The Grizzlies report to training camp this week for their 17th season in Memphis. Along with the usual mysteries — how are Chandler Parsons’s knees, will the Grizzlies extend their streak of playoff appearances and will a third player emerge to support Marc Gasol and Mike Conley? — there are a couple fresh ones: Who will own the team when the season is over? And is there any peril that the owner will ultimately move the team out of Memphis?
Since nobody involved with the Grizzlies current or future ownership will answer questions on this topic, I figured I would.
Q: Why is this coming up now?
A: When Robert Pera bought the team from Mike Heisley in October of 2012, he agreed to a buy-sell arrangement with two minority owners, Steve Kaplan and Daniel Straus, under which either of those minority owners could submit a bid to buy out Pera’s interest. Pera would then have to either accept the bid and sell the team, or buy out the minority owners’s interest at the bid price. So, for example, Kaplan could offer to buy the Grizzlies at the price of $1 billion, and Pera would either have to sell his 25-percent share of the team for 25 percent of $1 billion, or he’d have to buy out Kaplan’s 14-percent share of the team for 14 percent of $1 billion. That buy-sell arrangement — which was suggested by former NBA commissioner David Stern, as a safeguard in case the Kaplan and/or Straus didn’t like being minority owners with Pera — kicks in “after five years, and every three years thereafter.” Pera bought the team in October of 2012, which is why it’s coming up now.
Q: Are Kaplan or Straus going to make a bid?
A: The general feeling is that Straus doesn’t have any particular interest in owning an NBA team, but that Kaplan will make a bid. Kaplan was part of Mike Heisley’s attempt to buy the Los Angeles Dodgers and he has tried to buy both the Atlanta Hawks and the Minnesota Timberwolves. Along with former Grizzlies president Jason Levien, he is part of groups that own D.C. United of the MLS and Swansea City of the Premier League. The guy wants to own an NBA team. So my guess is that, yes, Kaplan will make a bid for the Grizzlies, after which he’ll either have the team or be liberated to pursue another franchise. But this isn’t going to happen instantly. The process could take months.
Q: If Kaplan does make a bid, would Pera buy out Kaplan or sell his share?
A: Nobody knows. Pera rarely comes to games and does not seem particularly connected to the franchise or the city. So it’s easy to imagine that he might be done with the entire enterprise, especially given that the Grizzlies are likely heading for some difficult years on the court and at the ticket office. But few people pretend to know what Pera is thinking. He may love owning the Grizzlies from afar. And he just poured more money into totally remaking the locker room and training facilities at the arena. Would he have done that if he were about to sell the team? One thing we do know is that Pera and Levien/Kaplan can’t stand each other. Kaplan used to be around the team all the time. He was much more visible — and engaging, frankly — than Pera has ever been. But it’s been years since Kaplan has been seen at a Grizzlies game. Indeed, the NBA has attempted to bring the two sides to the table, to avoid having to go through the formal buy-sell process, and so far, the effort has failed. My guess is the league will continue to try and broker an agreement. Either way, it’s hard to imagine that Pera would enjoy handing over the team to Kaplan — or enjoy writing Kaplan a check for his share of the team.
Q: Is any of this impacted by the recent report by Citron Research that Pera’s company, Ubiquiti Networks, is “a fraud?”
A: I doubt it. Andrew Left, the man behind the Citron report, subsequently contacted this newspaper to say he can “prove that Mr. Pera’s company and source of wealth is nothing but smoke and mirrors.” But Ubiquiti stock opened the week at $54.95 a share and closed the week at $54.18 a share, so the Citron report didn’t have a significant impact. Indeed, some have wondered, given the timing, if the report might be tied to the pending buy-sell showdown between Pera and Kaplan, but there is no evidence to suggest that is true. If Ubiquiti stock tanked, that could certainly shape Pera’s response to a Kaplan bid, but as of Friday the stock had not tanked.
Q: We’ve known this drama was coming. You, Chris Herrington and Ronald Tillery have outlined the particulars before. But should Memphians even care whether Pera or Kaplan ends up with the team?
A: Pera has been an excellent owner in many respects. He has provided the franchise the resources it needs and has otherwise largely stayed out of the way. Isn’t that what fans should want from an owner? No, he hasn’t lived up to his early promises to get involved in Memphis and to be transparent in the way he runs the team. But those are quibbles. Kaplan would certainly be more of a presence than Pera. But the real question is, which man would be more apt to keep the team in Memphis over the long haul? We simply can’t know the answer to that question. Who knows what lies in the hearts of billionaires, especially those with no connection whatsoever to the town?
Q: Why do you even bring that up? Is there a danger that the team could leave Memphis?
A: Not any time soon, no, and the periodic bursts of hysteria around this topic suggest that people don’t understand the considerable protections the city has in place. But unless a small-market NBA team is owned by dedicated local ownership, there is always a danger that the team could move away someday. The Los Angeles Clippers sold for $2 billion. The Houston Rockets sold for $2.2 billion. Seattle wants — and will almost certainly get — another NBA team and has an agreement in place to build a new arena by 2020. A lot has changed since Pera bought the Grizzlies from Heisley for $377 million.
