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SportsBiz: An empire in Chinatown

- The Washington Times - Thursday, November 26, 2009

Ted Leonsis is already the most popular team owner in the District, and he's about to become the most powerful.

The man who led a turnaround of the Washington Capitals likely will become owner of the city's NBA franchise now that Wizards owner Abe Pollin has died. As part of an agreement granting him the right of first refusal for any sale of the team, he also could purchase Verizon Center and the area's Ticketmaster franchise, giving him a sports empire that would be the envy of executives around the country.

The arrangement between Pollin and Leonsis, struck in 1999 when Leonsis bought the Capitals, is unusual. Typically, when a franchise owner dies, the team passes on to a spouse or children, who are happy to take over. In cases when family members wish to sell the team, they do so later, placing the team on the open market and looking for the highest bidder. That Pollin was willing to see his team passed on to Leonsis is a testament to the relationship the two men had and a final example of Pollin's love for the team.

The Wizards will be left in good hands, but there is still some work to do.

No one knew when Pollin would pass away or give up control of the team, so financial terms of the sale were not prearranged. Forbes magazine last year valued the Wizards at $353 million, which suggests that the share of the team not already under Leonsis' control would cost nearly $200 million. Verizon Center and the Ticketmaster franchise could double that figure, but Leonsis also would assume considerable debt from construction of the arena.

Since Leonsis has been designated as the heir apparent, the sale of the team could go more smoothly than most. But much of that will depend on how much cash Leonsis and his partners have on hand. A sale involving mostly cash would be completed quickly, investment bankers said, but the need to borrow money or bring in new investors could drag out the process.

Leonsis' partners, who make up a group known as Lincoln Holdings, are wealthy. But it's unlikely any would seek a majority share unless Leonsis were low on funds, and that's a doubtful scenario given the success of many of his investments. Just last week, he announced that Revolution Money, a company he served as chairman of and largely funded, was sold to American Express in a deal reported to be worth $300 million.

Working in Leonsis' favor is the fact that many other sports franchises are already for sale and not finding a rush of willing buyers. The recession has taken away billions of dollars of wealth, and banks are far tighter in their lending practices. If the Pollin family had an unexpected change of heart, it's unlikely that it could, in short order, find a group of buyers as financially sound as Leonsis and his partners from Lincoln Holdings.

If and when Leonsis takes over, he will have the ability to maximize revenues from Verizon Center because he will own three of the arena's major tenants. And he will have leverage in any negotiations with cable companies over broadcasting his teams' games, possibly selling their television rights as a package or even forming a separate cable network centered on Wizards and Capitals games.

For now, the rights to Wizards and Capitals games on television belong to Comcast SportsNet Mid-Atlantic.

"We have a close working relationship with Ted and long-term rights contracts with both teams," a network spokesman said.