Tuesday, April 17, 2012

What a difference an owner can make – Tom Benson saves the Hornets

On Monday afternoon, the National Basketball Association announced the 2014 NBA All-Star Weekend will be played at New Orleans Arena, home of the Hornets, pending the completion of the arena and hotel agreements. This will mark the second time the NBA All-Star Weekend will be hosted in New Orleans, having previously been held in the “Crescent City” in 2008.

“There is no better place to celebrate and showcase the NBA than in New Orleans, a city with a rich tradition of hosting major events that is second-to-none,” said NBA Commissioner David Stern. “Our 2008 NBA All-Star festivities proved a terrific experience for everyone involved, and we anticipate 2014 will be even better.”

Monday’s announcement capped a remarkable four days for the Hornets and the NBA in New Orleans. On Friday, New Orleans Saints Owner Tom Benson bought the Hornets for $338 million from the NBA, saving the Big Easy from losing their NBA franchise for the second time.

The NBA first arrived in New Orleans in 1974 when the league added New Orleans as an expansion team. The New Orleans Jazz left for Salt Lake City in 1979, becoming the Utah Jazz. The NBA returned to New Orleans at the start of the 2002-03 season when George Shinn moved his Charlotte Hornets to New Orleans after calling Charlotte home for 14 years.

Shinn moved the Hornets to New Orleans after he became embroiled in a sensation trial that was televised by Court TV. In 1999, a Charlotte woman accused Shinn of kidnapping and sexual assault. While the charges were later thrown out of court, Shinn did admit to having two sexual relationships outside his marriage. His reputation lost (Shinn reportedly has never returned to is His Charlotte), Shinn moved his NBA team to New Orleans.

In April 2010, Shinn began considering selling his majority share of the Hornets to Gary Chouest, who bought 25% of the team. The negotiations stalled due to the team's ongoing financial issues. Because Shinn was not in a financial position to continue to run the team, the NBA purchased the team and began looking for local ownership. The NBA completed their purchase of the Hornets from George Shinn and Gary Chouest in December 2010 for $318 million.

Not only did NBA owners get back what they paid for the team, each NBA team walked away with a profit of about $660,000.

Benson surprised many people when he bought the Hornets. In the years leading up to Hurricane Katrina, Benson talked about moving the New Orleans Saints. He purchased the Saints from John Mecom in 1985 after he learned from Governor Edwin W. Edwards that the team was on the verge of being sold to parties interested in moving the team to Jacksonville, Florida.

During the Saints' 2001 negotiations with the state of Louisiana, rumors began circulating that Benson would seek relocation if his requests — which included renovations to the Superdome, a new practice facility in suburban Metairie, and escalating annual payments from the state to the team — could not be met. Benson, born in New Orleans, owned a number of automobile dealerships in San Antonio. Time and time again Benson made veiled suggestions he was ready to move the Saints unless he received what he wanted from the state of Louisiana when it came to the Superdome (the Saints home).

NFL commissioner Paul Tagliabue (since retired) worked closely with Benson and the state of Louisiana, reaching out to both groups creating a long-term solution that would keep the Saints in New Orleans. In the aftermath of Hurricane Katrina, Benson stood by the rebuilt city and ended any discussions about moving the NFL franchise. The Saints resurgence was seen as a key New Orleans post-Katrina recovery. New Orleans will host the Super Bowl in February.

There was a growing concern in New Orleans after the league had owned the Hornets for two seasons, if the NBA didn’t find a local owner in the immediate future the league would sell the team to interests outside of New Orleans and the franchise would relocate. How and why could the NBA convince Tom Benson, who but for the perception of moving his NFL team out of New Orleans following Hurricane Katrina, to save the New Orleans NBA franchise?

“I told (brother) Larry I was a little bit concerned, even though (Bhathal – NBA rep) said he wasn’t going to do it, the first downturn he’d be looking to go to California or some place,” Benson said when the sale was announced Friday night. “That wasn’t very good.

“We really never stopped talking to (the NBA). With out-of-state owners … I called David and said, ‘Look, I’m the only guy you can count on who’s really going to stay here. Let’s work this thing out.’ ”

Sports marketing expert Marc Ganis helped put the deal together. Benson had made an offer to buy the team several months ago. That proposal was turned down by the NBA. Ganis told
the New Orleans Times Picayune he believed Benson was the perfect owner for the Hornets.

“I asked (Benson) a number of times: ‘Why do you want to do this?’ ” Ganis said. “I want them to know why they’re doing it. Don’t get caught up in a bidding war, or the ego of it. His answer was consistent from (the beginning) all the way to today. He wants to make sure this team stays in New Orleans, makes sure the team is successful in New Orleans and is an important part of the community. This is not a deal that’s going to generate some windfall profits return.

“I asked David: ‘Why do you want to keep the team in New Orleans?’ If he had an interest in maximizing the profit for the league, he very easily could have sold the team to someone who could have relocated it to San Jose, Anaheim, Seattle, Las Vegas. That wasn’t his interest. That was important. Asking each of them this question independently at different times, both of their answers were the same — that’s why this deal came together.

“Both principles had the same motivation (of keeping the team in New Orleans). David said, ‘We have a commitment to the fans of New Orleans who want the team to stay there, and we’re going to do everything we can to make that happen.”

Along with paying the NBA $338 million for the franchise, Benson also assumed the $125 million in debt the team has on the books.

Forbes Magazine determined in their latest NBA franchise valuation the average NBA team had a value of $393 million. The Forbes 2012 NBA list published in late January determined the Hornets value to be $285 million. The NBA selling the Hornets for $53 million more than Forbes subjective value for the franchise, suggests not only did the league do extremely well in selling the team for $338 million, but the value of an NBA franchise has increased substantially since Forbes January report.

For Sports Business News, this is Howard Bloom

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