New MiLB Housing Announcement is a Step Forward, but Overdue

[Lucas Seehafer PT]

On Thursday afternoon, all 30 MLB owners collectively announced a new housing policy for minor league athletes, which is slated to go into effect during the summer of 2022. According to the press release, the policy will “provide more than 90% of assigned Minor League players across every level with furnished housing accommodations at each Major League club’s expense.” 

The announcement piggybacked off of another made in mid-October in which Major League Baseball stated that they would require teams to provide housing beginning next season, though a specific plan was not provided at that time. 

The owner’s press release went further, specifying requirements that each team must meet, including, but not limited to:

• Housing must be “located at a reasonable, commutable distance from the ballpark” (A specific distance range was not provided)
• Each bedroom must contain at least one bed per player with no more than two players per bedroom
• Housing must be furnished and basic utilities (per Baseball America’s Josh Norris: electricity, water, and WiFi) must be paid for by the MLB team
• Hotels may be utilized if apartments, rental homes, and host families “are not feasible”

Further reporting from Norris, who obtained a memo distributed by the owners to all major front office personnel, revealed that players “will not sign any lease or utility agreements” as leases “are not permitted” and the MLB club will be paying utilities. Additionally, this policy will apply to all minor leaguers who 1. Do not possess a major league contract and 2. Make less than $20,000 per month (i.e. the remaining 10% of minor-league players or disqualified). 

The owner’s decision to provide housing for their minor league athletes is a move that was much needed, but not one that should earn them any modicum of praise. There was never an acceptable reason for why housing was not previously provided and the decision was conveniently made only after minor league players started speaking out about their mistreatment at the hands of billionaires en masse.

Additionally, while a near-doubling of salary may appear like a dramatic improvement, the average minor-league payout improved by only a couple hundred dollars per week, with rookie ball players bringing in approximately $20,800 before taxes last season and Triple-A players earning $36,400. In short, most minor leaguers will still earn a barely livable wage despite the previously installed pay bump.

Reducing travel and providing a roof over the athletes’ heads not only should improve the overall quality of play in Minor League Baseball but are also humane actions, even for professional athletes getting paid to play a game. However, work will remain to be done until the athletes’ average salary increases even more, at least to the point where they earn anything close to their valuation. 

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[roger]

Thanks for bringing us this great news, Lucas.

Long overdue.  Expect there will be no set format for how this is achieved as minor league cities vary greatly.  Hopefully, most of the arrangements will include some ability to cook meals, which I didn't see mentioned.

[Rosterman]

It should be something under control the team, as players can shuffle between leagues during the season. 

 

Not every minor league town was setup to handle players in homes, expecially in the non-short term leagues.

 

There is some charm to housing in a hotel/motel (dorm like) way, until you start thinking about any needs for food service. Are all minor league teams prepared to feed players in-house? You'd think this would be a more logical option to also feed players, to keep them nutritionally strong.

 

But housing is a first step, especially in a location comfortable for access to the stadium where you can spend hours working out, playing ball, and not feel the need to have a car (and that expense when youa re on the road half-the-time or working all day or at your leisure).

[bean5302]

MLB teams are not going to want to use hotels/motels for coporate housing. Even cheap hotels would wind up being $2,000/mo with all the fees which are tacked onto rates and hotels/motels won't generally allow people to stay there more than 30 days at a time due to renters rights laws.

I suspect small/medium sized, inexpensive apartment buildings will be purchased by the teams at this point since the players themselves are not allowed to sign leases. I'd imagine the owners of the MLB clubs are already in the process of finalizing this.

Concerns over being able to make food seem fairly unwarranted.

[Steve71]

If I were an owner of a MLB franchise I would go way beyond this and actually give good housing arrangements for my minor league players.  Have a free training table and nutritionists available to life-coach these young men. It seems to me that making a good impression on young players to make their life more comfortable would pay dividends down the road when signing players if you have the reputation of an owner that takes care of his/her players at all levels. 

In other words:  be First Class.

[roger]

2 hours ago, bean5302 said:

MLB teams are not going to want to use hotels/motels for coporate housing. Even cheap hotels would wind up being $2,000/mo with all the fees which are tacked onto rates and hotels/motels won't generally allow people to stay there more than 30 days at a time due to renters rights laws.

