Ted Leonsis’s vision of $10 billion regional sports empire in DC

Monumental Sports & Entertainment CEO Ted Leonsis (R), speaks as Virginia Gov. Glenn Youngkin (L) looks on during the announcement of a new sports arena for the Washington Wizards NBA basketball team and Washington Capitals NHL hockey team, on December 13, 2023 Virginia.

Win Mcnamee | Getty Images News | Getty Images

Ted Leonsis, the owner of the NBA’s Washington Wizards and the NHL’s Washington Capitals, has a grand vision for growing a regional sports empire. Moving both teams out of D.C. and to Alexandria, Virginia, a plan revealed this week, fits into his idea of a greater D.C. sports business model that has the potential for $10 billion to $15 billion in value, and an eventual IPO.

“My goal is to build the world’s most valuable regional sports and entertainment company,” Leonsis said at the CNBC CFO Council Summit in Washington, D.C., last month.

Leonsis, the former AOL senior executive, founded Monumental Sports & Entertainment in 2010. Along with his majority stakes in both the Capitals and Wizards, Monumental’s portfolio also includes the WNBA’s Washington Mystics, minor league hockey and basketball teams, stakes in esports organizations, several arenas, including Capital One Arena in downtown D.C., and a regional sports network.

While the large collection of assets spreads across multiple sports, there is one significant factor that ties it all together: Washington, D.C.

“I will not buy a soccer team outside of London, and I won’t buy a football team in another market. I want a platform, Monumental Sports, and we’ll put on that platform [local] teams and venues and networks,” Leonsis said.

That sports footprint is set to grow in the coming years.

On Wednesday, Virginia Gov. Glenn Youngkin announced that the Capitals and Wizards have agreed to move to a new arena in Alexandria, Virginia, as part of a $2 billion entertainment complex in 2028. The new development, which would see Monumental invest upwards of $403 million, would also house a new global headquarters for the company including an updated broadcasting studio, an esports facility, and a performing arts venue. The deal is pending legislative approval.

Monumental said it also plans to update Capital One Arena, reducing capacity to around 12,000 seats but providing a home for the Mystics as well as other concerts and events that aren’t currently able to be in the arena due to the NHL and NBA schedules.

There is also the potential for Leonsis and Monumental to acquire additional teams in the area.

“It’s no secret, I’m unabashedly – we should own a soccer team locally. We should own a baseball team locally,” Leonsis said. “But I won’t chase outside [Washington, D.C.], it’s not a trophy for us. It’s ‘Is this additive, is this accretive to the platform?’ If the platform is successful, then you can invest more in your hockey team, your baseball team, and your basketball team.”

Leonsis has been previously rumored as a potential buyer of both the Baltimore Orioles and the Washington Nationals, two MLB teams that would fit his location-based investment strategy. Both teams are also potentially for sale, with Carlyle Group co-founder David Rubenstein reportedly in talks to buy the Orioles, according to Bloomberg.

“You hear all the time, even when the Orioles do great — this year they had a fantastic team — how will they compete with the Red Sox? How will they compete with big market teams? By trying to build the world’s most valuable regional sports and entertainment company so those comments are void,” Leonsis said. “It should be how are they going to compete with us? We own the venue, we own the network, we own the teams, and our market is from Richmond to Delaware.”

The growing multi-sport ownership strategy

There are some examples of a multi-team investment strategy in sports. Fenway Sports Group, for example, owns the Boston Red Sox, the Pittsburgh Penguins, and the Premier League’s Liverpool. David Blitzer, Blackstone global head of tactical opportunities, became the first person to hold team equity in each of the five major North American men’s sports leagues in 2022 with stakes in the Philadelphia 76ers, New Jersey Devils, Washington Commanders, Cleveland Guardians, and Real Salt Lake.

James Dolan, through public companies MSG Sports, Sphere Entertainment and Madison Square Garden Entertainment, owns the New York Knicks, Rangers, the eponymous arena, and the corresponding regional sports network MSG Networks.

Atlanta Braves Holdings, which Liberty Media split off from its other businesses in August, consists of the MLB team, the operation of its stadium, and the surrounding mixed-use development.

However, few have full operational control of the teams, the arena and a broadcast network centered on one metro area like Leonsis and Monumental do, something he believes would offer his teams a competitive advantage.

Billionaire businessman Stan Kroenke is perhaps the closest example to what Leonsis is aiming to build, with his Kroenke Sports & Entertainment company owning several Denver-based franchises such as the NBA’s Nuggets, the NHL’s Avalanche, and MLS’s Rapids, along with the team’s corresponding arenas and a regional sports network. Outside of Colorado, Kroenke owns the NFL’s Los Angeles Rams and the Premier League’s Arsenal FC.

More sports teams going public?

Leonsis said Monumental is expected to earn $650 million in revenue this year, and through organic growth should reach $1 billion in revenue “relatively quickly.”

But a team acquisition would supercharge that. “We could have a billion-and-a-half-dollar revenue run rate and a $10 billion to $15 billion trend of valuation,” Leonsis said.

Earlier this year, Leonsis sold a 5% stake in Monumental to the Qatar Investment Authority, a deal that values the organization at around $4 billion. It also broke new ground for the investment of sovereign wealth funds into U.S. sports, which follows the opening of private equity firms and funds also being able to purchase team stakes in most leagues.

Leonsis said that QIA is “treated as investors, not partners, as it is 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.

The market performance of public sports organizations has often been as unpredictable as the team’s actual play, despite revenues continuing to grow. For example, MSG Sports is up just 1.22% since splitting off from the broader MSG business in April 2020.

MSG Sports, which encompasses the businesses of the NHL’s Rangers and the NBA’s Knicks, has a market cap of roughly $4.15 billion. Earlier this year, the Phoenix Suns were sold for a NBA record $4 billion, and the Ottawa Senators were sold for an NHL record of nearly $1 billion.

Leonsis noted that in his view, sports organizations like his remain undervalued, as they should be viewed more like SaaS businesses with recurring revenue lines like ticketing, sponsorships, and media rights.

“I think now with the valuations that have come out and private equity coming into the world, they’ll want exits. There’ll have to be some kind of market that develops,” Leonsis said. “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.”

Could that include a Monumental Sports IPO akin to MSG or the Braves? Leonsis said that if the company reached those high-end revenue run rates and valuation, that’s when companies start to think about going public.

“So, I’ve said let’s act like a pre-IPO company, that doesn’t mean I want to go public,” he said. “But if you act that way, I think you’ll be well positioned because the sports world has changed dramatically.”