“Rich people don’t like to lose money, even if they could lose it for 1,000 years and still have a nice Palm Springs winter home. It tends to affect the way they do business. Even when their side business is owning a baseball team. This is a concern within the organization.”
The above is from a Nov. 4, 2021, column of mine about the Lerners, the owners of the Washington Nationals, and the impact on their bottom line of the COVID-19-fueled collapse of commercial real estate — the Lerners’ core business and the one that made the family billionaires.
There were concerns inside the Nationals about the pressures facing the Lerners. And, as it turns out, there were good reasons for those concerns.
The Lerners — basking in the glow of the first Natonals victory of 2022, Sunday’s 4-2 win over the New York Mets, attended by some Washington fans — announced Monday that they are looking for a financial infusion, or, more likely, someone to buy the team.
Mark Lerner, the team’s managing principal owner who took over for his father Ted four years ago, said in a statement to The Washington Post that the team has hired the New York investment firm of Allen & Company to research possible investors, or, failing that, someone to buy the franchise.
“This is an exploratory process, so there is no set timetable or expectation of a specific outcome,” Mark Lerner said in the statement. “The organization is as committed as ever to their employees, players, fans, sponsors and partners and to putting a competitive product on the field.”
It was shocking news, no doubt, but something that, if you read the business tea leaves of the family’s primary business — commercial real estate — didn’t seem farfetched in the wake of the economic disaster that COVID-19 wrought.
Washington metropolitan businesses gave up 8.5 million square feet of office space between the second quarter of 2020 and the second quarter of 2021, according to the National Association of Realtors — the second-biggest loss in the country, behind only New York.
That kind of loss meant real financial pain for those, like the Lerners, in commercial real estate.
While retail workers have since returned to stores and showrooms and white-collar workers are trickling back into offices — federal employees aren’t far behind — there are large numbers of workers and businesses that have adjusted to a new remote reality and have no plans to go back to the way it was before.
Baseball revenue may have suffered even worse than commercial real estate over the last couple of years. The first year of the pandemic, 2020, with no fans in the stands, had to hit the Lerners particularly hard because they were unable to capitalize on the financial boom that surely would have come following the team’s 2019 World Series win — higher attendance and more sponsors.
Sources said that the team lost $170 million over that stretch, and the Lerners had to go into their own pockets to cover some of it.
Then there is the MASN mess, the dispute for regional cable dollars — as much as $100 million — between the Lerners and the majority MASN owner, Baltimore Orioles owner Peter Angelos, tied up in court for years.
Ironically, the Orioles will likely be up for sale at some point in the future, as Angelos, 92, has been reportedly ill for several years.
Now the Lerners are asking for help, and if none comes, a very lucrative ticket out of the baseball business. They purchased the franchise — the former Montreal Expos club — from Major League Baseball for $450 million in 2006. Commissioner Bud Selig favored the Lerners over other bidders, in part, because he liked the family ownership.
With the news of a collective bargaining agreement in place, the value of the Nationals is now $2 billion, according to the latest Forbes valuation formula.
It is possible they could bring in a minority investor. PitchBook reported that private equity firms invested nearly $2 billion for pieces of various franchises, with NBA teams being the most attractive investments.
But for single minority investors, there is little to be gained by going into the baseball business with the Lerners remaining in charge other than a good seat in the owner’s box.
What is surprising, though, is how Ted Lerner was so determined to purchase a local sports franchise for decades. He bid on the Baltimore Orioles in 1979, losing out to famed Washington lawyer and Redskins owner Edward Bennett Williams. And Lerner was one of the competing bidders for the Redskins in 1999 when the team was put up for sale several years after the death of owner Jack Kent Cooke.
He finally realized his dream with the winning bid for the Nationals in 2006.
What also may be in play is that Ted Lerner is 96 years old, and there just may not be the drive to continue in this business among his children, their spouses and grandchildren that the patriarch of the family has had.
Speculation will now take off about possible buyers. Would Ted Leonsis, owner of the Wizards and Capitals and business partners with the Lerners, take a shot? How about a group led by former Boston Red Sox and Chicago Cubs team president Theo Epstein? What about losing Mets bidder Josh Harris, who owns the Philadelphia 76ers and New Jersey Devils? Or, God forbid, baseball’s steroid superstar Alex Rodriguez, who bid on the Mets and lost, and then, with business partner Marc Lore, bought the Minnesota Timberwolves in April 2021?
The saddest part of this story? The wrong owner in this town is selling his team.
Hear Thom Loverro on The Kevin Sheehan Show podcast.