Post by scottie65 on Mar 21, 2010 11:30:27 GMT -5
www.nytimes.com/2010/03/17/sports/17teams.html
Hoping to Sell, Team Owners Face a New Opponent: Recession
As a basketball player, Michael Jordan ruthlessly exploited his opponents’ weaknesses. As a businessman, he is now trying to exploit the financially troubled sports world by buying the money-losing Charlotte Bobcats of the National Basketball Association for about $25 million less than they sold for in 2002.
Michael Jordan, left, with Stephen Jackson of the Charlotte Bobcats, is trying to buy the money-losing team for about $25 million less than it was sold for in 2002.
Jordan, whose $275 million purchase was approved by the N.B.A. board of governors on Wednesday, is not alone in seeing opportunity in financially weakened franchises. In the past year, five of the nine major professional sports teams in the United States that were sold or are being sold were saddled with substantial debt or operating losses. Another dozen in the four biggest leagues, which have a total of 122 teams, may soon change hands.
In the wake of the financial crisis, new owners like Jordan are facing a future without the near-certainty of making up for any short-term losses by selling their teams for hefty profits later.
“It used to be you got bailed out when you sold your team even if you lost money year after year,” said Marc Ganis, president of SportsCorp Ltd., a consulting firm. “Now, you’re no longer assured of cashing out to cover your capital costs and losses.”
Ganis and other sports-industry experts point to skittish banks that are tightening lending standards, ticket and sponsorship sales that have slowed and labor agreements now being negotiated that could force owners to pay players more or even lead to work stoppages.
At the same time, lawmakers in Washington are discussing whether to raise the capital gains tax by as much as 50 percent, which would slice into the profits of owners selling their teams.
George Postolos, a former Houston Rockets executive who bid against Jordan for the Bobcats, said rising franchise values earlier this decade masked years of losses, debt, bad management and the problems of running teams in smaller markets. “Warren Buffett says the tide has gone out and we can see who’s been swimming naked,” Postolos said.
This new dynamic could fundamentally change the business of sports. As lenders reassess what teams can earn, they are challenging some buyers unwilling to agree to stiffer rules for borrowing, like having the lead investor in a group sign a contract to personally guarantee annual losses.
“Does it practically change behavior? No,” said a person involved in buying a franchise who did not want to be named because the deal is not complete. “But does it cross a line? Yes.”
For decades, sports teams weathered recessions remarkably well. Ticket and advertising sales sometimes dipped, but teams continued to sell at a profit despite the headwinds buffeting the broader economy, according to research by Moag & Company, which brokers sales of teams.
But John Moag, the company’s chairman, said this recession had been drastically different. “The impact of the stock and real estate devaluation on franchise ownership is indirectly, but very certainly, impacting the stability of a number of professional sports franchises,” he said.
The effect of the financial crisis has been seen even in sales of marquee teams like the Chicago Cubs ($845 million) and the Montreal Canadiens ($550 million), which almost certainly would have received more in a thriving market.
But the sums paid for financially weakened teams like the Bobcats suggest a growing gap between the value of stronger and weaker franchises.
¶The Russian billionaire Mikhail D. Prokhorov agreed to pay $200 million for 80 percent of the Nets, the worst team in the N.B.A., and 45 percent of their new Brooklyn arena. He will also finance $60 million in team losses and be responsible for most of its $207 million debt.
¶Last month, the Tampa Bay Lightning of the National Hockey League was sold to Jeffrey N. Vinik, who once ran the giant Fidelity Magellan Fund, for a sum described as from $100 million to $150 million — well below the $200 million paid in 2008.
¶The debt-laden Phoenix Coyotes were sold last fall in bankruptcy court for $140 million to the N.H.L., which fended off a much higher bid from a suitor who wanted to move the team to Canada. The league plans to resell the Coyotes for an estimated $150 million.
¶In a three-step process, the buyers of baseball’s San Diego Padres are taking on more than $200 million in stadium debt from an owner who needed cash to pay for his divorce.
