SBJ/June 4 - 10, 2001/No Topic Name
Colangelo mulls selling Suns stake
Published June 4, 2001
Phoenix Suns owner Jerry Colangelo is considering selling part of his NBA club because of estate planning demands.
The 61-year-old Colangelo said the potential move is not tied to his debt problems with his other Arizona team, MLB's Diamondbacks, and he intends to keep running the Suns for at least another decade. It's premature, he said, to discuss whom he might sell the position to, or for how much.
"This is all about an asset that has appreciated dramatically," he said. "In terms of an exit strategy or estate planning, if you will, it is important to explore all the options that are available to protect the asset."
Financial sources said he already had talked to an old friend about buying a 40 percent stake in the team, but Colangelo disputed that account. The NBA, which would have to approve any sale, wouldn't comment.
Colangelo led a group of investors who bought the club for $44.5 million in October 1987 after he ran the team as general manager for 19 years. The current value of the club could be more than $200 million, given that was how much the Seattle SuperSonics sold for earlier this year.
Colangelo, who is believed to directly own about 36 percent of the team and is the controlling partner, said some of his current limited partners could be bought out by a new investor.
Financial and estate planning sources questioned whether Colangelo's potential minority sale might not be tied to his problems at the Diamondbacks, despite his denials. Since leading a group to buy the franchise that became the Diamondbacks in 1995 for $130 million, Colangelo was forced to ask those investors for $53 million in 1998 and 1999 to prop up the financially ailing club.
Also, there are easier ways of managing an estate than selling part of a basketball team, said accounting experts.
"You can sell a discounted minority interest to a family member or a trust," said Steve Resnick, a partner in Resnick, Amsterdam & Leshner, a Blue Bell, Pa., accounting and business development company. Resnick was unfamiliar with Colangelo's specific situation. "But selling a minority interest to an outside person is done to create liquidity that could be used to pay down debt, especially if the minority interest is worth a lot of money."
Estate planning is designed to minimize the inheritance taxes family members must pay when someone dies. In the case of Colangelo, the transfer of his Suns' interest could create huge tax demands for his survivors, unless he unloads part of his position now.
"This ... avoid[s] a fire sale by his family at death," said Susan Goldenberg, a partner specializing in estate planning with the Katten, Muchin, Zavis law firm, which represents owners and investors in major league sports.
Another concern for Colangelo is that if he decides to sell a minority stake, the market is weak and crowded. Miami Dolphins owner Wayne Huizenga recently scotched his plans to sell up to 30 percent of his team after finding no takers at the right price.
And Jon Ledecky is already trying to unload his interests in the Washington Capitals and Wizards, while Vancouver Grizzlies owner Michael Heisley said he wants to sell up to half the team as part of a move to Memphis, Tenn.
Last year, Baltimore Ravens owner Art Modell sold 49 percent of the team to Maryland businessman Steve Bisciotti for $272 million, but that included an option to buy the remaining stake in the Ravens in 2004.
"This is not a great economy to be selling a minority piece of a franchise," said John Moag, head of the sports practice at Legg Mason, which brokered the Bisciotti deal and is trying to find a buyer for Ledecky.
Colangelo also has been negotiating to sell his interest in the Arena Football League's Arizona Rattlers to a group led by the team's coach, Danny White. That sale could fetch around $10 million. He paid $220,000 for the franchise in 1991.