As Joe Tsai said of his investment in the Nets back in 2020, “NBA teams are not going to lose asset value, It’s like owning a penthouse apartment on Park Avenue.”
And Tsai knows about penthouses. His purchases of apartments at 220 Central Park South were the biggest residential purchases of the year, not just in New York City, but in the United States.
He knows NBA valuations too. According to Sportico’s annual survey of team valuations, the Nets are now worth $3.86 billion, about $600 million more than what he paid three years ago for the franchise and Barclays Center and about a quarter billion more than Sportico valued the team at last season. (He also paid a reported $10 million or so, plus the assumption of team debt, for the Liberty earlier that year. That investment also has likely risen.)
And valuations are likely to keep going up. The NBA’s TV deal is up for renewal in 2025 and the general belief is that it will be double or even triple the current deal with TNT and ESPN. The league is going to expand and the owners of new teams, probably in Las Vegas and Seattle, will have to pay fees as high as $5 billion per, split evenly among the current owners of the league’s 30 teams.
As a result, even small stakes are becoming attractive. In the past year, eight owners have sold pieces of their teams to private equity firms at substantial prices. It’s ideal for the owners: Control stays with them and they reap huge profits on the sale of the minority stakes.
As Sportico also reports, new rules permit institutional investment funds — pension funds, university endowments and sovereign wealth funds run by nation states — to invest in teams, which opens up new opportunities.
“The move puts more liquidity into the market, and these funds can write really big checks,” Sal Galatioto, longtime sports investment banker, told Sportico. “Sports teams offer some diversification, and these assets are not really correlated to the stock market.”
“Values are not going down,” as one league source told NetsDaily.
The rise in NBA teams’ valuations are in effect hedges against losses in other areas owners might invest in. As Sportico reports, “The average NBA franchise is worth $3 billion, up 16% versus last year. It is a strong showing, considering the S&P 500 is down 16% during the same period.”
Indeed, as we noted two weeks ago Tsai’s family investment office, Blue Pool Capital, sold almost all of its U.S. stock portfolio earlier this year. In effect, Tsai is using his investment in the Nets and Barclays Center — as well as his Manhattan real estate — as a stabilizing entry on his balance sheet. It’s yet another reason to believe that Tsai is in it for the long-term.
Despite the rise of valuation, the Nets are reportedly losing money, as they did under Mikhail Prokhorov who walked away with an estimated $2 billion profit when he sold to Tsai. Earlier in the year, reports from various sources suggested Brooklyn is the only NBA team to lose money last season, an estimated $34 million. Tsai told NetsDaily in 2021 that without the Nets’ $100 million annual luxury tax payments the team would be profitable. He sees the luxury taxes he sees as investments in the franchise’s future, he said.
Tsai has set lofty goals for revenue over the next several years, having previously told Forbes that he’d like to see the team revenue jump from around $350 million this year to “$500 million over the next two or three years” and a billion dollars by the end of the decade. If he does, that too will add to the team’s value.
- NBA VALUATIONS: WARRIORS TOP $7.6 BILLION AS TEAMS AVERAGE $3 BILLION - Kurt Badenhausen - Sportico
- Sportico: Brooklyn Nets now worth $3.86B, sixth in the league. Does BSE Global (Barclays Center operating company, mostly) really contribute $980M to value? - Norman Oder - Atlantic Yards/Pacific Park Report