Ted Leonsis' vision of a $10 billion sports empire in Washington, D.C. expands with the relocation of the Washington Capitals and Wizards to Virginia.

• Ted Leonsis, owner of several sports teams in the Washington, D.C. region, stated his goal of establishing "the world's most valuable regional sports and entertainment company," with a potential valuation of $10 billion to $15 billion, and the possibility of an IPO.
• This week, the Leonsis-owned Washington Capitals and Wizards were announced as potential candidates to relocate to Alexandria, Virginia, as part of a $2 billion entertainment complex.
• Both the Baltimore Orioles and Washington Nationals have been rumored to have had bids from Leonsis.

Ted Leonsis, owner of the NBA's Washington Wizards and NHL's Washington Capitals, has a vision to create a regional sports empire in the D.C. area. The plan to move both teams to Alexandria, Virginia, aligns with his idea of a profitable D.C. sports business model worth $10 billion to $15 billion, with an eventual IPO.

At the CNBC CFO Council Summit in Washington, D.C., last month, Leonsis stated that his objective is to establish the world's most valuable regional sports and entertainment company.

In 2010, Leonis, a former AOL senior executive, founded Monumental Sports & Entertainment. The company's portfolio includes the Capitals, Wizards, and Washington Mystics, as well as minor league hockey and basketball teams, stakes in esports organizations, several arenas, including Capital One Arena in downtown D.C., and a regional sports network.

Washington, D.C. is the unifying factor in the large collection of assets that are spread across multiple sports.

Leonsis stated that he will not purchase a soccer team outside of London or a football team in another market. Instead, he wants to use Monumental Sports as a platform to showcase local teams, venues, and networks.

That sports footprint is set to grow in the coming years.

On Wednesday, Virginia Gov. Glenn Youngkin declared that the Capitals and Wizards have agreed to relocate to a new arena in Alexandria, Virginia, as part of a $2 billion entertainment complex in 2028. The new development, which would involve Monumental investing over $403 million, would also include a new global headquarters for the company, an updated broadcasting studio, an esports facility, and a performing arts venue. The deal is currently awaiting legislative approval.

The Monumental company announced plans to update the Capital One Arena, decreasing its seating capacity to approximately 12,000 seats while also serving as a home for the Mystics and hosting other concerts and events that cannot be held in the arena due to the NHL and NBA schedules.

There is a possibility that Leonsis and Monumental may gain more teams in the region.

Leonsis stated that owning a soccer and baseball team locally is a no-brainer, but chasing outside of Washington, D.C. is not the ultimate goal. The success of the platform should be the priority, and any additional investment in hockey, baseball, and basketball teams should be evaluated based on their additive and accretive potential to the platform.

Previously, there have been rumors that Leonsis could be a potential buyer for both the Baltimore Orioles and the Washington Nationals, two MLB teams that align with his location-based investment strategy. It is reported that Carlyle Group co-founder David Rubenstein is in talks to buy the Orioles, according to Bloomberg.

Leonsis stated that the Orioles' competition with the Red Sox and other big market teams can be nullified by building the world's most valuable regional sports and entertainment company, which encompasses ownership of the venue, network, and teams, with a market ranging from Richmond to Delaware.

The growing multi-sport ownership strategy

The Boston Red Sox, Pittsburgh Penguins, and Liverpool are owned by Fenway Sports Group, while David Blitzer holds team equity in each of the five major North American men's sports leagues with stakes in the Philadelphia 76ers, New Jersey Devils, Washington Commanders, Cleveland Guardians, and Real Salt Lake.

James Dolan owns the New York Knicks, Rangers, Madison Square Garden, and MSG Networks through public companies.

The Atlanta Braves Holdings, which was separated from Liberty Media's other businesses in August, encompasses the MLB team, the management of the stadium, and the surrounding mixed-use development.

Few have complete control over their teams, arena, and broadcast network like Leonsis and Monumental do, which he believes would give his teams a competitive edge.

Leonsis is aiming to create a business empire similar to billionaire Stan Kroenke, who owns several franchises in different sports and regions, including the NBA's Nuggets, NHL's Avalanche, MLS's Rapids, the NFL's Los Angeles Rams, and the Premier League's Arsenal FC.

More sports teams going public?

Monumental is predicted to generate $650 million in revenue this year, with the expectation of reaching $1 billion in revenue through organic growth "relatively quickly," as stated by Leonsis.

A team acquisition could boost our revenue run rate to $1.5 billion and increase our valuation trend to $10 billion to $15 billion, according to Leonsis.

This year, the Qatar Investment Authority purchased a 5% stake in Monumental, valuing the organization at approximately $4 billion. This marked a new milestone for sovereign wealth funds investing in U.S. sports, following the trend of private equity firms and funds also purchasing team stakes in most leagues.

QIA is viewed as investors rather than partners by Leonsis, who acknowledged that it is a completely passive investment. However, he also pointed out that there is potential for more sports teams and organizations to go public as these types of investments become more prevalent.

Despite revenues growing, the market performance of public sports organizations can be as unpredictable as their actual play. For instance, MSG Sports experienced only a 1.22% increase in performance since splitting off from the broader MSG business in April 2020.

The market cap of MSG Sports, which includes the NHL's Rangers and NBA's Knicks, is approximately $4.15 billion. This year, the Phoenix Suns were sold for a record $4 billion in the NBA, and the Ottawa Senators were sold for nearly $1 billion in the NHL.

In Leonis's opinion, sports organizations are undervalued and should be viewed more like SaaS businesses with recurring revenue streams such as ticketing, sponsorships, and media rights.

With the release of valuations and the entry of private equity, Leonsis believes that there will be a desire for exits. However, he predicts that if individuals comprehend the inherent value and stability of our content's revenue streams, a market for large-scale sports venues and operators will emerge.

If a company reaches high-end revenue run rates and valuation, it may consider going public, as stated by Leonis.

"If you act like a pre-IPO company, you'll be well positioned because the sports world has changed dramatically," he said.