¶The pending sale of the Texas Rangers came after Tom Hicks, the Major League Baseball team’s owner, defaulted on $525 million in loans on the Rangers and the Dallas Stars of the N.H.L.
Now that the economy seems to be on the mend, owners who held off selling during the downturn are seeking to unload their teams. According to sports bankers, the teams thought to be for sale include the Atlanta Hawks, the Memphis Grizzlies, the Golden State Warriors and the Detroit Pistons in the N.B.A; the Stars, the Atlanta Thrashers and potentially the Columbus Blue Jackets in the N.H.L.; and baseball’s Houston Astros.
The Los Angeles Dodgers could be sold because of the pending divorce of their owners.
In any economy, owners cash out after long tenures, as H. Wayne Huizenga did early last year when he completed the sale of the Miami Dolphins for $1.1 billion nearly 15 years after buying them for $138 million.
And owners die. The St. Louis Rams agreed to the sale of the N.F.L team last month, two years after their owner’s death. The Washington Wizards are in play as their minority owner is seeking to buy out the interests of Abe Pollin, who died in November.
The sale of the Bobcats is symptomatic of how the economy exposes poorly run, money-losing teams.
David Stern, the N.B.A. commissioner, said Robert Johnson, the Bobcats’ primary owner, was hurt early on by a bad cable television deal, the absence of a naming rights partner for the arena and slow ticket and sponsorship sales. Though the team has largely fixed those flaws, Stern said, “The legacy of financial underperformance is still with the team.” He said the league and city of Charlotte were fortunate that Jordan, a Bobcats part-owner and executive since 2006, is buying the team, which has “lost money every year and has incurred substantial debt.”
While the economy is slowly improving, the pool of wealthy investors willing to buy teams has shrunk, as has the number of financial institutions willing to finance team acquisitions. Dave Checketts, who led a group to bid for the Rams, said buyers needed “a big equity check” to avoid using too much debt.
Checketts, the principal owner of the N.H.L.’s St. Louis Blues, said his goal was to find an undervalued team in any economy. He said, “We look for situations, like the Blues and Rams, that have seen better days.”
This article has been revised to reflect the following correction:
Correction: March 19, 2010
Because of an editing error, an article on Wednesday about the effect of the financial crisis on sales of professional sports franchises misstated the amount Michael Jordan is paying to buy the Charlotte Bobcats of the National Basketball Association. It is $275 million — not $300 million, which is the sum Robert L. Johnson paid for the expansion team in 2002.
Now, here's Atlanta's response to the article:
Has anybody seen the Atlanta Spirit? They were here just a minute ago . . .
ITEM: The New York Times writes an interesting story on pro sports ownership and the economy. The article mentions the Hawks and the Thrashers as teams that may be on the market. Hmmm.
POSTSCRIPT: So I posted this blog Wednesday morning on the Times story. Sent emails to two owners (Mike Gearon, Bruce Levenson), two general managers (Rick Sund, Don Waddell) and the heads of the teams’ respective public relations departments. Our Chris Vivlamore requested to speak to Waddell, who has been the quasi-CEO of the two sports teams since Bernie Mullin’s exit. No response. No denial. Certainly no confirmation. Not even a, “We’re not going to comment on every story that comes out” non-denial/denial.
Now, I don’t know if the Atlanta Spirit has put the two teams up for sale. I don’t know if one team is for sale and one isn’t and they didn’t want to put out a split statement. I don’t know if all of the owners couldn’t decide what they wanted the statement to say so they just bagged the whole thing. Maybe this was Waddell’s call, maybe it wasn’t. But to flat out respond to a story with silence is flat out unprofessional and allows speculation to linger in an already unsettled economic sports market. Nice job, guys.
blogs.ajc.com/jeff-schultz-blog/2010/03/17/quick-hits-spirit-mute-thomas-climbs-obama-goes-red/?cxntfid=blogs_jeff_schultz_blog
Hoping to Sell, Team Owners Face a New Opponent: Recession
As a basketball player, Michael Jordan ruthlessly exploited his opponents’ weaknesses. As a businessman, he is now trying to exploit the financially troubled sports world by buying the money-losing Charlotte Bobcats of the National Basketball Association for about $25 million less than they sold for in 2002.
