Inside D.C.'s Sports Ownership Boom

0:02When others hear noise, T. Rowe Price interprets market signals to find investment opportunities. That's the power of active ETFs from T. Rowe Price. Their portfolio managers approach data from multiple perspectives, analyzing trends and conducting deep research to give you their curiosity-backed active management expertise. Learn more about their active ETFs at TROPrice.com slash explore ETFs. Exchange-traded funds ETFs are bought and sold at market prices, not NAV. Investors generally incur the cost of the spread between the prices at which shares are bought and sold. Buying and selling shares may result in brokerage commissions, which will reduce returns.

0:43T. Rowe Price Investment Services, Inc. You know that thing where you get an amazing pair of shoes at a really great price and want to tell everyone about it? Yeah, so do we. Here at Designer Shoe Warehouse, we'll give you something to brag about. Like the latest styles from brands you love. Or the trends everyone's obsessing over. Or shoes that make you feel like, well, you. So go ahead, show off a little. Find shoes that get you at prices that get your budget. Head to your DSW store or DSW.com today. DSW, let us surprise you.

1:19Congratulations! Congratulations! You made the Varsity podcast. My name is John O 'Ran and I am Puck's sports correspondent and the host of this pod. And today, Mark Ein joins the Varsity. I reached out to Mark almost as soon as I heard that Josh Kushner and Bob Iger bought the Lakers for$12.5 billion. And that's because Mark knows a thing or two about sports team ownership. You see, Mark owned the Washington Castles of World Team Tennis, and he then parlayed that into buying the local tennis tournament here in D.C. He now has a portfolio that includes stakes in the Washington Commanders, the Baltimore Orioles, Leeds United.

1:56Mark has a very strategic view of team ownership, and I'm pretty sure that you'll get a lot out of his views of the defining trends of the business. But before I get to Mark, today is Wednesday, August 19th, and here's what I'm watching. I'm fascinated by what's happening in Chicago. Can you imagine the Bears not playing in Chicago, or even worse, not playing in Illinois at all? It looks like that's about to happen. Now, this isn't new. I mean, I live in D.C., which hasn't hosted a Washington Commanders game in 30 years. They play in Maryland. Well, last week, the Bears team chairman, George McCaskey, said that he hadn't talked with anyone from Illinois in the past two months, and the team is focused on a move to Hammond, Indiana.

2:39So it's looking more and more like the Bears bluff their way into having to leave Chicago. The Hammond Bears, my goodness. Okay, now let's get to Mark Ein. Mark Ein, first of all, thank you so much for joining the pod. One of the goals of my pod is to get as many people from the DMV onto the pod that are interested in sports business. You know, we've had Paul Rabel, we've had Scott Van Pelt, Joe House has been on it. Thank you very much. The pride of BCC now is on the pod, so thank you very much. Thanks for having me, John. I'm a big fan of your writing and of your pod, so it's an honor and pleasure to be with you.

3:22I want to get started. You've been so active in the Washington, D.C. area space where the Washington Castles, which I do want to talk about later on, I think what you did with them was, as a D.C. resident, was a lot of fun. You have ownership stakes in the Commanders. You have an ownership stake in the Orioles, not in D.C., but over in Leeds. Can you give, let's start before we get into some of the issues and topics, with your origin story. Like, when did you first realize that this is a path that you wanted to take? And why did you decide to take it? Yeah, so it started where you started the conversation.

4:14I grew up in the D.C. area in Chevy Chase, Maryland. And when I was a young boy growing up, the highlights of my life were being a ball kid at the tennis tournament and going to the football games with my dad. and the greatest memories of my childhood were sitting in section 320 row five seats 19 and 20 with my dad watching that team and I just had these memories of what that meant to me what it meant to my friends what it meant to our whole city and our community so I left DC for a while and worked in New York on Wall Street and worked on the west coast and venture capital went to business school and I came back to DC right after business school at a young firm called the Carlisle Group, which was only 30 people and$100 million of capital under management.

