It hasn’t been my desire to comment on the status of the discussions between Lincoln Holdings - the partnership group I’m involved in that owns the Washington Capitals and Washington Mystics and WSELP, which owns the Wizards, the Verizon Center, and the Washington-area Ticketmaster franchise. Yet with the news reports out there this morning, it probably makes sense to clear some things up. The first thing I’d like to point out that I think is getting lost in all of this is that I am part of WSELP, too. My partners and I already own 44% of WSELP; that means we already own nearly half of an NBA team, the Verizon Center and the Ticketmaster franchise. So when I hear people talk about this or that happening with WSELP, I’m not sure they understand that I am part of WSELP, a big part of WSELP!
Ten years ago, when Abe Pollin and I forged our partnership, we not only created a set of rights for me as a partner in WSELP, but we also agreed on a orderly process for Lincoln and me to acquire the Pollin family’s share of WSELP when he passed away. The process we agreed to, set out in an agreement that Abe and I both signed, was that if his heirs and my partners and I could not agree on a valuation of the team, we would start an appraisal process designed to arrive at a fair market value for the Pollin family’s share of WSELP (including the Verizon Center and the Wizards). The idea was to make it possible for us to do this transaction at a price that was fair to both sides. I’m not sure how or why someone would object to a process that is simply designed to arrive at a fair market value, so I was very surprised to read in the paper today that the Executors of Mr. Pollin’s Estate are attempting to find a way around the appraisal process Mr. Pollin put into place for my partners and me-and only my partners and me — to pay fair market value for the portion of the WSELP properties we don’t already own. We were even more surprised to see that a memo was circulated to WSELP employees (and keep in mind I already own 44% of WSELP) that didn’t even mention the appraisal process that Mr. Pollin agreed to more than 10 years ago and that the Pollin estate (through their lawyers) have committed to in writing. I’m sure this must have been an oversight on their part.
My partners and I are already very involved in the workings of the Verizon Center, and the teams that play there and keep in mind, we already own nearly half of the Wizards and the Verizon Center. On top of that, the Capitals play 41 regular season games there, as well as pre-season and playoff games, and the Washington Mystics play a minimum of 17 games. We have an extensive knowledge of sports team ownership and economics, and are proud that among the teams that play at the Verizon Center, the Capitals are doing the best financially. The Capitals are one of the fastest-growing teams in all of sports, we’ve created a very healthy business model, which is sustainable and strong. We sell out every game. We generate fantastic TV ratings, are a league leader in merchandise sales, and our sponsorship sales are growing. In fact, in every metric of our business, we’re growing.
Over the years that I’ve been the principal owner of the Capitals, I’ve learned a lot about sports team ownership. It was from Abe Pollin himself that I learned owning a team is a public trust. I have learned that owners have a responsibility to do everything in their power to build a great team that can achieve immortality for their fans by striving to win championships, and I hope with the Caps I’ve shown that that I’ve learned a great deal about the right way to build a winning team. I would like to restore a winning tradition to the Wizards, and help the team - and its fans in the Washington area - achieve the rewards that come from competing for a championship.
I am very confident this process will move forward in the manner Mr. Pollin and I agreed to in 1999. The last thing the Wizards need now is more uncertainty. My partners and I are confident in the rights we have, and will make sure to protect them.
In the first phase of the orderly process Mr. Pollin and I agreed to conduct by which Lincoln Holdings could acquire the share of WSELP we don’t already own, we suggested a price that would have amounted to one of the highest prices ever paid for an NBA team. We did that with full knowledge of the marketplace and an intimate view of the operations of the Wizards and Verizon Center.
The Pollin Estate didn’t agree to sell at that price, which of course was their right. That simply meant that we now move to the appraisal process. We have appointed an appraiser to set a value for WSELP, as required by the Agreement Mr. Pollin and I signed in 1999. Earlier this week, the Estate’s lawyers told us in writing that they are in the process of hiring an appraiser and assured us that they intend to pursue the appraisal in good faith. As the Agreement makes clear, if their appraisers and ours differ on a valuation, a neutral, third appraiser will be chosen to come in and establish fair market value and then Lincoln Holdings has the sole right to purchase the properties at the appraised price. Let me say that again so that it’s clear: at the end of the appraisal process established in my agreement with Mr. Pollin, there is only one person or entity that has the right to buy the outstanding share of WSELP: My partnership, Lincoln Holdings. The point of the appraisal is to establish a Fair Market Value for WSELP, that’s what the Agreement says and I’m willing and able to hold up my end of the deal. I should also note that in addition to the appraisal right I just described, Lincoln has many other rights, including Rights of First Refusal, Tag-Along rights and other related WSELP partnership and Lincoln purchase agreement rights.
Since this is, I hope, the only time I’ll be speaking out until the appraisal process is completed and we have an opportunity to acquire WSELP for the appraised price, I do want to clear up one other matter that has been in the public. Lincoln Holdings is very well capitalized and the Capitals are financially succeeding as a stand-alone company. We have very little debt against our ownership position in our teams, and zero debt against our 44% WSELP position. The Caps are not only playing great on the ice but doing very well financially.
We have been willing to take on the acquisition of WSELP even knowing that the Wizards are losing money this season and facing challenges that were also reported today. We are willing to do this because we want the Washington community to have multiple teams vying for championships. Wish us luck!
