Frank McCourt did nothing wrong

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Think of the Dodgers like an investment property.

McCourt bought the property in 2004 from a bad owner (Fox) and dramatically increased the revenue.

As revenue increased, the value of the property increased (cash-generative assets are valued at some multiple of the cashflow they generate; increase the cash, increase the value). The increase in value created equity for McCourt, his compensation for taking the risk of buying the property and for managing it well.

He re-financed the property to withdraw cash for his family. The banks were willing to lend because the new, higher cashflow of the property could support higher debt service payments, and because the new, higher value of the property gave the banks increased security (if he hadn’t paid the debt, the banks presumably had the team as collateral.)

Finally, McCourt sold the property. Like any other owner, he conducted an auction and chose the highest bidder.

The amount bid was enough to pay back the debt and leave enough money to pay a big divorce settlement and leave around $1bn for McCourt.

Everything else about this story, from the bad PR around the McCourts’ divorce, to the moralizing about how he “stole” the money, to the “redemption” meme around Magic Johnson buying the team, is window-dressing designed to sell newspapers.

You may not like McCourt, but he’s just a guy who made a highly levered bet and had it pay off. He’s no different from the average couple who bought a home with a mortgage and got rich when the property market went up, like everone who bought a home in Southern California between probably 1850 and 2003.

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