I suspect small/medium sized, inexpensive apartment buildings will be purchased by the teams at this point since the players themselves are not allowed to sign leases. I'd imagine the owners of the MLB clubs are already in the process of finalizing this.

Concerns over being able to make food seem fairly unwarranted.

One hurdle for buying anything is that team affiliations often change.  For that and other reasons, don’t see MLB teams investing in real estate in the small towns so many of these teams are located.  Thus, I see an entire smorgasboard of methods of addressing this concern.

Curious what you are referring to about longer than 30 day stays.  Spent over 45 years owning and operating hotels in many midwest and plains States.  Give me a customer who would stay 30 days or more and I was happy, real happy.  May even offer him/her a weekly or monthly rate.

[tony&rodney]

I read the ESPN article, have followed this closely, and know from many years ago that this has been a real problem. Glad to hear of the positive step. I am in favor of the removal of the Sherman Anti-trust Exemption that baseball operates under. The time has passed for that special treatment, if it ever was warranted.

Thank you for the post Lucas.

[DocBauer]

Agreed it's hard to pat the owners on the back for doing something they should have done a long time ago. But I will at least give credit for finally getting this done.

The ability to make meals shouldn't be dismissed. There certainly are hotels who gave kitchenettes, so I do think those are viable options. Agree with Steve71 that a smart and progressive owner should be doing all they can to go the extra mile for their investment in the lifeblood of their franchise. 

[bean5302]

7 hours ago, roger said:

One hurdle for buying anything is that team affiliations often change.  For that and other reasons, don’t see MLB teams investing in real estate in the small towns so many of these teams are located.  Thus, I see an entire smorgasboard of methods of addressing this concern.

Curious what you are referring to about longer than 30 day stays.  Spent over 45 years owning and operating hotels in many midwest and plains States.  Give me a customer who would stay 30 days or more and I was happy, real happy.  May even offer him/her a weekly or monthly rate.

The expense of buying an apartment complex isn't that bad. $100-200k per room. If a team were double-bunking, they could probably buy an entire 16 unit apartment complex for like $1.5MM in most places and cover the team roster. While affiliations do change from time to time, the MLB clubs could just swap ownership as the cities with affiliations rarely change. The most complicated part of the process would probably be clearing the entire complex of the existing tenants so it would be easier to operate.

Maybe I'm misremembering something, but I actually read the fine print at a hotel stay on a business trip as I was bored. Stays of 30 days or longer were not allowed. The person was required to check out and check back in. When I did some searching it looked like it was designed to prevent people from establishing residency at the hotel and residency rights so the hotel wouldn't have to go through the eviction process? I haven't researched well enough to back up my position. I just went with what I remembered.

[roger]

8 hours ago, bean5302 said:

The expense of buying an apartment complex isn't that bad. $100-200k per room. If a team were double-bunking, they could probably buy an entire 16 unit apartment complex for like $1.5MM in most places and cover the team roster. While affiliations do change from time to time, the MLB clubs could just swap ownership as the cities with affiliations rarely change. The most complicated part of the process would probably be clearing the entire complex of the existing tenants so it would be easier to operate.

Maybe I'm misremembering something, but I actually read the fine print at a hotel stay on a business trip as I was bored. Stays of 30 days or longer were not allowed. The person was required to check out and check back in. When I did some searching it looked like it was designed to prevent people from establishing residency at the hotel and residency rights so the hotel wouldn't have to go through the eviction process? I haven't researched well enough to back up my position. I just went with what I remembered.

Do you really think that teams are going to go thru everything involved with buying, owning, operating and leasing during fall/winter apartment complexes in four small/smaller towns to solve this problem?  Ain't gonna happen.  What I expect will happen is that the Twins will talk to their partners in each market and tell them the Twins will pay for it, but they should set up some type of housing arrangements that meet the rules set forth by the league.  In Cedar Rapids, for example, they have most players staying with families.  At least they did pre-COVID.  In other towns they may need to do something else.

Although I am aware how much government is getting into private business, I had never heard of anything regarding 30 day or longer stays.  Again this is something that would be set by local/state government, but I can assure you it didn't apply when I was operating our hotels, granted that was from 1970 thru about 2010.  Can assure you we had many people staying with us for a lot longer than 30 days and no one at our company ever even thought of this concern, if it was one.

