In July, he became the first U.S. sports owner to take on Middle East investment. With team values skyrocketing and given the rising costs of running a franchise, Leonsis expects others to follow suit.
“You’ll see,” he said in a recent interview. “I believe other teams and other leagues will all be embracing pension funds, college endowments, university endowments and sovereign wealth funds as investors, as a part of the tapestry of their investment base.”
As head of Monumental Sports & Entertainment, Leonsis, 66, owns seven pro teams, including the NBA’s Wizards, the WNBA’s Mystics and the NHL’s Capitals. The massive amount of money suddenly available from oil-rich Persian Gulf nations such as Saudi Arabia, Qatar and the United Arab Emirates coincides, he said, with a period when many teams are growing in value and sorting out how to make the underlying economics work.
Owners have routinely taken on limited partners as minority stakeholders, watched their team values climb sharply but then struggled to find the money to satisfy investors who wanted to cash out.
“We all feel great when Forbes comes out and says, ‘This is how much you’re worth and how much the teams are worth.’ But when the rubber hits the road and it’s, ‘Well, the company’s worth X; write us a check’ — most of us in sports, we’re not profitable; we’re not wildly profitable,” Leonsis said. “So it was a real issue.”
In 2020, a pair of sports-specific private equity firms were approved by the U.S. leagues — the NFL being the lone exception — to begin making minor investments in teams with some restrictions: No more than five deals per league, no more than 20 percent stake in a team, and the firms could only be passive investors.
Arctos Sports Partners and Dyal Capital Partners quickly established funds and have purchased minority stakes in more than a dozen U.S. franchises, including the Los Angeles Dodgers, Boston Red Sox and Golden State Warriors.
“To owners, it was really great,” Leonsis said. “When you have a limited partner as an individual, they feel like they’re an owner — they want in the owner’s box, they want to know what’s the budget for the team, who’s our new coach going to be? But the funds, they were administratively not allowed any of those things. They’re investors.”
While they provided an instant influx of cash to a handful of franchises, Leonsis said, the funds were too small to help every team that might be interested. As the partner in his own investment firm, he knew there was much more untapped money to be had. “It’s not like the spigot opened through these funds,” he said.
Leonsis was working with Middle Eastern interests before many American team owners. Monumental Sports partnered with UAE-based Etihad Airways in 2015, and a year later Capitals great Peter Bondra traveled to Abu Dhabi to help coach at a hockey school.
In 2021, Leonsis presented to the NBA’s advisory/finance committee at the annual owners meeting, pointing out how much money the league had closed itself off from: For example, the 10 largest sovereign wealth funds in the world control more than $8.5 trillion in assets. Norway’s is the world’s largest with $1.47 trillion in assets — and some sovereign wealth funds are controlled by states, including Alaska, Hawaii and West Virginia.
The sovereign wealth funds could be better investors for teams, Leonsis said, than private equity or some other limited partners.
“[A limited partner] expects to get their money back and return in a five-to-seven-year period. A sovereign wealth fund invests directly — they have no time horizon,” he said. “They want to invest and keep it over a long, long period of time.”
In 2022, NBA team owners unanimously approved amending league rules, capping investments at 20 percent and ensuring the funds could only be passive partners. This summer, Leonsis became the first NBA or NHL owner to take advantage of these rules, selling a 5 percent stake of Monumental Sports to the Qatar Investment Authority for approximately $200 million. For Leonsis, it’s the ideal business relationship, and he said the Qatari fund will have no influence on Monumental’s teams.
“I don’t view QIA as partners. I view them as investors,” he said. “And I’m aligned with their investment philosophy, which is: ‘We believe in you, Ted, and Monumental management as managers, where you’re fiduciary to all of your partners to do the right things in the right way. And we are not involved.’
“I went to breakfast with them. I can’t even tell them, ‘Oh, here’s what —’ They’re not interested,” he added. “They’re not [hands-on] in any way. In fact, it’s designed for them, as investors, to be many clicks back from the league and the team operations. So they have no influence.”
NBA Commissioner Adam Silver has said he doesn’t anticipate any sovereign wealth funds becoming controlling owners of a franchise in his league “in the foreseeable future.”
“I don’t want to say what could ever happen, but there’s no contemplation right now,” Silver said at a gathering of U.S. sports editors in July. “It’s very important to us, putting aside sovereign wealth funds, that individuals are in a position to control our teams, be responsible to the fans, be responsible to their partners and to the players.”
The Oct. 7 attack in Israel by Hamas and the ensuing war in Gaza have drawn scrutiny to the arrangement. In the past, Qatar has shown support for Hamas, and it allows the organization’s leaders to live and maintain an office in Doha. Rep. Jack Bergman (R-Mich.) penned letters last month to the commissioners of the NBA and NHL, saying it was “not only misguided but dangerous” to allow Qatar to invest in the D.C. teams, asking the leagues to preserve all documents and communications related to the deal “for a potential Congressional investigation.”
“There is no question that the Qataris are intending to leverage their pending 5% stake in the Washington Wizards to beef up their already considerable influence operation in our nation’s capital,” Bergman wrote in his Oct. 27 letter to the NBA.
Monica Dixon, a Monumental executive, replied in an Oct. 30 letter, saying “we absolutely share your horror at the recent atrocities perpetrated by Hamas against Israel” but also noting that the “QIA’s minority investment is passive, and QIA has no governance rights and no ability to direct, control or influence our teams or our business.”
Leonsis, in a September interview, said Qatar will have no visible presence at Capitals, Wizards or Mystics games and that fans will see no evidence of the investment. He said he wasn’t concerned with backlash, noting that Qatar has a range of relationships beyond sports — including a Georgetown campus in Doha, a major investment in the CityCenterDC mixed-use development in downtown Washington and vast real estate holdings from New York to London.
“When I heard, ‘Oh, you’re sportswashing,’ I said, ‘Well, that’s going to be pretty hard to do when we don’t talk about QIA and QIA can’t talk about their investment in our teams,’ ” he said.
Leonsis called the Qatar Investment Authority “a long-term, sophisticated small investor” and predicted it’s the first of many that will permeate the American sports ecosystem. The pool of billionaires who can afford escalating franchise price tags is shrinking — that’s one reason the NFL is exploring changes to its ownership rules, which could include allowing private equity groups, pension funds or sovereign wealth funds to invest. Leonsis noted that Josh Harris had to recruit 20 limited partners to purchase the Washington Commanders for a record $6.05 billion in July.
“Josh is one of the greatest investors, wealthiest humans on the planet and a great guy — and he couldn’t afford to write the check to buy the Commanders,” he said. “That in a nutshell is why this is a really good thing for the leagues: You want other pools of money unlocked to help you buy teams, to help you do things.”