Alex Meruelo

Earlier today, the Atlanta Journal-Constitution reported that Los Angeles businessman Alex Meruelo has agreed to purchase a majority ownership stake in the Atlanta Hawks. If the deal is approved by the NBA’s Board of Governors, Meruelo will become the first Hispanic primary owner of an NBA franchise. That’s pretty cool.

Meruelo built up his empire starting with a pizza restuarant, La Pizza Loca, that he opened in L.A. at the age of 21. His pizzeria grew into a chain of 50 restaurants in Southern California and his Meruelo Group also owns construction firms, the Grand Sierra Resort and Casino in Reno and a Spanish language TV station in L.A. He’s your classic American success story and now he wants “to bring a championship to the city of Atlanta.”

What I find particularly interesting about this deal are the numbers involved. In 2004, the Atlanta Spirit Group purchased the Hawks and Phillips Arena for a reported $208 million. Seven years later, they sold the team and the arena to Meruelo for a figure in excess of $300 million, according to David Aldridge. Meruelo will also assume the group’s Phillips Arena debt, which Tom Ziller estimates to be in the range of $120 million.

Since Atlanta Spirit Group will retain minority ownership and when you add the debt to the purchase price, that’s a nice little profit the group was able to make in a seven-year period. Who said owning an NBA team is bad business?

As we all know, that’s exactly what the owners are claiming in this spirit-crushing lockout we’re enduring. And it leads me to once again ask the question I’ve been asking ever since these lockouts started becoming commonplace in professional sports: Should we feel sympathy towards billionaire owners for incurring minor losses while running these teams, when they can usually make a significant profit if and when they sell the team?

I’m not taking sides in this NBA labor dispute — both sides are stubborn, greedy and clearly don’t have the best interests of the sport and its fans at the top of their lists of priorities. But if there’s anything more tiresome than millionaire athletes whining about their ability to feed their families, it’s billionaire owners who front like their financial losses related to sports team ownership are crippling. There doesn’t appear to be a shortage of presumably savvy, mega-rich businesspeople out there who are more than happy to enter into this supposedly shitty business.

Comments (9)

  1. Nicely put, Scott :)

  2. I’m no mathologist but assuming that debt is the operating loss (ie all income went to all creditors and 120 mil left) then these guys made about 5.5% per year. As far as I can tell that makes sense for some conservative investment, not for owning an NBA franchise. In other words, it seems like I would not be happy about that use of the money if it were my
    money, overall.

  3. You do realize this is the Atlanta Hawks, one of the worst attended franchises in the league? The team that sold away team merchandise in their arena?

    Yeah, I too hate it when I buy toys that only sometimes make me money and appreciate in value.

  4. Well, Atlanta had 71% the attendance of the bulls (who had the highest rank) and nearly 90% of the team ranked in the middle. That doesn’t seem too too bad. I also don’t think that “toy” is the right word here. For a reasonably well off guy making $100k year I guess a toy would be a $50 item. Are you saying these owners have a similar kind of ratio? Overall, I don’t get a lot of sense from your message.

    I was trying to say that, if you ignore the scale for a moment (these owners have far more money to invest than we do obviously), then the NBA investment doesn’t actually seem to be all that smart, given the amount of energy and risk involved (as compared to, say, giving your money to some fund manager or something). I may be wrong about my numbers, tho.

  5. (Oh and I should have said: owning an NBA franchise would be fantastic for non-monetary reasons; it is just the money that only seems so-so.)

  6. Sorry for the repeated postings, but I think I finally realize that William Brinkman is saying that NBA teams should just be treated like toys and not money making enterprises. So, perhaps, when an owner beats inflation, he should be happy. Is that it? If so, that doesn’t sound right to me (but I’m not an NBA owner, of course).

  7. [...] of Atlanta Hawks pizzas Posted by Trey Kerby under Atlanta Hawks, Food on Aug 09, 2011 As Scott mentioned yesterday, new Atlanta Hawks owner Alex Meruelo made his fortune in the pizza business. While this would [...]

  8. Not sure of the exacts, but I thought the 300M figure included the amount of absorbed debt. Not 300M + assuming 120M in debt. I’m not saying the ASG didn’t make a profit, but I’m am theorizing that it isn’t a great as guessed.

  9. I’ve lived in SoCal for ~15 years, and I’ve never heard of this chain, let alone been there. If it’s so successful, maybe I should give it a try…

Leave a Reply

Your email address will not be published. Required fields are marked *