[bean5302]

3 hours ago, roger said:

Do you really think that teams are going to go thru everything involved with buying, owning, operating and leasing during fall/winter apartment complexes in four small/smaller towns to solve this problem?  Ain't gonna happen.  What I expect will happen is that the Twins will talk to their partners in each market and tell them the Twins will pay for it, but they should set up some type of housing arrangements that meet the rules set forth by the league.  In Cedar Rapids, for example, they have most players staying with families.  At least they did pre-COVID.  In other towns they may need to do something else.

Although I am aware how much government is getting into private business, I had never heard of anything regarding 30 day or longer stays.  Again this is something that would be set by local/state government, but I can assure you it didn't apply when I was operating our hotels, granted that was from 1970 thru about 2010.  Can assure you we had many people staying with us for a lot longer than 30 days and no one at our company ever even thought of this concern, if it was one.

A lot of professional sports owners are real estate specialists. Buying a mid size apartment complex isn't going to be a big deal. It's easy and cheap. It's also virtually guaranteed to be "feasible." Hotels/motels are only allowed on a very exception basis based on what I read above. Apartments, Rental Homes (like AirBnB or VRBO) and Host Families must all be exhausted before considering hotels.

There are no leases the players can sign which would include sub-leasing. Apartment owners would not be able to have the tenant's (player) name on a lease.

Of course, hotel ownership and management is your expertise and I'm not even about to pretend I'm as knowledgable as you are on the subject. I might be opinionated, but I try not to be an ignorant and arrogant jerk at the same time.

Let's say MLB teams could go to motels and say I want to book 16 double rooms in your motel for 6-7 months. Let's compare the finances over a single year. Motel 6 vs. a $1.5MM apartment complex. The apartment complex with an I/O at 3.25% is going to be $3,312.50/mo * 12mo = $39,750 per year. In addition, we'll budget 10% of that for property management, bringing the total to $43,725. Now, what's a motel for 16 rooms per month in Cedar Rapids, IA (Kernels)? Let's say it's Motel 6. The motel owners are going to give a 30% discount off their already published rates ($39/night) at $27/night. Now add in taxes and fees and figure $35/night. 16 rooms, 30 days = $16,800/mo * 6 months = $100,800. So the MLB team would save nearly $60,000 annually by buying an apartment complex, and they'd have way more control, but also way more responsibility for the property. Any tax benefit from the more expensive hotel rate would be more than offset by depreciating the property value on the apartment complex or deducting improvements. Motel 6 comes with perks too. It's super easy from an accounting standpoint and it's staffed, comes with security cameras and key log reports of entry/exit, but again, hotels/motels can only be utilized on an exception basis.

It's cheaper to own the apartment complex than all options except maybe host families and teams would have more control over an owned property, plus they'd be able to concentrate their players in a single location for logistics and be able to set rules more effectively. Property management would be handled by a different company (possibly affiliated with the owner already) reducing that burden of owning the apartment, and of course, it's allowed to own an apartment complex in the rules whereas it's probably not allowed to use a motel/hotel service in most cases.

When it's all said and done, I can only speculate what owners or team front offices might be thinking. I could be completely and totally off base when valuing certain things. I can't even manage to agree with the baseball team on baseball related decisions, haha.

[roger]

6 hours ago, bean5302 said:

A lot of professional sports owners are real estate specialists. Buying a mid size apartment complex isn't going to be a big deal. It's easy and cheap. It's also virtually guaranteed to be "feasible." Hotels/motels are only allowed on a very exception basis based on what I read above. Apartments, Rental Homes (like AirBnB or VRBO) and Host Families must all be exhausted before considering hotels.

There are no leases the players can sign which would include sub-leasing. Apartment owners would not be able to have the tenant's (player) name on a lease.

Of course, hotel ownership and management is your expertise and I'm not even about to pretend I'm as knowledgable as you are on the subject. I might be opinionated, but I try not to be an ignorant and arrogant jerk at the same time.

