The looming bidding war for the NBA expansion team expected to be granted to Las Vegas is shaping up to be the most competitive and expensive sports deal in US history.
The list of potential suitors spans LeBron James and his backers to the company that owns the Red Bull brand, according to people familiar with the situation. The total price tag including building a new arena has the potential to hit $7 billion, according to two sports advisers who have previously sold NBA teams.
Expansion in America’s biggest sports leagues is rare. The NBA last added a team in 2004 when it awarded a franchise to Charlotte. The NFL hasn’t grown since 2002 and Major League Baseball’s most recent additions came in the late 1990s. There’s also been a boom in team valuations. And Las Vegas has become a sporting destination — hosting the most recent Super Bowl and is adding a MLB team to its NFL, NHL and WNBA franchises.
“Vegas is a unicorn,” said Michael Leeds, a sports economist and professor at Temple University. The combination of the city being a major tourist destination and booming sports town are going to make an NBA franchise a “huge draw.”
There’s been mounting speculation that the NBA will add two teams, with Seattle and Las Vegas being the top candidates. The league has been waiting to start the process until completing its media deals, which should be finished soon. Those agreements, which are expected to fetch about $75 billion, will then be used to price new franchises. Adam Silver, the NBA commissioner, said this week that the league will turn to expansion in the fall.
Adding to the intrigue is that the Vegas team appears very much up for grabs. That’s not the case if the league lands in Seattle, which saw its NBA team move away in 2008. The ownership group of Seattle’s NHL team — led by David Bonderman and his daughter Samantha Holloway — are considered the heavy favorites to get an NBA franchise.
A $7 billion price tag would top the current high of $6.05 billion that a group led by Josh Harris paid last year to acquire the NFL’s Washington Commanders and the team’s stadium.
One big variable on cost will be where the Las Vegas NBA franchise plays. The NHL’s Golden Knights play in the T-Mobile Arena, co-owned by MGM Resorts International. Bill Hornbuckle, CEO of MGM, said earlier this year that he also wants a shot at hosting an NBA team.
Arena costs
However, sports franchises are increasingly pushing to own stadiums and then develop the surrounding real estate as a way to add another lucrative revenue stream. An investor group taking this route might have to add a couple billion dollars to the price tag. The stadium being proposed for the relocation of MLB’s Athletics to Las Vegas is estimated to cost $1.5 billion and open in 2028.
The expense of building a new arena would be on top of buying the franchise from the NBA. Various media reports have the fee around $4 billion. Some advisers expected it to approach $5 billion because of stiff competition and increased revenue from media rights, according to people familiar with the situation who asked not to be named because discussions are private.
How the sale of the NBA champion Boston Celtics plays out might also impact pricing of the expansion teams. Sportico values the Celtics at $5.1 billion, the fourth-highest in the league.
On the ground in Las Vegas, various groups are vying for the real estate. Tim Leiweke, the developer behind Oak View Group, has proposed a $10 billion project based around an NBA arena. Meanwhile, LVXP has presented its own plan for a complex surrounding a sports venue on the Las Vegas strip.
James — a billionaire in his own right — has said he wants to own a team and pointed to Las Vegas. The Los Angeles Lakers star is backed by RedBird Capital Partners and Fenway Sports Group, with both parties investing in James’ The SpringHill Company in 2021.
“They have everything here,” James said in December after the league’s first in-season tournament was held in Las Vegas.
But James isn’t the only one. Shaquille O’Neal, an NBA Hall of Famer and media personality, has said that he wants in on whatever team is available. O’Neal was forced to sell his minority stake in the NBA’s Sacramento Kings due to a betting partnership.
Even a multinational consumer goods company wants a piece of the action. Red Bull GmbH, the energy drink maker, is in early deliberations about bidding to win a Las Vegas team, Bloomberg has previously reported.
And this is just the beginning. Once the NBA officially announces the expansion process even more investor groups are expected to join the fray.
