Crane, a Texas financier, invested $100 million in the Astros. [...]

"I didn't make $100 million by making a lot of dumb mistakes," Crane said. "We're not going to get everything right, but we're going to get a lot right."

The Astros — and a big share of a TV network — sold for around $680 million in 2011. Crane got majority control by investing only $100 million? I knew it was a high-debt deal, but ... wow.

I'm not sure going as cheap as possible on the big league roster is really the best way to rebuild. I guess if you really value locking up that #1 pick in the draft, that's one thing. But do the Astros really have enough intriguing young arms that signing a starter and a few recognizable names for the bullpen is going to block someone? If a player does well on a one-year deal, that usually makes for a nice trading chit at the deadline, particularly if it's a pitcher. Would throwing a bit of cash at, say, Shawn Marcum or Joe Saunders really have interfered with the rebuilding process?

The Astros — and a big share of a TV network — sold for around $680 million in 2011. Crane got majority control by investing only $100 million? I knew it was a high-debt deal, but ... wow.

The article says $615 million, and it's not clear that Crane owns a majority of the financial interest in the team. I think the limit is that a team can borrow up to 50% of its value in debt, so he could have put up $100 out of ~$307.5 million in equity and been the controlling partner.

The article says $615 million, and it's not clear that Crane owns a majority of the financial interest in the team. I think the limit is that a team can borrow up to 50% of its value in debt, so he could have put up $100 out of ~$307.5 million in equity and been the controlling partner.

IIRC, they were at about 40% debt, which is high for an MLB team, but perfectly normal for an average corp. Given all the guaranteed revenue in MLB, you want to be fairly leveraged.

I'm pretty sure he's managing partner, but not majority owner.

The article says $615 million, and it's not clear that Crane owns a majority of the financial interest in the team. I think the limit is that a team can borrow up to 50% of its value in debt, so he could have put up $100 out of ~$307.5 million in equity and been the controlling partner.

As of 2011, almost a third of MLB's teams were out of compliance with the debt rule, and I wouldn't be surprised if the Astros are now on the list.

I know Crane has dozens of minority partners, but he would have had to get almost $7M each from 30 partners (or $5M from 40 partners) in order to raise the other $200-plus million. Unless there are some heavy hitters involved whose names haven't made it into the stories, it's hard to believe there were 30 or 40 local car dealers and insurance executives who were willing to park an average of $5M to $7M each in minority shares of the Astros.

Probably figure 2013 is a lost cause no matter what they do - after all the AL West was 94-93-89-75 wins for the 4 teams and the Astros were at 55 wins. They would need a 20 game improvement to catch up to Seattle to get out of last - or if you feel Seattle is likely to drop maybe 10 to 15 games. That is a tall order.

Now, a plus is they have the #13, 27, 37, 50 and 99th ranked prospects (BA top 100) - 5 of the top 100 which is a good thing. But odds are they will need a lot of time to go from 55 to 90+ wins. Punting this year to get another #1 draft pick (or close to it) along with high picks in all other rounds probably makes a ton of sense. Hard for fans, hard for others on the ML roster but good for the team 5 years down the road. Sucks for TV ratings which will hurt as they own the station, sucks for attendance, but it certainly is a valid way to rebuild.

So upon further review, it appears the debt limit is not 50% of enterprise value, but rather 8x EBITDA (or 12x EBITDA for teams that incurred stadium-related debt in the last 10 years). So it's possible the Astros are more highly leveraged than 40-50%.

Punting this year to get another #1 draft pick (or close to it) along with high picks in all other rounds probably makes a ton of sense. Hard for fans, hard for others on the ML roster but good for the team 5 years down the road. Sucks for TV ratings which will hurt as they own the station, sucks for attendance, but it certainly is a valid way to rebuild.

Valid theory, anyway. How many teams have successfully done a rebuild on this scale within 5 years or less? I can't think of any, and the new spending limits loom as an additional impediment.

tampa

An idea that I haven't seen mentioned, but which Houston could do, is to take on high priced players via trade (in exchange for nothing of value), eat the players salary and then re-trade him for good prospects.