Let's say MLB teams could go to motels and say I want to book 16 double rooms in your motel for 6-7 months. Let's compare the finances over a single year. Motel 6 vs. a $1.5MM apartment complex. The apartment complex with an I/O at 3.25% is going to be $3,312.50/mo * 12mo = $39,750 per year. In addition, we'll budget 10% of that for property management, bringing the total to $43,725. Now, what's a motel for 16 rooms per month in Cedar Rapids, IA (Kernels)? Let's say it's Motel 6. The motel owners are going to give a 30% discount off their already published rates ($39/night) at $27/night. Now add in taxes and fees and figure $35/night. 16 rooms, 30 days = $16,800/mo * 6 months = $100,800. So the MLB team would save nearly $60,000 annually by buying an apartment complex, and they'd have way more control, but also way more responsibility for the property. Any tax benefit from the more expensive hotel rate would be more than offset by depreciating the property value on the apartment complex or deducting improvements. Motel 6 comes with perks too. It's super easy from an accounting standpoint and it's staffed, comes with security cameras and key log reports of entry/exit, but again, hotels/motels can only be utilized on an exception basis.

It's cheaper to own the apartment complex than all options except maybe host families and teams would have more control over an owned property, plus they'd be able to concentrate their players in a single location for logistics and be able to set rules more effectively. Property management would be handled by a different company (possibly affiliated with the owner already) reducing that burden of owning the apartment, and of course, it's allowed to own an apartment complex in the rules whereas it's probably not allowed to use a motel/hotel service in most cases.

When it's all said and done, I can only speculate what owners or team front offices might be thinking. I could be completely and totally off base when valuing certain things. I can't even manage to agree with the baseball team on baseball related decisions, haha.

Your example above confirms you likely don’t have any experience investing in real estate.  When comparing the apartment building cost to Motel 6, you assume the cost of operating the apartments is the mortgage payment plus 10% of that amount for management.  Haven’t taken a look at any apartment p&l’s in a long time, but do know that you are no where near actual operating costs.

First, management fees will either be a fixed cost, percentage of revenue, or some combination thereof.  Assuming rent includes utilities, operating costs will include utilities, real estate taxes, insurance, pest control, security contracts, repairs and maintenance, reserves for replacement, on site management (often someone getting free rent), advertising and marketing, legal, accounting, reserves for bad debts and other costs I likely forgot.

The point is that your financial example doesn’t carry water.  As for buying a project, don’t know what the market is in the three non Twin Cities markets.  I did get a recent email from a Denver broker who sold one of my hotels 20 plus tears ago.  Their listing included a couple office buildings and I believe two apartments.  One was a larger complex for around $500k per unit.  
 

on the other hand the Polahd’s own United Properties, so setting something up in the St Paul market may be easy.

[bean5302]

2 hours ago, roger said:

Your example above confirms you likely don’t have any experience investing in real estate.  When comparing the apartment building cost to Motel 6, you assume the cost of operating the apartments is the mortgage payment plus 10% of that amount for management.  Haven’t taken a look at any apartment p&l’s in a long time, but do know that you are no where near actual operating costs.

First, management fees will either be a fixed cost, percentage of revenue, or some combination thereof.  Assuming rent includes utilities, operating costs will include utilities, real estate taxes, insurance, pest control, security contracts, repairs and maintenance, reserves for replacement, on site management (often someone getting free rent), advertising and marketing, legal, accounting, reserves for bad debts and other costs I likely forgot.

The point is that your financial example doesn’t carry water.  As for buying a project, don’t know what the market is in the three non Twin Cities markets.  I did get a recent email from a Denver broker who sold one of my hotels 20 plus tears ago.  Their listing included a couple office buildings and I believe two apartments.  One was a larger complex for around $500k per unit.  
 

on the other hand the Polahd’s own United Properties, so setting something up in the St Paul market may be easy.

Management fees vary, as you say. I based it on 5% of the rental value at $800/mo per apartment, which worked out to about 10% of the payment which seemed nice and easy. Given the size, I'd actually expect it might be a bit more than that. Regardless, when we're at $60,000, arguing over a few hundred or even a couple thousand isn't going to turn the tide.

Typically, utilities are not included in units and MLB didn't say utilities had to be covered, but even if I were to add utilities (water, sewer, gas, electric, garbage), it would still be $45,000 cheaper. Maintenance, groundskeeping and common area cleaning is required and that can definitely cost some money so now maybe $38,000 cheaper assuming the players had to pay nothing at all. Not sure that's the case. Even though players don't have to be on the lease, are they going to have costs deducted? It didn't really say, I don't think. Not sure how the apartment complex would operate during the offseason, whether it would be filled with short term leases or what. I didn't take into consideration the potential value of having $77,000 of revenue during the offseason.

The whole thing is moot since MLB teams cannot use hotels/motels except when apartments, rental houses and host families are not feasible.