"One Billion Dollars..."

The Cleveland Browns have had remarkably few ownership groups.  Four to be precise.

1 Arthur McBride
2 Dave Jones
3 Art Model
4 Al & David Lerner

And now Jimmy Haslam and his group will be the fifth.

I imagine that ownership changes in the NFL aren't all that common.  Perhaps if I looked them up we would find that most teams don't transfer more than once every fifteen to twenty years.

But the current price tag for the Browns is both astounding and insightful in many ways.

The Haslam group is paying one billion dollars.  A far cry from the price of  $50,000 paid by Arthur McBride in 1945.  Of course we know that the dollar has diminished in value (or purchasing power) over the past century so I was curious how much each owner paid in real terms, or current dollars.

Owner          Year of Purchase                 Price                                    Price in 2012 Dollars

McBride        1945                                $            50,000                       $          637,439
Jones             1953                                $          600,000                       $       5,156,809
Model            1961                                $       3,925,000                      $     30,123,784
Lerner            1998                                $   530,000,000                      $   747,300,000
Haslam           2012                                $1,000,000,000                      $1,000,000,000

(all real dollars calculated with the BLS CPI calculator.  Of course that number isn't undervalued)

The increase in real value over time is astonishing.  This really gives someone an idea of the monster growth the NFL has seen in the later half of the twentieth century.   It also shows you how strong the Browns franchise is over time as well.  Certainly the growth over the past 14 years is due to the strength of the NFL and not some top notch stewardship by the Lerners.

Even still the Lerner clan saw a return of 33.8% when adjusted for price inflation.  Additionally we see a 1,568% increase over the life of the Browns.  Not too shabby.

But let's look at the value of the Browns in another way.  Let's say this were a real estate property.  Like a really big and really nice safe apartment.  Without spending too much time in appraisal world, large safe apartments in really nice neighborhoods with good occupancy rates are among the most desirable thing really big real estate investment trusts.  They like safe returns.  Safe properties also capitalize their values at a lower rate because there is less risk (ie a lower cap rate)  Part of the way you value a revenue generating property is by how risky that property is.

But I digress; if I were to value the Browns as an appraiser using a conservative apartment cap rate I would estimate that the annual income less expenses to be around $80,000,000 a year!  To put it another way.  For a real estate property to be worth one billion dollars right now, it would have to generate an annual gross profit of around eighty million dollars.

The Browns are worth a whole lot more now than when they were NFL powerhouse champions.  This tells you a lot about the state of the NFL and the kind of revenue it generates.