5:01Obviously, now it's one of the biggest investment management firms in the world. But when I came back, I sort of had a vision of my life and in my ideal state, what it would be would be to have success in business, to do things I was interested in, which really was to build companies. I wanted to be involved civically in this city that raised me. I wanted to be involved philanthropically. I wanted to have a family and I wanted to be in sports. It really was part of the vision when I moved back to D.C. after business school was to try to have that life. And sports was very intentionally part of it because I loved it.

5:40I knew what it meant to me and I know what it can mean to our whole community. And so from the very beginning, that was something I was interested in. Long before I had the resources to do anything, I was sort of fishing around. There was a moment where David Rubenstein is the founder of Carlisle, thought maybe there was something for us to do with the Capitals and the Bullets at the time with Abe Polin, who we knew. And we talked about that. I got the book when the Cook family sold the Redskins to Dan. And I got the book and tried to see if there was something to do. There wasn't anything. And it was ahead of my time being able to do something like that.

6:18But there was always an interest in that. And then, as you said, I started, my first thing was the Washington Castles, was starting a world team tennis team in Washington, D.C. And I knew of the league back from when it was a really big deal at its origins. And it had kind of faded into a less relevant place in the sports landscape. But I had friends who played in the league and thought it was amazing. Obviously, Billie Jean King was the founder and was driving it. and I happened to meet her at the U.S. Open or I asked to meet with her in 2007 and she said she always wanted a team in Washington, never found the right person to do it and let's talk about it.

6:59And out of that sprang the Washington Castles, which was the first world team tennis team ever in the Washington market and really got me started along the journey in sports. And I should say just as an interesting note, another person who got their first sports start in World Team Tennis was Bob Kraft. And there's a great NFL Films six-minute video where Bob Kraft talks about everything he learned about building a sports franchise came from owning the Boston Lobsters. And for me, obviously different, but similar. There is something about your first sports experience being not just an owner, but an owner-operator, which Bob was at the time and which I certainly was.

7:41Like, I really rolled up my sleeves and helped build this from scratch. And, you know, we were known for this really fun environment. We had great players. We had Venus and Serena and Martina Hingis and Leander Pays. We also were known for building tennis stadiums in incredible places in the middle of downtown Washington, where the old convention center was on the waterfront. And the last thing was we built it on, we built a stadium on the roof of a building in Union Market, which was, it was, it was, it was really extraordinary. area is also an extraordinary way to lose a lot of money. So we did that only once.

8:17But you learn a lot about... Let me interrupt you for a quick second. The greatest thing about the Washington Castles to me is, look, you're a D.C. guy. It has been a barren sports landscape for quite a while. Our only titles were with the Washington Castles, civically minded. You talk about rolling up your sleeves, you really took that seriously, much more so than it seems that other teams in the league. Yeah. I did. More than just the stadium experience. Yeah. Yeah, thanks. And I did. I really, this was like such a passion of mine. And from the beginning, you never know when you start anything, a company or anything or a sports team, what's going to happen.

9:04And from the very beginning, people really embraced it. And then that was really motivating to me to make sure that we did an amazing job, not just for the fans in the stadium, but also to have like these incredible teams. So as you said, we won six championships. We actually beat the Lakers record. We won 34 straight matches over three seasons, which if people know World Team Tennis, it is so hard because players are moving, the schedule. I mean, we won one game where players had to take a connecting red eye back from the West Coast and play the next night. We won a bunch of matches where we had match points against us.

9:39But the really fun thing, John, about that, too, was I saw how the success in the community and the passion that the fans showed really impacted the players. And again, we had Serena and Venus and Martina Hingis, Leander Pays. I mean, Leander Pays was inducted in the Hall of Fame two years ago, the Tennis Hall of Fame. And he spent a good couple minutes of his Hall of Fame speech talking about the Washington Castles, which was incredibly moving. But for a guy who accomplished so much and was being inducted in the Hall of Fame, to recognize what that experience meant to him, to me, said a lot. You know, when I talked to Venus and she talked a lot about how much playing on that team meant and how motivating it was.

