Ted Leonsis’s vision of $10 billion local sports empire in DC

Ted Leonsis, the owner of the NBA’s Washington Wizards and the NHL’s Washington Capitals, has a grand vision for growing a local sports empire. Moving both groups out of D.C. and to Alexandria, Virginia, a strategy exposed today, suits his concept of a higher D.C. sports organization design that has the capacity for $10 billion to $15 billion in worth, and an ultimate IPO.

“My goal is to build the world’s most valuable regional sports and entertainment company,” Leonsis stated at the CNBC CFO Council Summit in Washington, D.C., last month.

Leonsis, the previous AOL senior executive, established Monumental Sports & &(****************************************************************************************************************************************************************************************************************************** )in2010 Along with his bulk stakes in both the Capitals and Wizards, Monumental’s portfolio likewise consists of the WNBA’s Washington Mystics, minors hockey and basketball groups, stakes in esports companies, a number of arenas, consisting of Capital One Arena in downtown D.C., and a local sports network.

While the big collection of properties spreads out throughout several sports, there is one considerable aspect that connects everything together: Washington, D.C.

” I will not purchase a soccer group beyond London, and I will not purchase a football group in another market. I desire a platform, Monumental Sports, and we’ll place on that platform [local] groups and places and networks,” Leonsis stated.

That sports footprint is set to grow in the coming years.

On Wednesday, VirginiaGov Glenn Youngkin revealed that the Capitals and Wizards have actually accepted transfer to a brand-new arena in Alexandria, Virginia, as part of a $2 billion home entertainment complex in2028 The brand-new advancement, which would see Monumental invest upwards of $403 million, would likewise house a brand-new international head office for the business consisting of an upgraded broadcasting studio, an esports center, and a carrying out arts location. The offer is pending legal approval.

Monumental stated it likewise prepares to upgrade Capital One Arena, minimizing capability to around 12,000 seats however supplying a home for the Mystics along with other shows and occasions that aren’t presently able to be in the arena due to the NHL and NBA schedules.

There is likewise the capacity for Leonsis and Monumental to get extra groups in the location.

“It’s no secret, I’m unabashedly – we should own a soccer team locally. We should own a baseball team locally,” Leonsis stated. “But I will not chase after outdoors [Washington, D.C.], it’s not a prize for us. It’s ‘Is this additive, is this accretive to the platform?’ If the platform succeeds, then you can invest more in your hockey group, your baseball group, and your basketball group.”

Leonsis has actually been formerly reported as a possible purchaser of both the Baltimore Orioles and the Washington Nationals, 2 MLB groups that would fit his location-based financial investment technique. Both groups are likewise possibly for sale, with Carlyle Group co-founder David Rubenstein supposedly in speak with purchase the Orioles, according to Bloomberg.

“You hear all the time, even when the Orioles do great — this year they had a fantastic team — how will they compete with the Red Sox? How will they compete with big market teams? By trying to build the world’s most valuable regional sports and entertainment company so those comments are void,” Leonsis stated. “It should be how are they going to compete with us? We own the venue, we own the network, we own the teams, and our market is from Richmond to Delaware.”

There are some examples of a multi-team financial investment technique in sports. Fenway Sports Group, for instance, owns the Boston Red Sox, the Pittsburgh Penguins, and the Premier League’sLiverpool David Blitzer, Blackstone international head of tactical chances, ended up being the very first individual to hold group equity in each of the 5 significant North American guys’s sports leagues in 2022 with stakes in the Philadelphia 76 ers, New Jersey Devils, Washington Commanders, Cleveland Guardians, and Real Salt Lake.

James Dolan, through public business MSG Sports, Sphere Entertainment and Madison Square Garden Entertainment, owns the New York Knicks, Rangers, the eponymous arena, and the matching local sports network MSG Networks.

Atlanta Braves Holdings, which Liberty Media divided off from its other services in August, includes the MLB group, the operation of its arena, and the surrounding mixed-use advancement.

However, couple of have complete functional control of the groups, the arena and a broadcast network fixated one city location like Leonsis and Monumental do, something he thinks would use his groups a competitive benefit.

Billionaire business person Stan Kroenke is maybe the closest example to what Leonsis is intending to develop, with his Kroenke Sports & & Entertainment business owning a number of Denver- based franchises such as the NBA’s Nuggets, the NHL’s Avalanche, and MLS’s Rapids, together with the group’s matching arenas and a local sports network. Outside of Colorado, Kroenke owns the NFL’s Los Angeles Rams and the Premier League’s Arsenal FC.

Leonsis stated Monumental is anticipated to make $650 million in income this year, and through natural development ought to reach $1 billion in income “relatively quickly.”

But a group acquisition would turbo charge that. “We could have a billion-and-a-half-dollar revenue run rate and a $10 billion to $15 billion trend of valuation,” Leonsis stated.

Earlier this year, Leonsis offered a 5% stake in Monumental to the Qatar Investment Authority, an offer that values the company at around $4 billion. It likewise broke brand-new ground for the financial investment of sovereign wealth funds into U.S. sports, which follows the opening of personal equity companies and funds likewise having the ability to acquire group stakes in a lot of leagues.

Leonsis stated that QIA is “treated as investors, not partners, as it is a totally passive investment,” however he did keep in mind that he might see the capacity for more sports groups and companies to go public as these kinds of financial investments can be found in.

The market efficiency of public sports companies has actually frequently been as unforeseeable as the group’s real play, in spite of incomes continuing to grow. For example, MSG Sports is up simply 1.22% considering that splitting off from the more comprehensive MSG organization in April2020

MSG Sports, which incorporates business of the NHL’s Rangers and the NBA’s Knicks, has a market cap of approximately $4.15 billion. Earlier this year, the Phoenix Suns were cost a NBA record $4 billion, and the Ottawa Senators were cost an NHL record of almost $1 billion.

Leonsis kept in mind that in his view, sports companies like his stay underestimated, as they must be seen more like SaaS services with repeating income lines like ticketing, sponsorships, and media rights.

“I think now with the valuations that have come out and private equity coming into the world, they’ll want exits. There’ll have to be some kind of market that develops,” Leonsis stated. “But my intuition is that if people understand the true nature of the revenue streams and the predictability and intrinsic global value of our content, I think there will become a market for at-scale size sports venues and operators.”

Could that consist of a Monumental Sports IPO comparable to MSG or the Braves? Leonsis stated that if the business reached those high-end income run rates and appraisal, that’s when business begin to think of going public.

“So, I’ve said let’s act like a pre-IPO company, that doesn’t mean I want to go public,” he stated. “But if you act that way, I think you’ll be well positioned because the sports world has changed dramatically.”