As spring training nears, a partial sale of Nationals seems most likely

WASHINGTON –Nine months ago, Mark Lerner announced his family’s plans to explore changes to the Washington Nationals’ ownership structure, a declaration those close to the situation interpreted as an intention to sell the franchise.

But with spring training about a month away, a sale appears no closer, and those close to the process now believe the greater likelihood is that the Lerners will take on a minority partner instead — if there is any change in ownership structure at all.

It’s still possible the Nationals are sold entirely, but other scenarios now seem more likely, including a buyer potentially purchasing a minority stake in the team with the intent of buying controlling interest once certain hurdles impeding a full sale are cleared. Chief among those hurdles: the uncertainty surrounding the Nationals’ local broadcast revenue, a persistent snag in the process.

Should the Lerners take on a minority investor rather than selling the entire club, a litany of questions would follow — for both the family and a potential new partner. What is the Lerners’ commitment to rebuilding a winner on the field? Will they sell their majority stake in coming years? Do they have a long-term plan — and long-term enthusiasm — for running a baseball team alongside their commercial real estate and private equity businesses? Would an injection of cash from a new partner have any effect on fans’ experiences or hopes — or just lessen the majority owners’ financial burden?

And for a new minority partner: Does the investment accompany a desire to eventually buy out the Lerners, should the media rights issues be cleared up? Would such a desire require a right of first refusal to buy the entirety of the club once such impediments are resolved?

What’s clear is that the club’s unusual media rights agreement has lessened optimism about whether a full sale can be completed. The Nationals and the Baltimore Orioles remain locked in a legal battle over how much money the Nationals should make from their television rights, which were given to the Orioles as part of the 2004 agreement that allowed the Nationals to move to Washington. The Nationals say they are owed hundreds of millions for part of the 2010s, but a potential sale is affected more by what kind of revenue a new owner might be able to expect moving forward.

Major League Baseball Commissioner Rob Manfred has joined discussions about ways to give a potential bidder a sense of that potential revenue, according to an MLB official who referred to the situation around those rights as “a massive obstacle” to a Nationals sale. Television revenue is one of the steadiest streams of income for team owners.

With those figures uncertain, the Nationals are not exactly a can’t-miss investment opportunity. While other franchises maintain revenue streams from steady television or stadium naming rights deals, the Nationals do not have either. They also do not seem likely to be an on-field powerhouse next season, meaning ticket revenue probably will not be sky-high, and they have about $250 million in debt locked up in deferred player salaries.

And while teams such as the Boston Red Sox have availed themselves of new rules allowing them to sell advertising patches on jerseys, the Nationals have not yet taken that step. In fact, the Nationals are so limited in their revenue streams that they have maintained affiliation with Terra cryptocurrency as the title sponsor for their club level despite the fact that the company’s founder is on the run from the law. The alternative, according to a person familiar with the situation, would be to give back the $38.15 million Terra paid them to own naming rights to that club for five years.

All of that, combined with the ongoing litigation around MASN, means the franchise probably wouldn’t be selling for the maximum possible value. The Lerners were almost certainly overly optimistic to expect they could sell for the $2.4 billion the New York Mets did in 2020, but how much less the Lerners would accept remains to be seen.

The Miami Marlins sold for $1.2 billion in 2018. The Kansas City Royals sold for $1 billion in 2019. The Nationals, a recent World Series champion in a much larger market and the baseball jewel of the nation’s capital, have fair reason to believe they could command more than that.

For MLB, getting maximum value amounts to an unspoken imperative: If one of 30 MLB teams sells for a price lower than other owners feel it should, the value of all franchises can suffer. Manfred will not want the Nationals to sell from a position of weakness, according to people familiar with his thinking who emphasize his responsibility to other owners to ensure all franchises sell for the highest possible price.

While Manfred suggested in December that the other team on the market, the Los Angeles Angels of Anaheim, probably would be sold by Opening Day, he would not commit to the same timetable for the Nationals.

Even in these circumstances and perhaps especially because of them, Monumental Entertainment CEO Ted Leonsis continues to seem like the most likely fit in the short and long term. Mark Lerner, a minority partner in Monumental Sports, and Leonsis know each other well.