Multiple Washington, D.C.-area sports team owner Ed Leonsis stated that he hopes to create “the world’s most valuable regional sports and entertainment company,” estimating the company’s worth between $10 billion and $15 billion and indicating that an initial public offering (IPO) may be possible.
The news this week that the Washington Capitals and Wizards, owned by Leonsis, may relocate to Alexandria, Virginia as part of a $2 billion entertainment complex, helped to further that vision.
There have been rumors that Leonsis is interested in the Washington Nationals and Baltimore Orioles.
The owner of the Washington Wizards of the NBA and the Washington Capitals of the NHL, Ted Leonsis, has big plans for expanding a local sports empire. This week’s plan to move both teams from Washington, D.C. to Alexandria, Virginia, fits into his larger idea of a sports business model for D.C. that could be worth $10 billion to $15 billion, including an eventual initial public offering (IPO).
“I want to create the most valuable regional sports and entertainment company globally,” Leonsis declared during last month’s CNBC CFO Council Summit in Washington, D.C.
2010 saw the founding of Monumental Sports & Entertainment by Leonsis, a former senior executive at AOL. Monumental owns majority stakes in both the Washington Wizards and the Washington Caps. His holdings in esports organizations, minor league hockey and basketball teams, the Washington Mystics of the Women’s National Basketball Association, a number of arenas, including Capital One Arena in downtown Washington, D.C., and a regional sports network round out his holdings.
Even though the sizable asset collection is dispersed throughout several sports, one important element unites them all: Washington, D.C.
“I refuse to purchase a football team in a different market or a soccer team located outside of London. Monumental Sports is my platform of choice, and we’ll place [local] teams, venues, and networks on it,” Leonsis declared.
In the upcoming years, that sports footprint is expected to increase.
The Capitals and Wizards have decided to relocate to a new arena in Alexandria, Virginia in 2028 as part of a $2 billion entertainment complex, according to a statement made by Virginia Governor Glenn Youngkin on Wednesday. Monumental would invest up to $403 million in this new development, which would also house the company’s new global headquarters, complete with an updated broadcasting studio, an esports facility, and a performing arts venue. Legislative approval is still pending for the deal.
According to Monumental, it also intends to renovate Capital One Arena, which will result in a capacity reduction to about 12,000 seats but will house the Mystics and other events and concerts that aren’t currently able to take place there because of NHL and NBA schedules.
It is also possible that Monumental and Leonsis will purchase more local teams.
“I’m not hiding anything from you; we ought to own a local soccer team. Locally, we ought to own a baseball team,” Leonsis declared. “But since it’s not a trophy for us, I won’t pursue outside of Washington, D.C. “Is this additive or accretive to the platform?” is the question. Should the platform prove to be prosperous, you will have additional funds to allocate towards your baseball, hockey, and basketball team.”
The Washington Nationals and Baltimore Orioles are two MLB teams that would fit into Leonsis’ location-based investment strategy. Both teams have previously been mentioned as possible acquisition candidates. Both teams may be up for sale; according to Bloomberg, David Rubenstein, the co-founder of the Carlyle Group, is reportedly in talks to purchase the Orioles.
“Everyone always asks how the Orioles will compete with the Red Sox, even if they have a great team like they did this year. How will they go up against teams from large markets? In order to disprove those remarks, Leonsis stated that he is working to create the most valuable regional sports and entertainment company in the world. “It ought to be about how they plan to rival us. We are the owners of the network, the venue, and own the teams, and our market is from Richmond to Delaware.”
The growing multi-sport ownership strategy
In sports, there are a few instances of multi-team investment strategies. For instance, the Boston Red Sox, Pittsburgh Penguins, and Liverpool of the Premier League are all owned by Fenway Sports Group. In 2022, David Blitzer, the Blackstone global head of tactical opportunities, made history by being the first individual to own team equity in all five major North American men’s sports leagues: the Philadelphia 76ers, New Jersey Devils, Cleveland Guardians, Washington Commanders, and Real Salt Lake.
James Dolan owns the New York Knicks, Rangers, the arena that bears their namesake, and the corresponding regional sports network MSG Networks through his publicly traded companies MSG Sports, Sphere Entertainment, and Madison Square Garden Entertainment.
In August, Liberty Media separated Atlanta Braves Holdings from its other businesses. The company now owns and operates the MLB team, the stadium, and the mixed-use development around it.
He feels that having complete operational control over the teams, the arena, and a broadcast network focused on a single metro area—something that only Leonsis and Monumental possess—would provide his teams with a competitive edge.
The closest example of what Leonsis is trying to create is probably billionaire businessman Stan Kroenke, whose Kroenke Sports & Entertainment company owns multiple Denver-based franchises, including the NBA’s Nuggets, NHL’s Avalanche, and MLS’s Rapids, in addition to the teams’ respective arenas and a local sports network. Kroenke owns the Los Angeles Rams of the NFL and the Premier League outside of Colorado.
More sports teams going public?
According to Leonsis, Monumental is predicted to generate $650 million in revenue this year and should “relatively quickly” reach $1 billion in revenue through organic growth.
A team acquisition, though, would amp up 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.
Leonsis sold the Qatar Investment Authority a 5% share in Monumental earlier this year; the transaction valued the company at approximately $4 billion. In addition, it set a precedent for sovereign wealth funds to invest in American sports, following the establishment of private equity firms and funds’ ability to acquire team ownership in the majority of leagues.
QIA is “treated as investors, not partners, as it is,” according to Leonsis. a totally passive investment,” but he did note that he could see the potential for more sports teams and organizations to go public as these types of investments come in.
Even though revenue for public sports organizations is still increasing, their market performance has frequently been just as unpredictable as the team’s actual play. As an illustration, MSG Sports has only increased by 1.22% since separating from the larger MSG company in April 2020.
With a market valuation of about $4.15 billion, MSG Sports is the parent company of the NBA’s Knicks and the NHL’s Rangers. The Ottawa Senators were sold for an NHL record of almost $1 billion, and the Phoenix Suns were sold for an NBA record $4 billion earlier this year.
According to Leonsis, sports organizations like his are still undervalued and ought to be treated more like SaaS companies with recurring revenue streams like media rights, ticket sales, and sponsorships.
“I believe that exits will be desired by private equity given the recent valuations that have been released. A market of some kind will need to emerge, according to Leonsis. “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.”
Is there any chance that Monumental Sports, like MSG or the Braves, will go public? Leonsis stated that companies begin to consider going public when they reach those high-end revenue run rates and valuation.
“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.”