SBJ/May 8 - 14, 2006/This Weeks News

MLB's ownership stint ends profitably

Major League Baseball is expected to reap a profit of about $260 million on its sale of the Washington Nationals to a group led by Maryland developer Ted Lerner, bringing a fiscally robust end to one of the sport’s most turbulent chapters.

The Lerner family broke ground on the
Nationals' new ballpark last week.
The $450 million deal, announced last week, carries a price that is topped in MLB franchise sales only by the $700 million sale in 2002 of the Boston Red Sox, a transaction that included a dominant stake in the New England Sports Network.

With MLB owner approval of the Lerner family purchase set to come next week and a closing on the purchase to follow in June, the books are not yet closed on baseball’s often-rocky four-year ownership of the Montreal Expos-turned-Nationals. The ledger, however, will include a $120 million purchase price from Jeffrey Loria in 2002, $80 million in combined operating losses from 2002-04, and a $10 million profit last year in the club’s inaugural season in Washington, adding up to a total cost basis of about $190 million.

Subtracting from the $450 million purchase price, the remaining $260 million will go into MLB’s already-swelling general fund and be shared by the other 29 clubs. MLB general fund monies are generally split equally among all teams, but Washington will not receive a share in this instance.

“I’m comfortable saying baseball came out OK on this one,” said MLB Commissioner Bud Selig. “The owners of this sport took a huge gamble, spent a lot of money, lost a lot of money, and the return will be fairly earned.”

The final numbers, set to be tallied this summer, will also include a low seven-figure sum in legal and accounting costs, as well as some incremental revenue earned so far this year in the club’s second season in Washington.

The strong profit, however, was not without its heavy emotional and public relations costs. During the four-year run of the team as a financial ward of baseball, MLB executives received countless accusations of conflict of interest, drew embarrassingly low crowds in Montreal, played parts of two seasons in Puerto Rico, frustrated fans and civic officials over the glacially slow process leading to the team’s relocation to Washington, D.C., and battled with the D.C. Council over funding for a new ballpark.

Selig aimed to quell all that dissension by choosing Lerner and his model of family ownership, opting against seven other partnership-oriented bids that included a seven-year-old effort led by Washington businessmen Fred Malek and Jeffrey Zients.

“This is one of the most painful decisions I’ve ever had to make. I absolutely agonized over this,” Selig said. “But in the end, I decided family ownership has served baseball well in the past and will do so again.”

Lerner, 80, is joined in the group by his son, Mark, two sons-in-law, and Stan Kasten, the former Atlanta sports executive who will serve as team president. Also in Lerner’s group are nine Washington-area executives.

The media-shy Lerner said nothing publicly during the long search process for the new Nationals owner, and unlike his competition for the club, he did not court relationships with the D.C. Council. But with the deal now in hand, the successful developer plans to be more visible, even as Kasten assumes the role as public face of the franchise.

Lerner built his large commercial and residential real estate empire by maintaining a low-key but relentless business style. He unsuccessfully bid on the Washington Redskins in 1998 and also failed in attempts to buy the Baltimore Orioles and San Francisco Giants.

Mark Lerner is part of the ownership group that controls the Washington Capitals and holds a minority share in the Washington Wizards and Verizon Center.

In keeping with his prior practices, Ted Lerner is planning to rebuild the Nationals in a methodical way, focusing heavily on a now-barren farm system, developing long-range plans and seeking to re-engage an emotionally bruised fan base. Kasten also will be a significant voice and is expected to operate the Nationals similarly to his 17 seasons in Atlanta as president of the Braves, where he built a perennially winning club but did so without making waves with MLB or spending in a profligate fashion.

“I have always felt an obligation to give back something to this community, something historic and important that will be my legacy, my gift to future generations of Washingtonians,” Ted Lerner said. “I can’t think of a better way to do that than by acquiring the Nationals and operating the team in a way that will make this city proud.”

The Lerners will also lend their development acumen to the construction of the club’s $611 million ballpark in Southeast Washington. A groundbreaking for the ballpark was held last week, but district officials are racing against the clock to beat a looming March 2008 deadline for completion.

Nationals President Tony Tavares will soon be out of a job as Kasten will assume his role, ending a 52-month run in one of the most difficult jobs in sports. The rest of the club’s leadership, most notably general manager Jim Bowden, will be retained for the foreseeable future. Similarly, the front office will likely not see a widespread purge, though the Lerners and Kasten had not articulated specific staffing plans as of last Thursday.

Mark D. Lerner (left) and Theodore N. (Ted) Lerner

Mark D. Lerner

Age: 52
Education: Bachelor of arts, business and public management, George Washington University
Professional experience:

  • Principal of Lerner Enterprises
  • Represents the Lerner family as a minority partner in Lincoln Holdings LLC, the group that owns 100 percent of the NHL Washington Capitals and WNBA Washington Mystics, and 44 percent of the NBA Washington Wizards and Verizon Center.

Theodore N. (Ted) Lerner

Age: 80
Family: Wife, Annette; children Mark D. Lerner, Marla Lerner Tanenbaum and Debra Lerner Cohen
Education: Associate of arts degree, George Washington University; George Washington University Law School
Professional experience:

  • Founder/principal of Lerner Enterprises, the largest private real estate developer in the Washington, D.C., area.
  • Has served on the board of trustees and executive committee of George Washington University, and his family dedicated the Annette and Theodore Lerner Family Health and Wellness Center and Theodore N. Lerner Hall at the school.

Research by Brandon McClung
Sources: Lerner Enterprises, media reports

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