10:24And I learned that both when the two sides feed off themselves. And when you get to bigger sports teams, there's the business side and the competitive side. But they always feed off one another. And the better your fans, the better fan base you have, the more players like playing there. The more better players you have, the more you get a good fan base. And when you get them both going, you create a virtuous cycle, which just leads to really amazing things. When you started with the Washington Castles, how much of it was a labor of love versus you saw an opportunity to really, A, grow the castles, or B, sort of develop your chops so that you could then become a partner in bigger clubs like the Orioles or the Commanders?

11:18It mainly was a labor of love, John. I mean, I would have moments where I would convince myself this was going to be a great business opportunity and I was building something of value. Those were the minority of the time where I thought that. Most of the time, I mean, I lost, I didn't have to pay much for the franchise, but I lost a bunch of money every year. And in my hopes, I thought maybe there was a path where ultimately there would be franchise value. But it wasn't the motivation. The motivation for me was just, I intrinsically like building things and I had a lot of fun building it. I intrinsically love doing great things in the city that, as we've talked about, I grew up in and I live in and doing great things for the community.

12:04So I got a lot of intrinsic value out of that. and um and i was just very it really was that one was mainly a labor of love and just something that i got a lot of intrinsic value out of more than it was ever realistically seeing a great return out of the money that was invested there so i i want to keep on this because i do find this fascinating about how did you turn that into these ownership stakes that that that you are now overseeing yeah so um what was interesting is the tournament in town that i now own has been there since 1969 i was a ball kid as i mentioned for a lot of years and it really was a highlight of my youth was being a ball kid at that tournament as we were having more success in the castles we were actually becoming reasonably competitive with the tournament which was an unnatural act Like a World Team Tennis team should not be competitive with an ATP 500 event.

13:09But realistically, people were really enjoying the fan experience and the way that the World Team Tennis was being put on. And I'd say that the tournament over the years needed some help. And so when you looked at attendance and you looked at a lot of metrics, we were starting to be competitive with that. I always really wanted to own the tournament because I knew that we could do amazing things with it. A lot of that came after doing the castles. I thought if we applied the things we're doing here to a major event, the results should be really spectacular. But it was owned by a foundation for a long time.

13:53I asked them a few times. They weren't interested. and then out of the blue in 2018, they came to me and said, look, we think we need to do something. The tournament needs a lot of investment. We don't really have the wherewithal to do it and you're the natural party to do it. Would you be interested? I jumped on it, of course. It ended up being a lot more complicated and drawn out process where people from around the world bid on it and the board had a fiduciary duty to check all their alternatives. So it ended up being less straightforward than it started. But that was, I was just, I was so happy that we were able to get that done.

14:35And it's been an amazing seven years since then. Mark, I love that story. We just had Ramona Shelburne on the pod and she was talking about the Lakers sale, which was started by what essentially was a cold call. You know, it's almost the same story of like, I want to buy your team. I want to buy your tournament. These, you know, big transactions like that, often they just start very innocently. Yeah, they do. And my pitch to them was it was actually much more expansive. It was this this amazing after school program organization called the WTF. It's been around actually 70 years before the tournament.

15:17And Donald Dell and John Harris, Arthur, I started from it. they donated it to the charity. And it really is the lifeblood of the charity in terms of their fundraising and also a lot of what makes it unique. And so when I went to them, I said, look, let me run the tournament, take all the financial upside downs. Let me take care of that. But I'm going to let you keep all the intangible benefits that you had. So you guys have suites and you have tickets and the kids get to work at the tournament and you have a gala and the tournament supports it and donates auction items. We're going to take everything you have outside of the tournament and let you always have that in perpetuity, as long as the tournament is in Washington, D.C., which I hope is forever.

16:03You will keep all of that. In addition, you'll get a pot of money that will endow your organization forever, plus some ongoing financial support. And you don't have any of the downside risk, which was starting to get more and more as the tours were requiring them to invest more into the tournament. And so what we really constructed was a win-win, where they got all the things that they covet and desire, gave them a nest egg, but also relieved them of the financial obligations.

