Will McDonough on The Celtics & Other Despicable Owners

[Way Of The Ray <wayray@xxxxxxxxxxxxx>]

As bad as the Gastons were, I'm not sure they're anymore despicable
than the Jacob Brothers, or Bob Kraft, who had the gall to
take something like $70 million in state funds....

Celtics a green machine

They produced money by the basketful for Gaston family

By Will McDonough, Globe Columnist, 10/6/2002

ou are the best fans in sport, and you prove it by putting your money
up, even though the results haven't been the best.



You proved it once again last week, when the Celtics sold for $360
million, far more than any team in the history of the NBA has fetched.
Some reports at the time attributed the record-breaking price to the
storied history of the franchise. History had nothing to do with it. The
bottom line sold the team.

Even though the Celtics reportedly made a $4.5 million profit last year,
they make a lot more than that per year, according to people who looked
at their books long before this sale was consummated. The Celtics make
more than $20 million per year, and have for years, which makes it a
tempting purchase for the new owners. No one in their right mind would
pay $360 million for something that makes just $4.5 million - after its
best year on the court in recent history.

The story here, though, is really how the Gaston family made out. In
1983, with partners Alan Cohen and Paul Dupee, they purchased the team
from Harry Mangurian for $16 million cash and $3 million debt, a total
of $19 million. A few years later, they sold part of the team to the
public in a stock offering and collected in the area of $40 million. So
they had that money to pay for the team and put some in their pockets.
Since then, they have run a money-making outfit.

A few years back, after some in-house differences, the Gastons bought
out Cohen and Dupee for approximately $40 million, or about what they
took in from the stock sale. This gave them total managerial control,
and over the years the Gaston family reportedly has been buying back the
public stock, with an eye toward selling the team. Their price had
always been in the $300 million range. When it was rumored that the
Steve Belkin-Larry Bird team was going to take a run at buying the team,
Gaston sent word through his lawyer for them not to bother unless they
could come up with $300 million or more. It never got closer than that.

Belkin, who is now considered the leader to be the owner of a proposed
expansion franchise in Charlotte, N.C., couldn't get it done here, but
he might in Carolina. The feeling is that the NBA will name Charlotte as
a franchise city this week, and Dec. 1 will be the target date for the
league to name the owners. Belkin was calling friends and business
associates in Boston last week, seeking partners in the Carolina
venture. Bird reportedly told friends that he has no interest in coming
back to Boston, and the new owners reportedly have no interest in
bringing him back.

Incidentally, the new Celtics owners are searching for partners to help
pay the $360 million. Meanwhile, the Gastons leave town with $320
million, plus an estimated $150 million smart people say they made while
they were running the franchise. However, some of this will have to be
paid to the stockholders. Not bad for hardly putting up any money of
their own nearly 20 years ago. Not included in this summation is the
millions of dollars they could write off over the years on taxes for
depreciation of the team and the players. The present revenue stream,
and the tax benefits, are the reasons the team could sell for the kind
of money it did last week.

Bruins bonanza

J erry Jacobs purchased the Bruins and Boston Garden for $8.5 million in
1976, when no one else was interested. Jacobs made a great deal with
Storer Broadcasting of Miami, which owned the team and the building. At
the time, Storer owed the Bruins $5 million for five years of television
rights on Channel 38. Jacobs told Storer to keep the money it owed the
Bruins, so all he had to put up was the remaining $3.5 million. He made
that back in a heartbeat, when he took over the concessions in Boston
Garden. The difference between the Gastons and Jacobs is that Jacobs
paid for the FleetCenter and is still paying for it. The deal he gave
the Gastons to play in it was free rent through the 2011 season, plus
Jacobs pays for all game-day expenses in the building, which run a
couple of million dollars a year. However, Jacobs has done a marvelous
job of marketing and running the FleetCenter. While the Bruins and
Celtics haven't lived up to expectations at the gate, Jacobs has done
very well with other events he has put in the building, such as music
shows with Paul McCartney and Bruce Springsteen. Beyond that, in what
has turned out to be a brilliant move for him and the Red Sox, they
formed a business partnership in the mid 1980s to launch a local cable
sports network, known as New England Sports Network. Together, the
Bruins and Sox bought out the Channel 38 interests in the network a few
years later, and with the rise of cable around the nation, this
investment has become sensational. Jacobs owns roughly 20 percent of
NESN. The current Red Sox ownership controls the majority interest, and
this cable network was the gem in the Red Sox sale, the reason the club
went for $700 million. The potential buyers who looked at the sale felt
the TV station was worth more than the team in the long run, placing its
value in the $350 million range. If it sells for that much someday,
Jacobs owns 20 percent of that action. And beyond the FleetCenter, the
Bruins, and NESN, he also owns a prime piece of real estate in Boston,
the old Garden site, adjacent to the FleetCenter. One can just imagine
what the sale price would be for the building, the team, the real
estate, and the interest in NESN. All of it starting with a $3.5 million
investment 26 years ago.

The Yawkey legacy

T om Yawkey paid $2.3 million for the Red Sox and Fenway Park in 1932.
When he died in 1977, his estate got $15 million from a group headed by
Buddy LeRoux and Haywood Sullivan. However, his widow, Jean, stayed in
the action as a general partner, and eventually bought out LeRoux and
Sullivan. Jean Yawkey died 10 years ago, leaving John Harrington in
charge of the franchise, with the stipulataion that when the team was
sold, all of the money would go to her charitable foundation. Her
interest in the team went for $410 million, and her trust reportedly is
now worth $500 million. I have always said that the Yawkeys, both of
them, never got the credit for what they did here. Neither was a
Bostonian - or even a New Englander - yet they left nearly all of their
money to be distributed here for charity, forever.


The Patriot model

The Patriots are building toward being the biggest financial winner of
them all. What is going on at Gillette Stadium is out of sight,
unmatched in the history of sport in this country. No team has grossed
more than $200 million in a year, but the Patriots are going to do that
- and go beyond. Bob Kraft purchased the team eight years ago for $162
million, and bought Foxboro Stadium out of bankruptcy court for about
$25 million. He also built the new Gillette Stadium for $320 million.
More than three years ago, he had already paid off Foxboro Stadium and
the team. Now, he is well on the way to paying off Gillette Stadium. A
source close to Kraft estimates that if he put the team and stadium up
for sale tomorrow, he could easily get $1 billion. Besides income from
the Patriots, the stadium also takes in money from Revolution soccer
games and nonsports functions such as birthday parties, bar mitzvahs,
weddings, and business meetings. The stadium facilities reportedly are
booked daily through November. No one in this area, or perhaps around
the country, can match the marketing genius of the Kraft family. The way
they have sold this stadium is a model for others to copy.