No reason why it can't be done, other than this would affect Crane's finances, but since they have such a small payroll ($25MM), adding an extra $30MM +/-would not derail their plans.

8 - it may take quite awhile. Still likely the best course of action, imo

tampa

Tampa might be the closest parallel, but they were a last-place team for nine out of the ten preceding seasons (with a fourth-place finish mixed in) before 2008. The (Devil) Rays of 2003–07 were also an average of 9 games better than the 2011–12 Astros, and that's before comparing the Rays' A.L. East to the Astros' N.L. Central (or, now, the A.L. West).

How many teams have successfully done a rebuild on this scale within 5 years or less?

Marlins tore down in 1998 (lost 108 - even the Astros haven't lost that many yet) and won the World Series in 2003.

How many teams have successfully done a rebuild on this scale within 5 years or less?

Washington Nationals, if you measure from when they fired Jim Bowden.

How many teams have successfully done a rebuild on this scale within 5 years or less?

2001 Tigers: Lost 95 games

Winter 2001: Let starting CF (Roger Cedeno), starting 1B (Tony Clark), starting SS (Deivi Cruz), #3 starter (Chris Holt) go in free agency. Traded starting RF Juan Encarnacion for Dmitri Young. Replaced Cruz with Craig Paquette. Replaced Cedeno with Wendell Magee Jr.

2002 Tigers: Lost 106 games

July 5, 2002: Traded ace Jeff Weaver
July 23, 2002: Traded #3 starter Brian Moehler

Winter 2002: Let starting RF, starting 3B, starting 2B, closer (Fick, Truby, Easley, Acevedo) go in free agency. Traded starting DH (Randall Simon) and #2 starter (Mark Redman). Replaced them with nobody.

2003 Tigers: Lost 119 games

2006 Tigers: World Series

Crispix beat me to it - I was also going to cite the Tigers.

JRVJ has an intriguing idea. Hopefully Luhnow et al take note. They can start the contract-eating middleman ploy by trading Chuckie Fick for Ryan Howard.

Looking at the Rays as a five year period before becoming a 97 win team the following players (2008 bWAR) were in the organization prior to 2003:

Carl Crawford (2.3)
BJ Upton (3.1)
Jonny Gomes (-1.1)
Shawn Riggans (0.2)
Rocco Baldelli (0.3)
Elliot Johnson (-0.1)
James Shields (3.6)
Jason Hammel (-0.7)
Juan Salas (-0.1)

That's their 3rd and 5th most valuable position players and most valuable (tied with Kazmir) pitcher. Important players but if you assume they could have gotten 1 WAR replacements for them and use their pythag (which was 92 wins) then it's still an 86 win team built within five seasons. While the Rays have gotten great value from some high draft picks (Upton, Longoria, and Price) the big reason they're so successful instead of just another mediocre team with a couple stars has been smart trades and key diamond in the rough free agent pickups. That's what Luhnow and Houston are going to need to do to get the team back into contention; even if they were to start throwing around big free agent dollars in the future the scarcity of impact players available and competition from other teams is going to make it virtually impossible to do anything but supplement their roster. If it's not fairly strong already through development/trades/lesser pickups then free agents would have a pretty limited effect.

2006 Tigers: $100 M payroll. Guillen, Pudge, Polanco, Ordonez, Robertson, Bonderman, Rogers, Maroth, Grilli, Jones, Durbin and a few more all picked up in trades or FA. Verlander, Zumaya, Inge, Granderson and Infante were the major homegrown players.

The Tigers did the exact opposite of what Crane is talking about. Maybe it was their intent but they followed those 119 losses in 2003 with a mad scramble to add ML talent. They signed Pudge, signed Rondell White, signed Vina (an obvious disaster), signed Urbina, signed Yan, made a big play for Tejeda but lost out, got Guillen for next to nothing. Because they'd had so many lousy contracts, their payroll actually stayed the same. They kept adding ML talent in 2005.

An idea that I haven't seen mentioned, but which Houston could do, is to take on high priced players via trade (in exchange for nothing of value), eat the players salary and then re-trade him for good prospects.

