The Philadelphia 76ers' Arena Gambit
The Philadelphia 76ers' Arena Gambit
The Brooklyn Nets may sell a slice of the team. A (contested) new arena could also boost the Sixers.
The value of NBA teams has been rising steadily, and owners, like the Brooklyn Nets’ Joe Tsai, seem ready to sell a minority share to reap profit from their investment in the team (and associated venue).
An even bigger upside might be right down I-95, at least if the Philadelphia 76ers can get a new arena built in downtown Philly—and that’s hardly certain.
Discussing NBA team valuations in a Dec. 14, 2023 Sporticast podcast (below), Sportico's Scott Soshnick, Eben Novy-Williams, and Kurt Badenhausen were bullish on the Sixers’ future.
Sportico valued the 76ers at $4.13 billion, 8th in the 30-team NBA, above the Nets, valued at $3.98 billion, 13th in the league.
But Tsai—according to unnamed “sources”—aims to sell a slice of the Nets (and arena company) at a valuation of $4.8 billion. That’s in part because of expected future revenues from NBA-wide media rights.
New arena proposed
The former New Jersey Nets, upon moving to Brooklyn, got their new arena in September 2012,
The 76ers are a tenant of the dated Wells Fargo Center, well south of downtown Philadelphia, shared with the NHL's Philadelphia Flyers.
However, the team might become more valuable if a new downtown arena, dubbed 76 Place (surely as a placeholder), gets built.
I plan to write more about the Philadelphia proposal, given that both proponents and opponents have invoked the example of the Barclays Center in Brooklyn, though they're only partly comparable. (Yes, I recently visited Philly.)
Note that the image above orients the eye west along Market Street, to the city's high-rise district, rather than north, to adjacent Chinatown, where there's deep opposition to the plan, as suggested by the photo below.
Private equity goals
In the podcast (go to 20:16 below), Editor Soshnick asked Badenhausen, Sportico’s valuations expert, about the thought process of private equity executives who sought to invest in the NBA and double their money in five to seven years.
"Well, if you're going to bet on a new facility," Badenhausen said, "I think you've got to look at Philadelphia."
"If they can make that downtown building happen," he said, "you could be looking at a team that that moves up the ranks pretty quickly and generates more revenue and creates really a foundational arena... the first downtown building in Philadelphia."
Contested turf
Soshnick noted the battle between the NBA team and their landlord at Wells Fargo, which is controlled by Comcast.
"You've got a core tenant in the building looking to leave,” he said, “and build a competing arena that would of course siphon off revenue for all sorts of events and concerts.”
Use of the term "siphon off" suggests there's a finite amount of revenue.
One contested issue, and surely important to Philadelphia decision makers, is whether the new arena would indeed cannibalize Wells Fargo or whether the two arenas could both thrive by hosting more total events, as owners of the 76ers contend. Stay tuned for some studies.
Soshnick likened the fight between Comcast CEO Brian Roberts, who operates the Wells Fargo Center, against 76ers owners Josh Harris and David Blitzer as "like a steel cage match in the sports business world."
(That’s not the only battle, of course, given opposition from Chinatown and other forces in the city.)
A building’s boost
In other words, a new building, eased by public entities, helps juice valuations. That’s certainly been the case for the Nets, which also benefited, of course, from a move to a far buzzier location than New Jersey.
An increased valuation for the 76ers doesn't necessarily mean current ownership, which also includes real estate developer David Adelman, would sell the team.
Instead, they might sell a fraction, at a newly increased valuation, given the ability to sell up to 20% of a team to sovereign wealth funds, pension funds, and sports-fan billionaires looking for return.
A juiced-up sale by Tsai of a piece of the Nets surely would be noticed in Philly.