The price and structure of the Phoenix Suns’ record $401 million sale could trigger more deals for NBA owners looking for an exit strategy from the league, sports finance experts said last week.
“What it tells the [NBA] owners is that the market has improved in the past two years,” said John Moag, owner of Baltimore-based sports finance company Moag & Co. “We are seeing more interested buyers in the NBA.”
The Suns deal, announced April 16, calls for Robert Sarver to buy the NBA club, the WNBA Phoenix Mercury, the AFL Arizona Rattlers and operating rights for America West Arena. The $401 million purchase price eclipses last year’s $360 million sale of the Boston Celtics and ranks among the highest ever for a U.S. sports property acquisition (see chart).
“It’s a very strong price,” said Robert Caporale, chairman of Game Plan LLC, which brokered last year’s Celtics sale. “I was surprised, and to be honest, we looked at the Suns on behalf of a client. But it’s a price supported by NBA teams and by the job [Suns owner] Jerry Colangelo has done in the market.”
Nearly all the value is assigned to the Suns, with the additional properties adding little to the deal, experts said.
For Sarver, an Arizona native who made his fortune in California real estate, the deal stands as a hometown purchase.
Neither Sarver nor Colangelo was available to discuss the deal.
“It’s a rich price and it’s a little steep,” said one sports finance expert familiar with the Phoenix market. “But for a wealthy individual [like Sarver], how many times does a team in your own backyard come on the market?”
The deal, which still must be approved by NBA owners, includes $200 million in debt, split evenly between America West Arena and the Suns, a source said. NBA rules allow teams to carry up to $100 million in debt. Terms call for Sarver, 42, and his investment group to pay 65 percent of the price by the end of June, with the balance to be paid in 2007.
Colangelo and his investment group paid $44 million for the Suns in 1987. Colangelo owns 20 percent of the franchise. Under Sarver’s deal, Colangelo will remain as chairman of the team for at least three years, a valuable arrangement that helps ease the transition for the new ownership group.
There are no other NBA franchises openly for sale.
Sarver’s other investors include Colangelo’s son, Bryan, and former NBA and University of Arizona player Steve Kerr. At least 10 other investors are expected to join Sarver’s group. Bryan Colangelo is now president and general manager of the Suns.
Lehman Bros. handled the sale for the Suns, another in a string of recent team sales for the New York-based bank.
“One of the reasons the purchase price was so high is the job Jerry has done with the franchise,” said Sal Galatioto, managing director of Lehman Bros.’ sports finance division. “Jerry has done a fantastic job of managing this franchise.”
Staff writer Daniel Kaplan contributed to this story.