No reason why it can't be done, other than this would affect Crane's finances, but since they have such a small payroll ($25MM), adding an extra $30MM +/-would not derail their plans.

If the overpriced player was overpaid enough, the Astros might even be able to pick up something of value in the initial trade. This is the extreme example, but wouldn't the Angels add something of at least mild value for the Astros to take Vernon Wells of their hands? The Angels would receive scrap making the league minimum or middling prospects while the Astros would receive Wells at full-price and a B- prospect/couple lotto tickets/useful relief arm. The Astros could then hold onto the prospects/useful role player or trade them/him as well.

That's their 3rd and 5th most valuable position players and most valuable (tied with Kazmir) pitcher. Important players but if you assume they could have gotten 1 WAR replacements for them and use their pythag (which was 92 wins) then it's still an 86 win team built within five seasons.

Sure, but Tampa was still a horrendous team for 10 straight seasons, and most of the same execs from the pre-2003 period were still there until late 2005, when Sternberg arrived.

Walt beat me to it re: the Tigers, although the answer was correct in the strict sense. (When I asked about 5-year rebuilds, I meant Astros-style scouting-and-development rebuilds, but perhaps I should have been more specific.)

The Marlins and Nationals are interesting examples, although the latter has also spent a lot more money than we'd probably expect Crane to spend (or that Crane would be allowed to spend, with the new draft and international spending limits).

There might be more out there yet to be mentioned, but it appears the list of teams that have pulled off what the Astros seem to believe they're going to pull off is short if non-existent.

While the Rays have gotten great value from some high draft picks (Upton, Longoria, and Price) the big reason they're so successful instead of just another mediocre team with a couple stars has been smart trades and key diamond in the rough free agent pickups.

And they have been very good at developing lower level draftees.

Matt Moore - 8th round
Desmond Jennings - 10th round
Jeremy Hellickson - 4th round
James Shields - 16th round

Yeah, I meant to put that in there too. Also, Wade Davis and Jake McGee were third and fourth round picks respectively.

This is the extreme example, but wouldn't the Angels add something of at least mild value for the Astros to take Vernon Wells of their hands? The Angels would receive scrap making the league minimum or middling prospects while the Astros would receive Wells at full-price and a B- prospect/couple lotto tickets/useful relief arm. The Astros could then hold onto the prospects/useful role player or trade them/him as well.

There is no way Luhnow et al haven't already thought of this. It didn't happen last year, and it hasn't happened so far this year, even as the payroll approaches comical lows. If this kind of scenario never happens at all, that is as clear a sign as any that Lisa's worst fears are true and that Crane will run a big market team like one stuck in the smallest of small markets.

Crane will run a big market team like one stuck in the smallest of small markets.

There's a lot not to like about Crane. For one, he's about as PR-savvy as Saddam Hussein (see, for instance, the "why don't you write me a check for 10 million" quote in TFA).
But I just can't see him settling down to run a bargain basement kennel for AAAA mutts, as if he were an absentee corporate owner or the shambling corpse of Calvin Griffith. Did he really spend 8 years on an obsessive-compulsive fanboy quest for a Major League franchise just to do that?

Of course that does not mean that this will all work out in the end. There's still all that debt, and nobody seems to know exactly how much of it there is. Is there going to be a competitive team five years from now that will be left incomplete or prematurely broken up because, shut up, debt service! The bigger question is whether, once the Astros are ready for prime time, Houston will still be a big (baseball) market... Luhnow and company have been very clever on the baseball side of things, but Crane has been a total disaster on the marketing side. He's a rather creepy and unlikable guy overall, and he seems to be falling into the classic CEO trap of trying to bully your customers and treat them like employees instead of patrons. Then there's all that stuff outside of his control... the forced league change, the ascendancy of the Rangers, etc. By the time the Astros start winning again, the fans might have already opted out. Then Crane will have no choice but to back up the truck...

There is no way Luhnow et al haven't already thought of this. It didn't happen last year, and it hasn't happened so far this year, even as the payroll approaches comical lows. If this kind of scenario never happens at all, that is as clear a sign as any that Lisa's worst fears are true and that Crane will run a big market team like one stuck in the smallest of small markets.