16:38So as you got in, you were part, when you and Josh bought the Commanders, uh set a record nobody's ever seen that amount of money uh paid for it seems very quaint now what is just over the six billion dollars i mean talk about a steal yet do you feel like like that was a steal now is it looking back on it i mean in hindsight i don't know it definitely wasn't a steal but it was a good value and as it as it turns out um and i i should just go back because actually it's interesting you talk about my motivation for doing this when i was doing world team tennis for a while. Josh was, you know, thriving in his career, leaving Apollo.

17:21And he and I have been friends since we were little kids. Like literally we went to elementary school together. We played on soccer teams. His dad was an orthodontist. My dad's a doctor. Like we were really like closest of friends growing up and stayed close. Our whole lives went to the same college, same business school, worked next door to each other on Wall Street. And one night in the summer after one of my World Team Tennis seasons, Josh and I had dinner and he said, it looks like you're having so much fun doing this. Should we go look at other sports franchises together? And kind of was like, I don't really have time to spend a lot.

17:57I don't, I don't have a lot of time to spend on it, but you could sort of lead it, but I want to be involved and we could do it together. And, and so he and I, this was probably 2009 and 10, really focused on the NBA because the NBA at that time, people forget, was really struggling. There wasn't a labor deal. There wasn't a media deal. And a large number of the owners actually were in reasonable financial distress in their core businesses after the financial crisis. And I think the stats were something like the league in aggregate lost$300 million

18:40and two thirds of the teams were losing$800 million and a few were making some money. So it was, and this was sort of what Josh has done in his career was be a contrarian and bet when other people don't see the value. And it is a little bit what I had done too. And so we spent a lot of time, we actually talked to a lot of owners about buying or investing in teams. We talked to Ted about providing the capital for him to buy the Wizards, which he was eventually going to do. None of those ended up coming to fruition. And then Josh came upon the Sixers opportunity and worked on it and, you know, sort of said, well, you're going to do this.

19:18And I knew it would be a good investment, but it wasn't in my town. And I just thought for me, the magic really of sports for me was doing it in the city that I live in and I grew up in. And so I passed on. It was probably the single worst investment decision of my life because I think Josh paid$250 million and it's been such a success. And obviously now it's going to reach new heights with LeBron. I'm so proud of what Josh has done there. So that was an interesting moment. You couldn't live with yourself if you were cheering for a team that had Philadelphia across his chest. I know. Well, I thought of that, John.

19:54I know. And as you know, I've had floor seats at the Wizards for 20 years and I was like, how could I do it? That was the reason I didn't. But I knew it would be an investment. I love Josh. I really believed in what he was doing. I just, yeah, at the end of the day, back then, my motivation, and still, my motivation was to do things in my community. And so then when the Commanders came up, it was really interesting, because I had looked at buying the Cincinnati Tennis Tournament that year in 22, and put together a group, and Josh was part of it. We had an amazing group. Redbird was part of it, Serena, Venus, like a really lion tree.

20:35We had a really amazing group. And I think we were pretty much the cover bid to Ben Navarro. And we ended up not getting it. And Ben got it. And he's done an amazing job with the Cincinnati tournament. But the same banker who represented the USTA in that sale also knew Dan. And he and I met at the US Open. And he said, would you ever consider if there was an opportunity in the commanders to do something on a minority basis, which we said no. But then not that long thereafter, I think in November, the word got out that Dan was exploring a sale. And literally in five minutes, Josh and I had touched base.

21:11And then ironically, 10 minutes later, Mitch Rails and I had touched base. And, you know, we got going on it.

21:23A lot has changed since Bob's Discount Frenature opened its first store 35 years ago. Car phones have become cell phones, grunge band hits have become oldies, and you can order furniture online. But what hasn't changed is the way they do business, a.k.a. the Bob's way. Doing things the Bob's way means that when I shop at Bob's, I know I'll find the latest top-rated styles like the Aspen sofa for just$3.99, bedrooms with storage and charging, consumer reports recommended mattresses, real marble dining sets, and more. All at 90s-era prices. There's even no money down financing and lightning-fast shipping, so you aren't stuck waiting months for your furniture to arrive.

