The long — and sometimes contentious — negotiations for Capitals and Mystics owner Ted Leonsis to purchase the Verizon Center and the Wizards from the estate of Abe Pollin appears to be over.
According to reports, the two sides agreed to value the arena and the NBA franchise at around $550 million — although Leonsis’ Lincoln Holdings Group already owns a 44 percent stake in both as part of his agreement to purchase the Capitals from Pollin in 1999.
The value was the biggest sticking point in the talks. While Leonsis felt he had the right of first refusal to purchase the club upon Pollin’s death in November, an e-mail surfaced in January from Washington Sports & Entertainment president of business operations Peter Biche that stated there was nothing to prevent from marketing the team “to other potential buyers.”
Leonsis had responded by emphasizing his right to negotiate a fair price for the arena and team on his blog. “I am very confident this process will move forward in the manner Mr. Pollin and I agreed to in 1999,” Leonsis wrote back in January. “The last thing the Wizards need now is more uncertainty.”
The reports caution the deal could still fall apart as the talks will concern the transition from the WS&E Group — which has run the building and its operations since the opening of the then-MCI Center in 1997 — to Lincoln Holdings. But a source also tells AP that the deal could be done in “weeks, not months.”
“Some details are still to be worked out so its not a done deal entirely,” Jason Maloni, Chair of Sports & Entertainment practice at Levick Strategic Communications said of the reports. “It’s a fair price. It’s a good time for Ted to buy and the Wizards are a good value.”
The potential deal also would still have to be approved by the NBA, although that is likely simply a formality with Pollin’s intent to sell the franchise to Leonsis.
If he adds the building and Wizards to his portfolio, the accessible former AOL executive becomes one of the biggest sports magnates in the mid-Atlantic. He would own Verizon Center, three professional sports franchise as well as the region’s TicketMaster franchise.
Leonsis became involved in the Washington sports scene in 1999 when he agreed to purchase the NHL franchise — and the stake in WS&E — from Pollin for $85 million. Lincoln Holdings added the WNBA team to its portfolio in 2005 for $10 million.
Despite the partnership, it wasn’t always smooth sailing between the two groups.
The most famous dispute involved the courting of Michael Jordan to run the franchise’s basketball operations in 2000. Leonsis pushed hard to bring the NBA great into the team’s front office, and eventually Jordan suited up for the squad for two seasons to help the club. Once Jordan left the court for good, however, Pollin decided to let Jordan go in May of 2003. According to a New York Times report, Jordan yelled at Leonsis during the meeting, chastising him for “getting him into this mess.”
But there was always tension beneath the surface as well. Despite owning 44 percent of the arena, Lincoln Holdings did not draw on funds paid from the club seats or suites in the building, leaving it difficult for the Capitals to draw a profit despite a resurgence in attendance in recent seasons.
But with the building under the Lincoln Holdings umbrella, it certainly will give the team’s bottom line a healthy boost.
“The impact will be greatest on the Capitals who now will derive revenue from the arena itself,” Maloni said. “We’re likely to see a very good franchise bolstered with an infusion of cash because Ted’s in it to win it.”
While Leonsis has successfully guided one rebuilding project for the Capitals, as the team is on the verge of clinching its first-ever Eastern Conference regular-season title, he will inherit an NBA franchise that is badly in need of a major rebuilding.
The Wizards dropped their 13th straight game to equal a franchise record Wednesday night in Indiana, and their poor on-the-court play has been overshadowed by an incident where the team’s star, Gilbert Arenas, was suspended for the rest of the season for bringing a weapon into the team’s locker room.