Michael Jordan, left, with Stephen Jackson of the Charlotte Bobcats, is trying to buy the money-losing team for about $25 million less than it was sold for in 2002.
Jordan, whose $275 million purchase was approved by the N.B.A. board of governors on Wednesday, is not alone in seeing opportunity in financially weakened franchises. In the past year, five of the nine major professional sports teams in the United States that were sold or are being sold were saddled with substantial debt or operating losses. Another dozen in the four biggest leagues, which have a total of 122 teams, may soon change hands.
In the wake of the financial crisis, new owners like Jordan are facing a future without the near-certainty of making up for any short-term losses by selling their teams for hefty profits later.
“It used to be you got bailed out when you sold your team even if you lost money year after year,” said Marc Ganis, president of SportsCorp Ltd., a consulting firm. “Now, you’re no longer assured of cashing out to cover your capital costs and losses.”
Ganis and other sports-industry experts point to skittish banks that are tightening lending standards, ticket and sponsorship sales that have slowed and labor agreements now being negotiated that could force owners to pay players more or even lead to work stoppages.
At the same time, lawmakers in Washington are discussing whether to raise the capital gains tax by as much as 50 percent, which would slice into the profits of owners selling their teams.
George Postolos, a former Houston Rockets executive who bid against Jordan for the Bobcats, said rising franchise values earlier this decade masked years of losses, debt, bad management and the problems of running teams in smaller markets. “Warren Buffett says the tide has gone out and we can see who’s been swimming naked,” Postolos said.
This new dynamic could fundamentally change the business of sports. As lenders reassess what teams can earn, they are challenging some buyers unwilling to agree to stiffer rules for borrowing, like having the lead investor in a group sign a contract to personally guarantee annual losses.
“Does it practically change behavior? No,” said a person involved in buying a franchise who did not want to be named because the deal is not complete. “But does it cross a line? Yes.”
For decades, sports teams weathered recessions remarkably well. Ticket and advertising sales sometimes dipped, but teams continued to sell at a profit despite the headwinds buffeting the broader economy, according to research by Moag & Company, which brokers sales of teams.
But John Moag, the company’s chairman, said this recession had been drastically different. “The impact of the stock and real estate devaluation on franchise ownership is indirectly, but very certainly, impacting the stability of a number of professional sports franchises,” he said.
The effect of the financial crisis has been seen even in sales of marquee teams like the Chicago Cubs ($845 million) and the Montreal Canadiens ($550 million), which almost certainly would have received more in a thriving market.
But the sums paid for financially weakened teams like the Bobcats suggest a growing gap between the value of stronger and weaker franchises.
¶The Russian billionaire Mikhail D. Prokhorov agreed to pay $200 million for 80 percent of the Nets, the worst team in the N.B.A., and 45 percent of their new Brooklyn arena. He will also finance $60 million in team losses and be responsible for most of its $207 million debt.
¶Last month, the Tampa Bay Lightning of the National Hockey League was sold to Jeffrey N. Vinik, who once ran the giant Fidelity Magellan Fund, for a sum described as from $100 million to $150 million — well below the $200 million paid in 2008.
¶The debt-laden Phoenix Coyotes were sold last fall in bankruptcy court for $140 million to the N.H.L., which fended off a much higher bid from a suitor who wanted to move the team to Canada. The league plans to resell the Coyotes for an estimated $150 million.
¶In a three-step process, the buyers of baseball’s San Diego Padres are taking on more than $200 million in stadium debt from an owner who needed cash to pay for his divorce.