22:04Plus, Bob's still makes furniture shopping fun, with friendly associates and cafes full of free treats and ice cream. Want a seat for yourself? Stop into your local Bob's store this Labor Day weekend to party up like it's 1991 and celebrate 35 years of doing things the Bob's way. What the heck is going on with all these promotional popcorn buckets? the giant shorts that all of Gen Z is wearing now, and whatever the heck High Rocks is? I'm comedian and certified hater Matt Bellassi, and these are the types of questions I'm demanding answers to on my podcast, What the Heck with Matt Bellassi. Listen or watch every Thursday as I rant about all the internet trends, pop culture stories, and personal mayhem that makes me scream, what the heck?

22:49Follow What the Heck with Matt Bellassi wherever you get your podcasts.

22:55as you as you made that purchase um sitting where we are now are you surprised at the uh at these franchise valuations that are good because every every couple of months i'm right it seems like every six months i'm right yeah setting a record for for for a team sale uh sitting where you are right now when you look back on it um this is a two-part question were you surprised and why is this happening why why why all of a sudden is are these franchise values going through the roof yeah so it's interesting if i look at all these things the sixers back when we looked at it the commanders the nfl now the time frame's just accelerating like we thought with josh that model you know he would make we we would make three times our money in 10 years and ended up being three times in three years.

23:51We thought, you know, the commanders would be two to three times in 10 years. It's probably two times in three years, same thing. So yeah, we're surprised at how fast values are going up, for sure, but we also think there's good reason for it. And actually, we really don't think that it's gonna end anytime soon. And so you ask why. I do think people view this a bit as a business and even more as a store of value. And as people look to diversify their wealth and oftentimes diversify their wealth for things that have huge volatility, maybe huge upside, but also a lot of downside, taking some of that wealth and putting it into a franchise where there only are a certain amount and there always will only be a certain number of them, is actually a prudent financial decision.

24:47And what's happening is it's just more and more people are realizing this and thinking about it. It's more out there in the ether where people talk and think about it. One of the things about our transaction for the commanders that was interesting is even after the original core group, we still needed to go raise a good amount of money. And, you know, it's pretty well known that we have a good size group there. It's an amazing ownership group that's a huge asset for the franchise. But I think we were all surprised at how many people were willing to write really big checks into a, you know, minority stake into a sports team back then.

25:23And I think it was just a precursor of now what's happened over the last three years is more and more really wealthy people view this as a store of value. And, you know, just like a piece of art is very, it's even more intangible than sports team because there is no cash flow or gold or Bitcoin or anything else people consider stores of value where financially you say, I want some of my portfolio in these things. Sports teams are that. And then there's all the other things about sports that are really appealing to a lot of people, including sports innately itself. If you live in the city, it's great.

25:58The people you get to meet, the business opportunities that come out of it. So it's a store of value, plus, plus, plus, plus, plus. I just think more and more wealthy people are now coming to that conclusion and seeking out these opportunities. So as you talk to these people to convince them to take a stake in the team, what works the best in terms of selling them on it? And I guess I should ask you, do you feel like you're selling them on it? Is it sort of a vanity play about like, hey, you know what, you get the real estate of those front row seats? or is it like a business play about people that you can rub elbows with?

26:47Or is it you write us this check and the valuation is going to double within, what, six years, seven years, however long? It's really that. I mean, really the cornerstone of the – and it wasn't a pitch or a sales thing. It was like – because you only want people who are enthusiastic. You don't want to sell anyone. Oh, I think you turned down a ton of people. Yeah, yeah. Well, yeah, I mean, you want the right people who you want to be partners with in any of these things. And the pitch, it's a pitch, or the reason is really that this is a store of value. And there's a whole bunch of trends that are going to make this continue, sports continue to thrive.