Ted Leonsis never stops looking for ways to grow and expand his Washington-based sports and entertainment empire into new and emerging territories, adding in the past few months an Arena Football League team, an “e-sports” franchise and an over-the-top streaming network that, among other things, could include those new teams’ games as content.
But at the heart of the Leonsis holdings are three main properties: the Washington Capitals, the Washington Wizards and Verizon Center. And now, six years after consolidating his majority stakes in all three, Leonsis, 59, is confronting a future full of important economic milestones and fundamental crossroads, including, potentially, a move of the Capitals and Wizards out of their downtown arena.
“My inclination right now would be — it’s pretty awesome where we are,” Leonsis said Wednesday, the morning of the Wizards’ 2016-17 home opener. “And I love what’s happened to [downtown] D.C. But I don’t know what’s going to happen five, six, seven years from now. . . . I will be a free agent. I mean, that hasn’t been lost on me.”
In a 90-minute interview with Washington Post reporters and editors, Leonsis discussed at length his new media deal, in which he is receiving a minority share of Comcast SportsNet, reportedly one third. He also will attempt to expand his own Monumental Sports Network into a viable over-the-top regional content network that will carry games of his smaller franchises and provide supplemental coverage of the Capitals and Wizards.
“I am trying to build the most important, most influential regional sports and entertainment set of franchises in the world,” he said. “That’s my goal.”
Leonsis also spoke about his business challenges — including a mortgage on Verizon Center that costs him an estimated $36 million annually, which he called “the worst building deal in professional sports” — and acknowledged the possibilities, among them a potential move, that will open up once that mortgage is paid off in seven years.
His “free agent” comment aside, Leonsis made it clear he is not actively seeking to leave downtown D.C., an area that has grown up around the franchises into a thriving, inner-city entertainment and shopping district. But neither would Leonsis commit to keeping the teams there.
“In terms of the Verizon Center, I’m being sincere: There’s been no discussions of would we look to move,” he said. “Have we talked to Virginia? We have not. Have we talked to Maryland? We have not. I would never do that. My goal would be stay where we are or stay within the city.”
Leonsis, though, danced around questions about the current site of RFK Stadium in Southeast Washington, long rumored to be a potential landing spot for the Capitals and Wizards after D.C. United moves into its new stadium at Buzzard Point in 2018 or 2019. District officials and Events DC, the District’s sports and convention arm, are considering future uses for the 190-acre site, including a new Redskins stadium or an arena complex for NBA and NHL games.
The plans prompted city officials to consider a future of downtown D.C. without Verizon Center, something the Downtown Business Improvement District, an association of downtown developers, plans to study.
Asked directly about the RFK site, Leonsis at one point said, “I don’t know. All I know right now [is] I’m working my way through a really massive real estate morass, where I’ll eventually own the building.”
Leonsis purchased 100 percent of the Capitals and 44 percent of the Wizards and Verizon Center from the late Abe Pollin in 1999 and acquired the remaining stakes in 2010. Largely because of the unfavorable mortgage, Leonsis said he is paying $14 million annually in interest and $9 million in principal, as well as maintenance costs that last year totaled $13 million. By comparison, he said, most teams pay rent of $3 million to $4 million to play in municipally owned arenas.
The mortgage costs are a leading factor in what Leonsis estimates will be a loss of $40 million in 2016 for his company, Monumental Sports and Entertainment. But with naming rights for the building set to become available in 2018 and with the mortgage paid five years after that, Leonsis said he expects the company to become profitable eventually.
“No more paying four, five times the rent compared to other teams that we compete with,” he said. “I know that sounds silly. But you’re competing with a team that pays $3 million in rent, and you’re paying $40 million in [building costs]. . . . When we finish paying the mortgage, that will right-size the business, and for once we would be advantaged [economically], as opposed to disadvantaged.”
Leonsis cited the economic success of downtown D.C., made possible largely by the presence of the Capitals and Wizards, as motivation for one of his latest projects, a new arena facility on the campus of the former St. Elizabeths Hospital, in the Congress Heights area of Southeast Washington. There, Events DC is building a $65 million arena where the WNBA’s Mystics will play and where the Wizards will make their practice base, with an NBA D-League affiliate likely to be added.
Leonsis and D.C. Mayor Muriel E. Bowser say the 4,200-seat facility, scheduled to open in 2018, will jump-start economic development in the neighborhood. Monumental Sports will pay only $4.46 million, or about 6.9 percent of the cost, in an upfront lease payment.
“It’s one of the reasons we want to transform another neighborhood,” Leonsis said.
Jonathan O’Connell contributed to this report.