us about your intentions.’ Maryland state treasurer Dereck Davis told The (Baltimore) Sun. “We had a right to know, given the amount of investment we were committing to this.”

People in the game, however, cited a combination of factors that might have increased Angelos’ urgency to sell and persuaded him to move forward with the deal sooner rather than later:

The final terms of the Orioles’ new lease

Angelos, in his negotiations with the state, sought to develop an area around Camden Yards and make it similar to The Battery Atlanta complex adjoining the Braves’ Truist Park, which opened in 2017.

He did not gain those rights.

All the Orioles received was an option to end the 30-year lease after 15 years if they did not reach a deal with the state on a development plan that perhaps was not even viable. The necessary land for such a project around Camden Yards does not exist. The ballpark sits in the middle of Baltimore, while Truist was built in a suburb 10 miles outside of Atlanta.

Angelos fought hard for the development rights, evidently believing they were worth hundreds of millions of dollars. When he failed to secure them, he was left without, at least in his view, a potentially lucrative revenue source and vehicle to boost the value of the franchise.

Cash-flow issues

The bill for the Orioles in their years-long dispute with the Nationals over television rights fees is coming due.

In June, Orioles-controlled MASN agreed to pay the Nationals about $100 million in unpaid rights fees for the period between 2012 to ’16. In November, a league-appointed committee ruled MASN owed the Orioles and Nationals about $300 million each for the period between 2017 and ’21.  The rights fees for 2022 to ’26 have not been determined.

MASN held about $105 million in escrow preparing for the possibility of the first payment. It is not known how the network – and by extension, Angelos – planned to come up with the money for the 2017 to ’21 period.

What is known is that the Angelos family is seeking to become more liquid by selling off a variety of land assets, including One Charles Center, a 22-story office tower in downtown Baltimore.

Family considerations

The influence of Georgia Angelos, Peter’s wife and John’s mother, was no small factor in the family’s decision to sell, according to two sources briefed on the discussions.

Georgia’s exact motivations are unclear, but she and John were sued by her other son, Louis Angelos, over control of the team in 2022. According to the suit, Georgia determined it was in the family’s best interest to sell the team, but John misled her into believing he was working to accomplish that goal when ultimately he wanted to thwart it.

According to court documents from the suit, attorneys for Georgia wrote that her husband did not intend for the family to own the team forever, saying, “Although Peter felt that the Orioles should be sold on his death so Georgia could enjoy the great wealth they had amassed together, he felt that decision was ultimately Georgia’s to make.”

By identifying a buyer before Peter’s death, the family achieves resolution. The two-step sale – 40 percent now, 60 percent later – enables the family to receive an infusion of cash while avoiding a full capital gains tax it would incur if it sold the entire club before Peter’s death.

In a statement on Wednesday, John Angelos said, “When I took on the role of Chair and CEO of the Orioles, we had the objective of restoring the franchise to elite status in major league sports, keeping the team in Baltimore for years to come and revitalizing our partnership group. The relationship with David Rubenstein and his partners validates that we have not only met but exceeded our goals.”

The deal might work for Angelos. The question is whether it will create a downward ripple effect on the valuations of other teams going forward.

(Top photo (l-r) of Louis Angelos, Orioles executive VP Mike Elias, John Angelos in 2018: AP Photo/Patrick Semansky)