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Handicapping The Nationals Ownership Selection (Part I)

12th April 2006

Betting is for suckers, plain and simple. It’s even worse when you start applying that to MLB business matters. If you had placed bets on which All-Star break MLB was going to pick to award the Montreal Expos to during the Relocation Derby of 2002-2004, you’d have probably lost a sizebale chunk of change. That said, I’m a glutton for punishment, and see now as good a time as any to try and handicap the selection for a new owner for the Washington Nationals, which (holding breath), should be occurring within the next 2 weeks (of course, we’ve heard that before too, right?).

There are 8 groups vying for the right to purchase the Nationals from MLB, who has owned the club since purchasing it from Jeffery Loria in 2002 for $120 million. Since that time, the asking price in Washington, D.C. has risen to $450 million with all the bidders agreeing to pay that sum.

The handicapping and profiles will come in two parts. Today’s offering looks at those that will most assuredly be on the outside looking in. Tomorrow, I will go over those that look to have the best chance at landing the Nationals.

William Collins and Albert Lord Group (100:1) – William Collins sank more than $13 million into trying to lure the Montreal Expos to Northern Virginia, first at a site in Arlington owned by the Cafritz foundation, and then later in Dulles at a site location owned by Chantilly Crushed Stone, which had a huge rock quarry at its center. The deal failed under its own weight, and when DC was awarded the Expos, Collins shifted to owning the club in a market he had competed against during the Expos derby. As Collins said during the time of the relocation effort, “We’ve always looked south and west of the [Potomac],” Collins said. “Nothing has really changed there. In this area, you do not want to cross any bridges.” The comment was clearly pointed at distacing the Northern VA effort from DC. (to read more on the failed Nothern Virginia effort, see How Northern Virginia went from highly favored to NoVa)

With this in mind, how would it look for MLB to award the club to Collins where he and Albert Lord would have to negotiate with the DC Council as the development of the new ballpark comes under what Councilchair Linda Cropp has deemed Task Force to examine the construction of the new $611 million facility and make sure that it remains on course and on budget?

To possibly address this, Albert Lord Sallie Mae Chairman Albert L. Lord took over the William Collins-led group at the beginning of June of last year, although Collins continued to be referred as heading up the group in various media reports.

The group of investors started to crack in September of 2005 when it was reported that former Redskins Art Monk and Charles Mann jumped from Collins group to the group headed by Jeffery Smulayn.

Regardless, given Collins connections to the Northern VA effort, his odds of landing the franchise seem distant, at best. Given the fact that he just missed acquiring the Astros in 1995 and relocating them to the DC area, Collins strikes a bit of a sad profile. Will he be seen as someone in the same cloth as Charles Dolan? Time will tell.

Jonathan Ledecky and George Soros Group (50:1)
– In MLB, money is not always the overriding factor. Take Washington area entrepreneur Jonathan Ledecky.

Ledecky, who as Steven Pearlstein of the Washington Post profiled him:

“Those who had the foresight to get in and out early [in companies that crashed and burned in the 1990s] — including Ledecky himself, to the tune of $60 million — made small fortunes with “roll-ups” such as U.S. Office Products, U.S.A. Floral Products and Building One Services.

Those who got in late, or hung on too long — usually after Ledecky had given up his post as manager or director — suffered spectacular losses. Ledecky was sometimes in that group, too, watching many millions of dollars in paper profits evaporate.

In the end, the rap on Ledecky was that he was much more talented as a dealmaker, networker and self-promoter than he was at actually running businesses.

Ledecky didn’t have nearly enough financial muscle to pull off the deal for the Nationals, but he brought in someone that did.

When Ledecky announced that he had added billionaire financier and philanthropist George Soros to the group, heads turned. Soros was ranked the 72nd richest man in the world in 2005 with his worth valued at $7.2 billion. Soros was added to New York commercial real estate developer Marc S. Cohn and ABRY Partners, a private equity firm in Boston, and along with Ledecky the investment group was named Big Train Holdco, and commissioned the Citigroup Private Bank to provide financing. Soros’ addition was huge plus from a financial position. From a political position, it was thorny to say the least.