And even more obvious than JRVJ's idea was the fact that the 8 months from late 2011 until late June 2012 would be the last opportunity for the Astros to turbocharge their rebuilding process by spending big internationally without incurring any penalties, but the Astros spent little or no money in that time.

***

Did he really spend 8 years on an obsessive-compulsive fanboy quest for a Major League franchise just to do that?

I guess we'll see if it was a "fanboy quest" or just a savvy businessman's quest. It's tough to reconcile the "fanboy" idea with the fact that Crane, a longtime Houston resident, reportedly attended less than five Astros games in the 2-3 years before he bought the team. (Perhaps it was due to bad blood after his prior attempt to buy the Astros fell through, but it's still a little odd.)

Is being a bottom-feeding MLB owner really a better investment than any of the other stuff Crane could have done with his money? Including all the stuff he could have done without leveraging the heck out of himself?

And if it is, why didn't he just wait a little while longer to buy a team that really is small market and thus avoid paying the big-market premium?
The franchises he's targeted... the Cubs, Rangers, and Astros... are awfully pricey for an aspiring small town grifter...

Is being a bottom-feeding MLB owner really a better investment than any of the other stuff Crane could have done with his money? Including all the stuff he could have done without leveraging the heck out of himself?

I'm guessing the answer is yes. The Astros should make millions this year with the payroll as low as it is, and even if all of it goes toward debt service, Crane still wins via increased equity in both the Astros and the new sports network.

If the Astros stick to their current model, I bet Crane could sell the team again in three years and double his money (or better).

And if it is, why didn't he just wait a little while longer to buy a team that really is small market and thus avoid paying the big-market premium?
The franchises he's targeted... the Cubs, Rangers, and Astros... are awfully pricey for an aspiring small town grifter...

TV money. Any alleged premium Crane & Co. paid for the Astros will likely be recouped several times over via TV rights.

There might be more out there yet to be mentioned, but it appears the list of teams that have pulled off what the Astros seem to believe they're going to pull off is short if non-existent.

I dunno. The expansion teams have often found fairly quick paths to respectability and even success. The Jays lost 318 games in their first 3 seasons and were stinko in 1981 too. Then won 78 in 82 then didn't dip below 500 again until 94.

The Royals were never really awful and were over 500 by 71 and a winner by 75.

The 73 Rangers won 57, the 74 Rangers won 84 and the 77 Rangers won 94. The 69 Expos lost 110, were respectable by 73, lost 107 in 76, were genuinely good by 79.

Also, we've currently got the Marlins, Pirates, Royals, Astros and, to a large extent, Twins and Mariners following this model. Maybe the Padres too? You've got the Rays and A's somehow churning out regularly good teams on pretty minimal payrolls. Some of those teams are going to hit the jackpot.

Matt Moore - 8th round
Desmond Jennings - 10th round
Jeremy Hellickson - 4th round
James Shields - 16th round

Other than Shields this is a recent phenomenon -- it gives them a lot of hope for the future but it doesn't have a lot to do with how they built successfully.

EDIT: I suppose the Myers for Shields trade means the Royals have decided the rebuild is done, it's time to go for it.

Also, we've currently got the Marlins, Pirates, Royals, Astros and, to a large extent, Twins and Mariners following this model. Maybe the Padres too? You've got the Rays and A's somehow churning out regularly good teams on pretty minimal payrolls. Some of those teams are going to hit the jackpot.

- Marlins: two 90-plus win seasons in 20 years, but won the World Series both times;
- Pirates: 20 consecutive losing seasons;
- Royals: sub-.500 for 18 of the past 20 seasons.

The Twins seem like an inapt example; they've had 7 winning seasons in the last 10 years, and have spent fairly big money, at least in certain years. The Mariners have also spent big money, while the Padres didn't announce a rebuilding so much as they ran into financial problems because of the owner's divorce (and then treaded water during a prolonged and ultimately doomed sale to an undercapitalized buyer).

