Aug 3, 2010, 11:16 AM EDT
Location, location, location. Oh, and timing.
Golden State just sold for well above its value as estimated by Forbes, in part because the San Francisco Bay Area is one of the wealthiest areas of the nation.
The Detroit Pistons are estimated to be worth $479 million and have turned more than $40 million in profit the last three seasons. It as well run a franchise as there is in the NBA, with a fantastic brand name.
Yet the sale price may be $100 million or more below that estimated value, according to a report in Forbes today.
But location and timing are critical factors to consider. As it relates to location, the Detroit MSA faced a 15.4 unemployment rate as of June 2010 compared to the national 9.5 rate. This would cause any potential investor to seriously question whether fans would continue to support the team at the level of avidity they have historically, especially given that the team is in major rebuilding mode and not likely to challenge the current Beasts of the East (Orlando, Boston, Miami) anytime soon.
Furthermore, in light of the climate of ‘guilt’ that surrounds corporate spending on sports sponsorships (especially in a city whose main industry has been the beneficiary of significant TARP money), a prospective buyer would be justifiably anxious over the likelihood of short term corporate support (e.g. buying luxury suites, paying for facility signage, etc…).
Karen Davidson also owns the Palace at Auburn Hills, where the Pistons play. The team and the building may be sold as a package.
Still buyers are leery. Any investor coming is has to be wary of the almost-certain lockout coming next fall — you will be getting no income from the team next fall (and have reduced expenses, but still). The economics of the NBA may be friendlier to owners on the other side of that lockout, but the down time has to be taken into consideration.
Still, Bill Davidson bought the Pistons in 1974 for $8 million (Forbes says that counting for inflation that is $28 million in today’s market). Even if the team only sells for $350 million that is a tidy little profit.
- Report: Lakers finally offer coaching position to Byron Scott, deal expected soon 22
- Report: Cavaliers leading Kevin Love-trade sweepstakes 34
- Chris Paul on boycott if Sterling is still owner: “That’s something me and Doc are both talking about” 26
- Players union approves of Thunder’s Josh Huestis arrangement 15
- Cavaliers officially sign Andrew Wiggins, putting 30-day hold on him being traded 56
- Lakers deny rumor they are waiting around for Doc Rivers to be coach 61
- James Harden: “Dwight and I are the cornerstones of the Rockets. The rest of the guys are role players.” 91
- Mavericks signing Al-Farouq Aminu to two-year, minimum salary contract 12