Soros, a man of Hungarian descent has been heavily active in politics, having donated $5 billion to promote democracy in the former Soviet bloc, Africa and Asia. But he has shifted his political leanings to within the US especially when it comes to his displeasure with President Bush.

As Soros said in the Washington Post in Dec. of 2003, removing Bush, “is the central focus of my life.” Further added Soros, “America, under Bush, is a danger to the world,” Soros said. “And I’m willing to put my money where my mouth is.”

Given this highly charged political position with the Nationals residing in Washington, DC, and with the current president being a former owner and one that has been discussed as a possible heir apparent to Selig when he finally leaves the position of commissioner, Soro’s addition to the Ledecky group comes with too much political dynamite.

Yusef Jackson Group (200:1)
– Yusef Jackson, the son of the Reverend Jessie Jackson, has been active in business endeavors including a bid for the purchase of the Chicago Sun-Times in 2004. He is the president of River North Sales and Service, a distribution company owned he and his brother Jonathan. River North Sales and Service has an exclusive lock on all sales of Budweiser and other Anheuser-Busch beer brands in a North Side swath spanning from Lake Michigan west to Harlem Avenue and from Irving Park Road south to Roosevelt Road. Its distribution area includes the United Center as well as Wrigley Field, and annual sales have been estimated in the $30 million to $40 million range.

Yusef ‘s partners on the Nationals bid include Los Angeles supermarket magnate Ron Burkle, a family friend, founder of Yucaipa Cos. and a major-league Democratic fund-raiser whose fortune Forbes estimates at $2.3 billion.

The issue with the Jackson group has been seen as financial diversification and possible issues with heavy political ties, most notably his father.

Franklin L. Haney Sr. Group (100:1) – Haney, a Washington area real estate developer has developed office buildings and hotels from Tennessee and throughout the Southeast. He has heavy ties to the Democratic party (he’s run for office twice, and lost), and has been investigated prior for violations of federal campaign contribution law.

Still, Haney has regrouped from these issues to become adept at restructuring real estate investments. As the Washington Post reported in Nov. of 2005:

In the early 1990s, he bought a bankrupt Colorado residential development whose landowners had the authority to issue tax-exempt bonds. He turned his $130 million investment into bonds that resold for $148 million, the Denver Post reported. Then, through complex steps using several companies he created, Haney put the land up for sale, bought it back, and invested the proceeds in the Portals, an office complex in Southwest Washington that the FCC was scheduled to occupy. The Wall Street Journal chronicled this series of transactions in a front-page article in 1998.

The Smith Barney Managed Municipal Fund sued him over switching from Treasury securities to lower quality federal bonds in one of those Colorado transactions. Smith Barney claimed the swap devalued the deal. A jury agreed and Haney was ordered to pay Smith Barney $12.7 million in damages and $2 million punitive fines. Haney paid the fine, but then negotiated a separate settlement, said D.C. lawyer Stan Brand, who represented Haney in a separate case.

“Every businessman at his level has had lawsuits, scrapes with the government and brushes with authority. That’s true about everybody in this bidding process,” Brand said. “I can say he’s been fortunate in that every one of those [lawsuits] has worked out and has not been a problem in the end.”

Haney became a standout during the staredown between the DC Council and MLB over cost overruns for the new ballpark, as long as he could become a co-developer of the stadium Haney made waves with MLB by saying that he’d be willing to cover as much as $200 million in overruns, which made him a darling with the Council.

But, the public announcement of such a deal, without MLB’s approval, moved Haney from being a consideration of front runner status, to now being seen as a near impossibility given how co-development would be taken out of the picture, as well as the unfavorable manner in which Haney went public with his offering to cover cost overruns without MLB’s consent.

Tomorrow… the front runners are handicapped. Are there any surprises in the making?

One Response to “Handicapping The Nationals Ownership Selection (Part I)”

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