Mikhail Prokhorov’s Investment In Brooklyn Nets Just Went Up In Value Thanks To Donald Sterling

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It is a dream time for team-owners in the National Basketball Association again. With plenty of froth in the stock markets, New York real-estate values rising out of sight and talk of a bubble in the technology world again things are looking up for franchised baseball teams and other sports franchises as well.

Donald Sterling may be reviled for his recent racist remarks, but everyone loves a financial winner. So if he and his wife Shelley really do sell his team, the LA Clippers, whether in a forced or voluntary sale, as this newspaper and many others have written about extensively, many now expect the price to be somewhere near the stratosphere.

Of course until there is an actual sale, the current hyperbole will massively exceed anything that could be considered hard facts about such a sale. We know Sterling paid just US$12.5 million for the team in 1981 and that it has since become a very profitable venture, as have many other basketball franchises as well in the interim. The entry of live television performances brought huge infusions of cash to all the owners in the NBA and raised its profile enormously. New upcoming renewed TV contracts are expected to increase these cash inflows for the League substantially again, from 2016.

Before the Donald Sterling row even broke out, some said the LA Clipper team was maybe worth somewhere around US$700 million. Since then estimates have ballooned to as high as US$2 billion – for a team that does not even own its own stadium. The bottom line, though, remains nobody really knows what it may now be worth, whatever the press speculation may be.

It is ironic, even, that the biggest beneficiary of all the press exposure and relentless publicity about his highly indiscreet, and indeed hurtful to many, private telephone conversations may be Sterling himself if it results in pushing up the value of the team in a bidding war at auction. We will know soon enough however; if, as and when the team is actually sold, and including finally for how much.

Others salivating will doubtless include Bruce Ratner of Forest City Enterprises and Russian billionaire Mikhail Prokhorov, owners of the Brooklyn Nets.

If the LA Clippers, without their own arena and situated only in the nation’s second largest viewing pool on the West Coast, are indeed sold for close to $2 billion, then Prokhorov and Ratner may well claim an even higher value for their own team. Then, too, ownership of Barclays Center, home to the Brooklyn Nets could also be a billion dollar property, which is held by them as a separate investment.

In 2010 Prokhorov bought 80 percent of the New Jersey Nets and 45 percent of its new Brooklyn stadium the Barclays Center. To pay for it he put up US$223 million in cash and assumed responsibility for about US$160 million of the team’s debts and another US$60 million to cover team losses in New Jersey before it moved to Brooklyn, including buying out the team’s old lease at its former stadium.

So Prokhorov is likely in for a big uplift in carrying values regardless with the buzz going on over the Clipper’s sale. And that is without even making it through the play-offs.

Recently Prokhorov’s partner, Bruce Ratner, mandated his own investment banking advisers to find a buyer for his 20% position in the team, according to the Sports Business Journal. Ratner was reported to be placing a US$1 billion valuation on the team alone then, hoping to sell Ratner’s 20% position for about US$200 million therefore.

Admittedly minority positions are worth less, and Prokhorov also has a right of refusal to pick up the stake on such a sale. But the exact numbers don’t matter there either; one way or another Ratner may now also be in for an even bigger pay day thanks to Donald Sterling.

Unless, that is, the sky falls on Wall Street in the mean time, before anyone has time to cash in. It has certainly happened before…