Before they decided on the Brooklyn Nets, Joe and Clara Wu Tsai had another NBA opportunity.
Nearly a decade ago, Joe and Clara Wu Tsai had just decided to get involved in pro sports as an investment. Sports had been part of their personal development, Joe played collegiate lacrosse at Yale and Clara was raised on the-hoop-happy campus of the University of Kansas during the Danny Manning era. They had an ultimate goal, owning an NBA team, but started slowly.
As Megan Greenwell of Bloomberg News wrote this weekend, professional lacrosse was the easy entry point for the Tsais and it quickly led to other opportunities. They initially looked at two NBA franchises, the Brooklyn Nets … and the Houston Rockets.
In 2017, Tsai bought the rights to an expansion professional indoor lacrosse team in San Diego, a baby step toward the couple’s real goal of owning an NBA team. They didn’t want to be stuck as minority owners long term, so they looked for franchises that presented a clear path to outright control. That narrowed the options down to the Houston Rockets or the Brooklyn Nets. The kids voted for Houston: It had superstar James Harden, and the Nets were decidedly the No. 2 team in their own hometown. The parents, though, wanted New York. At the end of 2017 they bought a 49% stake in the Brooklyn franchise. A little more than a year later, they acquired the rest for $2.4 billion, then the highest price ever paid for a sports team. They also bought the Nets’ home arena, the Barclays Center.
The Tsais’ three children had a point. In 2017-18, the Rockets won 65 games, the Nets 28. But by the end of the year, the Tsais had agree to buy that stake in the Nets and hotelier Tillman Ferttita had agreed to buy all of the Rockets. The price tags were similar. Fertitta paid $2.2 billion with the Tsais agreed to a valuation of $2.4 billion. There were a number of reasons why, but New York presented opportunities Houston could not.
Part of the reason the Tsais bought the Nets instead of the Rockets was that she thought Brooklyn would be a good place to concentrate her philanthropic work, much of which aims to help people build wealth: teen boot camps dealing with artificial intelligence and the blockchain, a tech accelerator that invests in founders of color, grants and low-interest loans for small-business owners, an annual social justice prize for people working to improve their communities.
In an interview with US Lacrosse Magazine not long after he had bought the Nets, Joe Tsai said New York over Houston was not that hard a choice.
“At the same time the Nets were up for sale…the owners of the Houston Rockets also put the team up for sale. We thought about it, but we decided to put the focus on the Nets because I just couldn’t imagine myself spending too much (time) in Houston,” said Tsai. “No knock on Houston, but I love New York. And owning a sports team, especially in a major league like the NBA, it’s like owning a nice apartment on Park Avenue.”
As Greenwell notes in her profile of Wu Tsai, the couple’s investments are not philanthropic nor only about their mutual love of sports. They’re about business. They invest in projects that they think will make money. Big money.
Indeed since those initial investments, the Tsais have gone all-in on sports investments through their family investment office, Blue Pool Capital. They were part of a group that tried but failed in an attempt to buy the Carolina Panthers in early 2018. They added a second lacrosse franchise in the National Lacrosse League, this one based in Las Vegas; invested in the outdoor lacrosse league as well; bought a stake in an Esports league, etc. More recently, they acquired a three percent stake in the NFL’s Miami Dolphins and their Formula 1 franchise.
Their most successful investment by far — both in terms of success on the field and asset value — is the New York Liberty which came after they had bought their minority stake in the Nets. The NBA asked if they would be interested in buying the Liberty owned then by James Dolan who Greenwell describes as a “legendary sports villain.”
They dove in and changed the face of the WNBA, moving the team from a glorified high school gym in Westchester to Barclays Center. Wrote Greenwell, that was just the beginning. There was a best-in-class locker room, the biggest performance staff in the league, on-site chefs and a midseason bonding trip to Napa. Wu Tsai also deliberately broke league rules by chartering team flights for which the Tsais were fined $500,000.
“We had that philosophy that we were just going to upgrade everything,” she says. “The North Star was building a championship-caliber team that could bring back the old fans and attract new ones.”
“She rescued us,” Liberty CEO Keia Clarke, who spent eight years working under Dolan, told Greenwell.
Wu Tsai also went after the league’s dominant player, Breanna Stewart, flying to Istanbul where Stewart was playing in the W’s off-season and making her pitch while the two sailed through the Bosporus on a tourist boat.
“I wanted to go somewhere where not only could I fight for a championship but go lock arms with the people who are going to make this league better,” Stewart told Bloomberg. “She made me feel like everything I wanted was exactly what she was fighting for too.”
All that of course led to the ultimate prize, the dramatic, Game 5 overtime win vs. the Minnesota Lynx at Barclays Center last October. Wu Tsai admits that the team isn’t making money yet but “soon” will. But the value of the franchise which cost the Tsais somewhere between $10 and $14 million, mostly in debt relief for Dolan, has soared. When members of the Koch family bought a 15% stake in BSE Global last June, the Liberty valuation was put at $200 million. Since then, prospective owners of WNBA expansion teams have offered entry fees of up to $275 million, putting Wu Tsai’s goal of a billion dollar price tag within reach.
Things are looking good for the Liberty and their owners this season. People are talking about a dynasty in New York and the team has become a phenomenon. GQ called Liberty games the best party in New York City.
As for the future, Wu Tsai confirmed reports, also in Bloomberg, that BSE Global is planning what will likely be a billion dollar investment around Barclays Center, a vertical version of LA Live! the entertainment district built around Crypto.com, nee Staples, Center, home of the Lakers.
[M]eanwhile, the Tsais are planning a major development initiative in the traffic-clogged area around Barclays. Adding hotels and restaurants, Wu Tsai says, will help draw more fans for the Liberty and Nets while also benefiting Brooklyn more broadly: Only a fraction of New York City’s 63 million annual tourists ever set foot in the borough.
And the Nets and Liberty will continue their focus on the arts, having brought Brooklyn-born Jean-Michel Basquiat’s work to the attention of the city’s school population. Next year, it will be Rashid Johnson another local artist who’s a friend of Wu Tsai.
Bottom line: It’s been a bad bet to underestimate the Tsais’ ambitions.
“Like all women’s sports, the team had been underestimated and underfunded. We changed that,” Wu Tsai told Greenwell. “We bet on women. And we are winning.”
- With the New York Liberty, Clara Wu Tsai Aims for the First $1 Billion Women’s Sports Franchise ($) – Megan Greenwell – Bloomberg Business Week