Q: Is any of this related to the recent ESPN report that the Grizzlies lost $8 million last year?
A: Not really. In a small market like Memphis, the Grizzlies are always going to be a roughly break-even enterprise. They could make $8 million or lose $8 million and it doesn’t change the reality that they would be worth a lot more in Seattle.
Q: OK, but let’s say someone wanted to move the team. What would stop them?
A: First of all, the lease. It binds the Grizzlies to Memphis through the end of the 2020-2021 season. After that, alarmists like to focus on the section of the lease that provides the team could move by paying a gradually-descending lease termination fee, intended to pay off the remaining building bonds if the franchise does leave. In 2021, that fee would be $57.7 million, which is peanuts in the new NBA. In 2027, the last year of the lease, the fee is just $8.4 million. So taken by itself, that could be worrisome. But the lease also provides that all this only applies after the 2020-2021 season IF certain ticket or suite thresholds aren’t met, and IF the city and county don’t cure the shortfall by buying up an appropriate number of tickets or suites. And even then, the owner couldn’t move the team himself, but could only sell the team to an “unaffiliated third party.” Oh, and after all that, the the city and county would still have the right of first refusal to buy the team.
Q: Goodness. Any other protections we should know about?
A: Actually, yes! In order to persuade local owners to kick in money to buy the team from Heisley, Pera — and this is according to an NBA document from October, 18, 2012 — “has granted a call right to the other owners at a price equal to his invested capital in the event he files with the NBA to relocate the team within 15 years of the closing date of the transaction.” In other words, if Pera tries to move the team any time before 2027, the local owners could — and certainly would — buy it from him for the money Pera put into the team.
Q: OK, but what if Kaplan buys the team from Pera? Is he bound by those same terms?
A: Absolutely. If Kaplan tried to move the Grizzlies before 2027, the local owners would have the right to buy the team from him. The only murky part is price. Obviously, if Kaplan makes a lucrative bid, either he or Pera — whomever emerges with the team — would ultimately have more equity in the franchise. Would the local owners have to account for that increased equity in their purchase? It makes sense that they would.
Q: So you’re not worried about the future of the Grizzlies in Memphis?
A: You mean, beyond Parsons’s knee? Like I said, a small market team that doesn’t have local ownership will always be at least somewhat vulnerable. But the Grizzlies were brought here because a deeply committed group of Memphians believed the franchise could help transform the city’s sense of itself. Given that that’s exactly what happened, it’s hard to imagine that group won’t do everything possible to ensure the franchise sticks around. In the meantime, either Pera will buy out Kaplan, or Kaplan will buy out Pera, and given that we can’t really know the intentions of either of man, there’s no reason to get too worked up about the result.
- Mitchell scores 22, Jazz beat Grizzlies 126-112
- Morant, Grizzlies cruise past Warriors
- Report: Grizzlies declining Josh Jackson’s fourth-year option
- Why thousands of dog owners are suffering serious hand injuries because they’re holding their leads wrong (so how SHOULD you hold them?)
- Swansea City’s owners to make huge profit with sale to US investors
- No. 17 Memphis secures AAC championship, likely punching ticket to Cotton Bowl
- Special Report: Icebound - The climate-change secrets of 19th century ship's logbooks
- Knicks owner James Dolan seen 'ejecting a fan at a music festival over a sign demanding he sell the struggling NBA franchise' in newly released video
- Knicks owner James Dolan bans critical fan for life after 'ambush,' insists he's not selling his struggling team, and defends barring reporter as radio host tells him he's 'very sensitive'
- Sign of changing Mission: dim future for bar’s neon beacon
- Jacinda Ardern is confronted by furious gun owners at the opening of a school after sweeping law changes following Christchurch terror attacks
- Climate change threatens peace efforts: SIPRI
- Cruel dog owners dumping their pets rather than put them in kennels while they’re away for Christmas
- 'They wanted to protect the kids': How the wives and children of gangster brothers changed their identities after one of the most brazen underworld hits in Australia's history
- Lyon Players, Fans Clash Over Donkey Banner After Memphis Depay Secures Champions League Last 16 Spot
- How to Wipe Your Hard Disk Drive Leaving the OS Intact
- Koh Chang to Koh Kood: island-hopping around eastern Thailand
- EXCLUSIVE: Masterpiece Cakeshop Owner Speaks Out After Supreme Court Victory
- Panthers owner David Tepper reportedly interested in adding Kevin Colbert, Steelers execs to Carolina's staff
- For cod and country! PM woos voters at Grimsby fishmarket as he tries to smash Labour's 'red wall' of Leave-voting heartlands with warning Jeremy Corbyn has 'betrayed' them on Brexit - with just three days left until election
Memphis Grizzlies might be changing owners but, no, they're not leaving have 2003 words, post on www.commercialappeal.com at September 24, 2017. This is cached page on Game Breaking News. If you want remove this page, please contact us.