I understand why a lot of people are fascinated by what the Astros are doing; I just believe their odds of pulling it off are very low.

- Marlins: two 90-plus win seasons in 20 years, but won the World Series both times;
- Pirates: 20 consecutive losing seasons;

Sure but that doesn't mean they haven't gone through phases and it's not like it's always been the same GM, etc. When Huntington came in, the first thing he did was trade away every piece of veteran "talent" that he had. In fact he traded away more than an entire starting lineup worth of players in his first 12-18 months. Just because there was no talent there doesn't mean it wasn't a total tear down and rebuild.

And the Pirates had gone through an earlier phase of "high payroll" with Meares, Young, Bell, etc. Again, they were very bad at it but it was a shift from the "suffer and build from within model."

The Royals have been following this model for a while but it was pretty much a reset when Moore took over -- he had very little major or minor league talent when he came in. He did sign Meche and I think Kendall.

The Ms stopped spending big money a while ago and went "all-defense, all the time" except for their contract for Felix (did that ever get signed?)

The Twins did make a big investment a few years back in Mauer and Morneau ... but now they're pretty much stuck with those (could move Mauer obviously). But the 2010 Twins had Cuddyer, Hudson, Hardy, Delmon Young, Span, Kubel, Thome, Punto, Lirano, Baker, Rauch ... it's been a pretty full teardown and a definite shift away from the Hudson/Hardy/Thome end of the spectrum.

I don't see what the Astros have done to be any more radical than what Huntington did -- Huntington had more quantity to dump, the Astros probably more quality, Huntington inherited more talent in the pipeline.

But I agree I think the odds of pulling it off aren't high. If you're stuck in a small, crappy market like TB, Pitt, KC then you may not have much choice. The Houston market is more than big enough to support a much bigger payroll and fielding terrible teams is hardly necessary ... and the Astros had a very long history of not fielding terrible teams. It's certainly a long wait and, as I think the Royals and Pirates do show, if the first guy gets it wrong, you're stuck here for 10 years.

i can't understand why crane is getting such a pass

he's a complete and total ****head. no matter WHAT he says, he gets zero criticism from either the media or from statheads.

he invested exactly 5 million of his OWN real money to buy the team. after all the kickbacks/etc he got. he is keeping the payroll at rock bottom so he can make somewheres around 30 mill PROFIT this year. he doesn't get the shtt loria gets because houston is some nowhere town that nobody care about and because he is supposedly "rebuilding."

they didn't spend a penny during the window they had to buy foreign talent.

they have NO young up and coming stars - and i mean evan longoria, justin verlander type stars. they don't even have another hunter pence. they don't have a minor league pitcher over A ball who even projects as more than a #3 if everything goes great.

this team is NOT going to be good next year. or the year after. or the year after. they are crowing about chris carter and brad peacock - the guys billy beane dumped for a crappy middle reliever and a utility SS - as The Next Big Stars.

please

and crane is NOT gonna spend money on jayson werth type free agents, or even pudge rodriguez 2004 FA. he is gonna have to pay more than carlos lee money to get a FA to sign with houston - heck, they couldn't get FA when the team was great every year. his idea of big money is carlos eff pena. crane is not exactly mike ilitch - and he doesn't have that kind of wealth anyhow. it is gonna be interesting to see how many 100+ loss seasons in a row the media is gonna tolerate before they put up even the kind of minimal fuss they did with kc/pittsburgh

The Crane backlash will come, give it a month or two. (To be clear, I don't like him, from what I know of him.)
I don't think Houston is likely to be successful following the Tampa template - too high risk. But, I probably wouldn't pursue that different of a strategy in years 1 and 2 of a rebuild (salaries starting to ramp up next year w FA acquisitions and the like). I don't expect DET style spending, but that they should rejoin the ranks of big league payrolls in time.

The reasons they aren't catching more flak are:
Luhnow is respected
Wade and friends decimated the org
Individual moves that they've made have generally made sense, in isolation and as part of a possible plan.

I've covered pre-pool int'l signings previously. They appear to be spending normally now, but that doesn't tell us anything.