Monumental Sports & Entertainment CEO Ted Leonsis (R), speaks as Virginia Gov. Glenn Youngkin (L) seems on in the course of the announcement of a new sports area for the Washington Wizards NBA basketball crew and Washington Capitals NHL hockey crew, on December 13, 2023 Virginia.
Win Mcnamee | Getty Images News | Getty Images
Ted Leonsis, the owner of the NBA’s Washington Wizards and the NHL’s Washington Capitals, has a grand vision for rising a regional sports empire. Moving both teams out of D.C. and to Alexandria, Virginia, a plan revealed this week, matches into his concept of a better D.C. sports enterprise mannequin that has the potential for $10 billion to $15 billion in worth, and an eventual IPO.
“My aim is to construct the world’s most beneficial regional sports and leisure firm,” Leonsis stated on the CNBC CFO Council Summit in Washington, D.C., final month.
Leonsis, the previous AOL senior government, based Monumental Sports & Entertainment in 2010. Along with his majority stakes in each the Capitals and Wizards, Monumental’s portfolio additionally consists of the WNBA’s Washington Mystics, minor league hockey and basketball groups, stakes in esports organizations, a number of arenas, together with Capital One Arena in downtown D.C., and a regional sports community.
While the massive assortment of property spreads throughout a number of sports, there may be one important issue that ties all of it collectively: Washington, D.C.
“I cannot purchase a soccer crew exterior of London, and I will not purchase a soccer crew in one other market. I need a platform, Monumental Sports, and we’ll placed on that platform [local] groups and venues and networks,” Leonsis stated.
That sports footprint is about to develop within the coming years.
On Wednesday, Virginia Gov. Glenn Youngkin announced that the Capitals and Wizards have agreed to move to a new area in Alexandria, Virginia, as half of a $2 billion leisure advanced in 2028. The new improvement, which might see Monumental make investments upwards of $403 million, would additionally home a new international headquarters for the corporate together with an up to date broadcasting studio, an esports facility, and a performing arts venue. The deal is pending legislative approval.
Monumental stated it additionally plans to replace Capital One Arena, decreasing capability to around 12,000 seats however offering a house for the Mystics in addition to different live shows and occasions that are not at present ready to be within the area due to the NHL and NBA schedules.
There can be the potential for Leonsis and Monumental to purchase extra groups within the space.
“It’s no secret, I’m unabashedly – we must always personal a soccer crew domestically. We ought to personal a baseball crew domestically,” Leonsis stated. “But I will not chase exterior [Washington, D.C.], it isn’t a trophy for us. It’s ‘Is this additive, is that this accretive to the platform?’ If the platform is profitable, then you may make investments extra in your hockey crew, your baseball crew, and your basketball crew.”
Leonsis has been beforehand rumored as a potential purchaser of each the Baltimore Orioles and the Washington Nationals, two MLB groups that will match his location-based funding technique. Both groups are additionally probably on the market, with Carlyle Group co-founder David Rubenstein reportedly in talks to purchase the Orioles, according to Bloomberg.
“You hear on a regular basis, even when the Orioles do nice — this yr they’d a unbelievable crew — how will they compete with the Red Sox? How will they compete with huge market groups? By making an attempt to construct the world’s most beneficial regional sports and leisure firm so these feedback are void,” Leonsis stated. “It must be how are they going to compete with us? We personal the venue, we personal the community, we personal the groups, and our market is from Richmond to Delaware.”
The rising multi-sport possession technique
There are some examples of a multi-team funding technique in sports. Fenway Sports Group, for instance, owns the Boston Red Sox, the Pittsburgh Penguins, and the Premier League’s Liverpool. David Blitzer, Blackstone international head of tactical alternatives, grew to become the primary particular person to maintain crew fairness in every of the 5 main North American males’s sports leagues in 2022 with stakes within the Philadelphia 76ers, New Jersey Devils, Washington Commanders, Cleveland Guardians, and Real Salt Lake.
James Dolan, via public firms MSG Sports, Sphere Entertainment and Madison Square Garden Entertainment, owns the New York Knicks, Rangers, the eponymous area, and the corresponding regional sports community MSG Networks.
Atlanta Braves Holdings, which Liberty Media break up off from its different companies in August, consists of the MLB crew, the operation of its stadium, and the encompassing mixed-use improvement.
However, few have full operational management of the groups, the sector and a broadcast community centered on one metro space like Leonsis and Monumental do, one thing he believes would provide his groups a aggressive benefit.
Billionaire businessman Stan Kroenke is maybe the closest instance to what Leonsis is aiming to construct, with his Kroenke Sports & Entertainment company proudly owning a number of Denver-based franchises such because the NBA’s Nuggets, the NHL’s Avalanche, and MLS’s Rapids, together with the crew’s corresponding arenas and a regional sports community. Outside of Colorado, Kroenke owns the NFL’s Los Angeles Rams and the Premier League’s Arsenal FC.
More sports groups going public?
Leonsis stated Monumental is predicted to earn $650 million in income this yr, and thru natural progress ought to attain $1 billion in income “comparatively shortly.”
But a crew acquisition would supercharge that. “We may have a billion-and-a-half-dollar income run fee and a $10 billion to $15 billion pattern of valuation,” Leonsis stated.
Earlier this yr, Leonsis bought a 5% stake in Monumental to the Qatar Investment Authority, a deal that values the group at around $4 billion. It additionally broke new floor for the funding of sovereign wealth funds into U.S. sports, which follows the opening of non-public fairness companies and funds additionally having the ability to buy crew stakes in most leagues.
Leonsis stated that QIA is “handled as traders, not companions, as it’s a completely passive funding,” however he did notice that he may see the potential for extra sports groups and organizations to go public as these varieties of investments are available in.
The market efficiency of public sports organizations has typically been as unpredictable because the crew’s precise play, regardless of revenues persevering with to develop. For instance, MSG Sports is up simply 1.22% since splitting off from the broader MSG enterprise in April 2020.
MSG Sports, which encompasses the companies of the NHL’s Rangers and the NBA’s Knicks, has a market cap of roughly $4.15 billion. Earlier this yr, the Phoenix Suns had been bought for a NBA report $4 billion, and the Ottawa Senators had been bought for an NHL report of practically $1 billion.
Leonsis famous that in his view, sports organizations like his stay undervalued, as they need to be considered extra like SaaS companies with recurring income strains like ticketing, sponsorships, and media rights.
“I feel now with the valuations which have come out and personal fairness coming into the world, they’re going to need exits. There’ll have to be some type of market that develops,” Leonsis stated. “But my instinct is that if individuals perceive the true nature of the income streams and the predictability and intrinsic international worth of our content material, I feel there’ll grow to be a marketplace for at-scale measurement sports venues and operators.”
Could that embrace a Monumental Sports IPO akin to MSG or the Braves? Leonsis stated that if the corporate reached these high-end income run charges and valuation, that is when firms begin to take into consideration going public.
“So, I’ve stated let’s act like a pre-IPO firm, that does not imply I need to go public,” he stated. “But should you act that means, I feel you will be effectively positioned as a result of the sports world has modified dramatically.”
