Wyc Grousbeck and his fellow Boston Celtics owners have certainly restored the Green to their old winning ways.
But their payback off the court has lagged compared to the blockbuster gains enjoyed by peers Robert Kraft and John Henry, principal owners of the New England Patriots and Boston Red Sox, respectively, who turned around similarly struggling franchises.
The Pats are worth well north of a $1 billion and the Sox are quickly headed in that direction.
By contrast the Celtics, despite coming within a few minutes of winning two championships in three years, are struggling to hit the half billion dollar mark.
Maybe that will change if the winning ways continue, but there is reason to be skeptical. It’s certainly not for lack of diving for loose change – Celtics business chief Rich Gotham has worked wonders pushing up team revenue.
But the owners of the Sox and Patriots have the power to control their destiny in one key area the Celtics investors ironically do not – real estate.
“The Celtics don’t own their own arena,” notes Andrew Zimbalist, a Smith College economist and sports business expert. While the team has a great lease deal, this lack of ownership “limits their growth potential and their ability to grow outside of basketball.”
The numbers highlight the growing team value gap between the Celtics on one hand and the Sox and Patriots on the other.
Peer Pressure
Grousbeck, along with the Epstein family, the folks behind Boston developers the Abbey Group, and a group of fellow investors unveiled a blockbuster $360 million deal to buy the Boston Celtics at the team’s practice gym one Friday afternoon in 2002.
Eight years later, the team is worth $433 million, a $63 million increase, according to Forbes.
While that’s certainly respectable, it’s not the kind of returns we’ve seen with the Pats and Sox when it comes to rising franchise values.
Robert Kraft bought the Pats for $175 million in 1993, having already scooped up Foxboro Stadium for $25 million after the struggling venue had fallen into bankruptcy.
Today (are you sitting down?), the Pats are worth a whopping $1.4 billion – one of the most valuable teams in all of professional sports, according to Forbes’ annual team value rankings.
John Henry and his fellow Red Sox investors/adventurers have had similar success, fending off a horde of competing bidders to land a $700 million deal to buy the Sox in late 2001.
Nine years later, the Sox are worth $870 million, according to Forbes, and even that doesn’t cover the full value. Throw in the team’s stake in regional broadcast partner NESN, and you easily get to a billion.
One sports business expert lauded Henry and the Krafts for their entrepreneurship. The suggestion seemed to be the Celtics owners were maybe not in the same league in this regard.
However, nothing could be farther from the truth.
The “new” Celtics owners (I guess they are not all that new now) have been nothing but creative.
They’ve fashioned a whole new class of courtside seats, fetching hundreds of dollars per seat, per game. In the hands of scalpers, these prices can rise into the thousands of dollars in the playoffs.
Ticket sales averaged $1.3 million per game in 2008 third in the NBA behind only the New York Knicks and rival Los Angeles Lakers.
And they have found all sorts of ways to sell corporate sponsorships in TD Garden – many quite ingenious, since they control just a sliver of ad space in the arena.
Iced Out
But when it comes to understanding our theme here, this last detail is king. The Celtics owners don’t own the Garden – it’s owned by Jeremy Jacobs, the Buffalo-based concessions mogul and owner of the Celtics’ professional hockey brethren, the Boston Bruins.
And by not controlling their real estate, the Celtics owners have only limited control over the growth potential of their fabled franchise.
Jacobs controls the concessions at the Garden, a multimillion-dollar bonanza, as well as most of the luxury seating and ad signage. He also controls significant potentially developable property around the arena.
By contrast, both the Krafts and Henry own their own sports palaces – and significant property around them as well. This has given both a broad business field on which to play.
The Krafts knocked down sad sack Foxboro Stadium and replaced it with the gleaming new Gillette Stadium in 2002. Next came the blockbuster Patriot Place mall, and now plans to turn a surface parking lot across traffic-choked Route 1 into either a corporate headquarters or biotech research center.
Henry and his fellow owners, West Coast television mogul Tom Werner and baseball-insider Larry Lucchino, have also taken full advantage of their real estate good fortune.
They’ve spiffed up antique Fenway Park, put new concessions in every nook and cranny, and added thousands of high-priced seats. With City Hall’s help, they have taken over neighboring Yawkey Way and turned in it an outdoor extension of the ballpark, while acquiring additional properties around the old Fenway.
I’ve got to think, knowing how savvy Celtics owners Grousbeck and the Epsteins are, that they would now be working similar miracles around the mostly barren cityscape that surrounds the TD Garden, if only they had the chance.
There’s no lack of potential there – proposals for millions of square feet of new retail, office and residential development for the vacant lots that surround the arena have been gathering dust for at least 15 years.
But Jacobs, not the Celtics, controls the real estate, and the Buffalo concessions king can hardly be called a visionary when it comes to developing franchise value.
And in sports, he who controls the real estate controls a franchise’s destiny.