¶The pending sale of the Texas Rangers came after Tom Hicks, the Major League Baseball team’s owner, defaulted on $525 million in loans on the Rangers and the Dallas Stars of the N.H.L.
Now that the economy seems to be on the mend, owners who held off selling during the downturn are seeking to unload their teams. According to sports bankers, the teams thought to be for sale include the Atlanta Hawks, the Memphis Grizzlies, the Golden State Warriors and the Detroit Pistons in the N.B.A; the Stars, the Atlanta Thrashers and potentially the Columbus Blue Jackets in the N.H.L.; and baseball’s Houston Astros.
The Los Angeles Dodgers could be sold because of the pending divorce of their owners.
In any economy, owners cash out after long tenures, as H. Wayne Huizenga did early last year when he completed the sale of the Miami Dolphins for $1.1 billion nearly 15 years after buying them for $138 million.
And owners die. The St. Louis Rams agreed to the sale of the N.F.L team last month, two years after their owner’s death. The Washington Wizards are in play as their minority owner is seeking to buy out the interests of Abe Pollin, who died in November.
The sale of the Bobcats is symptomatic of how the economy exposes poorly run, money-losing teams.
David Stern, the N.B.A. commissioner, said Robert Johnson, the Bobcats’ primary owner, was hurt early on by a bad cable television deal, the absence of a naming rights partner for the arena and slow ticket and sponsorship sales. Though the team has largely fixed those flaws, Stern said, “The legacy of financial underperformance is still with the team.” He said the league and city of Charlotte were fortunate that Jordan, a Bobcats part-owner and executive since 2006, is buying the team, which has “lost money every year and has incurred substantial debt.”
While the economy is slowly improving, the pool of wealthy investors willing to buy teams has shrunk, as has the number of financial institutions willing to finance team acquisitions. Dave Checketts, who led a group to bid for the Rams, said buyers needed “a big equity check” to avoid using too much debt.
Checketts, the principal owner of the N.H.L.’s St. Louis Blues, said his goal was to find an undervalued team in any economy. He said, “We look for situations, like the Blues and Rams, that have seen better days.”
This article has been revised to reflect the following correction:
Correction: March 19, 2010
Because of an editing error, an article on Wednesday about the effect of the financial crisis on sales of professional sports franchises misstated the amount Michael Jordan is paying to buy the Charlotte Bobcats of the National Basketball Association. It is $275 million — not $300 million, which is the sum Robert L. Johnson paid for the expansion team in 2002.
Now, here's Atlanta's response to the article:
Has anybody seen the Atlanta Spirit? They were here just a minute ago . . .
ITEM: The New York Times writes an interesting story on pro sports ownership and the economy. The article mentions the Hawks and the Thrashers as teams that may be on the market. Hmmm.
POSTSCRIPT: So I posted this blog Wednesday morning on the Times story. Sent emails to two owners (Mike Gearon, Bruce Levenson), two general managers (Rick Sund, Don Waddell) and the heads of the teams’ respective public relations departments. Our Chris Vivlamore requested to speak to Waddell, who has been the quasi-CEO of the two sports teams since Bernie Mullin’s exit. No response. No denial. Certainly no confirmation. Not even a, “We’re not going to comment on every story that comes out” non-denial/denial.
Now, I don’t know if the Atlanta Spirit has put the two teams up for sale. I don’t know if one team is for sale and one isn’t and they didn’t want to put out a split statement. I don’t know if all of the owners couldn’t decide what they wanted the statement to say so they just bagged the whole thing. Maybe this was Waddell’s call, maybe it wasn’t. But to flat out respond to a story with silence is flat out unprofessional and allows speculation to linger in an already unsettled economic sports market. Nice job, guys.
blogs.ajc.com/jeff-schultz-blog/2010/03/17/quick-hits-spirit-mute-thomas-climbs-obama-goes-red/?cxntfid=blogs_jeff_schultz_blog