By Sonya Kimble-Ellis
Bob Johnsold sold his interest in the Bobcats to Jordan
Sports investing has proven to be for a wealthy and chosen few. It has been four years since an NBA team was up for sale. But so far, 2010 has seen both the Charlotte Bobcats and the New Jersey Nets placed on the auction block. “Of the ninety or so teams in Major League Baseball, the NBA and NFL, only a small number of them would be for sale or available for transactions,” said George Postolos, president and CEO of The Postolos Group LP, a sports investment and advisory firm in Houston. Franchise owners, he says, tend to hold onto their teams for a very long time.
That wasn’t the case with Bob Johnson, founder of Black Entertainment Television. He purchased the Charlotte Bobcats six years ago, making him the first African-American majority owner of a professional sports team. After purchasing the team for $300 million, he reportedly lost upwards of $30 million per season as the franchise had difficulty finding sponsorships and filling arena seats.
Bob Johnson recently criticized the Charlotte business community
Reflecting on the challenge Johnson faced, Andre Farr, chairman and CEO of the Black Sports Agents Association (BSAA), said, “Some investments just take a long time to mature, and to start a new NBA team in a city that didn’t have a team beforehand is a difficult task.” Farr added that making a team profitable takes top tier investors, coaching staff, executives and marketing personnel. “It’s not just the players,” he said. “When it works, it works. The New York Yankees are a good example of that.”
Seeing his fortunes decline, Johnson began looking for buyers some six months ago. In the running to purchase the franchise was Michael Jordan, who had been a minority investor since 2006, yet who had played a major role in team decisions both on and off the court. Jordan’s experience also includes working as president of operations for the Washington Wizards, during which time they won six championships. Also making a play for the Bobcats was Postolos, who had previously served as president of the Houston Rockets for eight seasons. He declined to go into detail about his role in Jordan’s recent acquisition of the Bobcats.
On March 17th of this year Jordan, having received unanimous approval from the NBA’s Board of Governors, finalized his purchase of a controlling interest in the team. The purchase was done under the auspices of MJ Basketball Holdings LCC, a group of investors organized by Jordan himself. Insiders place the value of the deal at $240 million dollars. Reportedly $160 million of that will cover the team’s debt, while $80 million will be used for expected losses for this season and the next.
I plan to make this franchise an organization that Charlotte can be proud of,” Jordan told reporters recently, “and I am committed to doing all that I can to achieve this goal. . . .I plan to be very hands-on with this business. For me there’s a personal dimension to owning this team. I’m doing this because Carolina is, and always has been, home for me, and basketball is my main business. I’m also the first player to become the principal owner of a team, and that gives me a different perspective on ownership than anyone else in the league.”
“While what Jordan says is true, several former athletes such as Magic Johnson, Mel Farr, Gayle Sayers and Dave Bing have tried their hand at the ownership side of the game. “There are a lot of athletes who have gone into business after their playing years,” said Farr. “But I have to say that [the business is actually] being led by business leaders and entrepreneurs. Now, guys are getting even smarter and doing things together.”
According to Farr, BSAA’s Athletes Rebuild America project is at the forefront of joining investors with sports backgrounds with those from other industries, helping to gather resources and capital, and facilitating their investment in communities throughout the country. “It makes sense for the viability of progressive investing,” he said, “and there is less risk because it’s spread out among a number of people.”
George Postolos was said to have competed with Jordan in the Bobcats sale
For Postolos, the key to sports investing is figuring out which sport to pursue and learning as much as one can about it. In moving forward one must consider the prevailing ownership structures. There have been a couple of situations in which teams were widely held. For example, the Boston Celtics was once a publicly traded team. But generally, according to Postolos, a team is owned by either one person or a small group. “Every team in the NBA is owned in that manner now,” he said. Researching requirements for controlling ownership or partnership within a given investment group is critical for choosing the right opportunity. “There are also certain financial requirements and tax advantages,” he said. “These tend to be long-term investments, where over the period of a decade, a person can do quite well.
Only time will tell if Jordan will make good on his investment. And as Farr reminds us, the gains will not only be computed in dollars and cents, but also in terms of how African-American leadership within the industry stacks up. “The sports business is one that is a little tricky because most of the [African-American individuals] we’ve worked with have been players. There are more who are [working as] coaches now,” he said.
Although the Charlotte Bobcats continue to struggle on the court, there is no question that they will remain in the spotlight as the only major African-American owned team. “The Michael Jordan venture is going to be one that is studied and viewed heavily from a lot of investors from around the country and the globe,” said Farr. “They’ll be looking to see how he handles being the majority owner of a national basketball association team.”
