Although Tilman Fertitta is the ninth-wealthiest NBA owner, here’s why the price tag of the Houston Rockets has proven to be too hefty for even him to afford.
Houston Rockets owner Tilman Fertitta has earned the reputation of a penny-pinching sports owner, and his decision to consistently avoid paying the luxury tax has played a large part in that. But aside from that, Fertitta has made decisions regarding his other businesses during the COVID-19 pandemic that have earned him slander, which includes attempting to eliminate the benefits of the workers of his Post Oak hotel, not to mention laying off 70 percent of his employees before Houston was even under quarantine-mode.
Perhaps there’s another reason for Fertitta’s cost-cutting moves, and it might come as a surprise to many. It’s quite possible that Fertitta wasn’t financially prepared to own the Houston Rockets.
The furlough isn’t at all surprising. What’s surprising, in hindsight, is that the league allowed the purchase of the Rockets to go through in the first place given the structure of the financing: he can’t afford to own a team. https://t.co/qODUn2Rj5v
— RussNinetyFour (@RedNinetyFour) March 25, 2020
Upon first glance this sounds blasphemous. Sure, Fertitta owns the Landry’s restaurants, Kemah Boardwalk, Pleasure Pier, the Golden Nugget casinos, and more, but it’s important to note the construction of his purchase of the Houston Rockets from then owner Les Alexander.
As detailed by Mike Ozanian of Forbes, Fertitta needed Alexander to loan him $275 million in order to complete his purchase of the Rockets, as he and his businesses had less than $300 million in cash when he began the process of purchasing the Rockets. Fertitta also assumed $175 million in debt as a part of the deal, which should’ve raised eyebrows.
Fertitta sold $1.42 billion in bonds, which led to the $1.75 billion in equity that was used to buy the Rockets. When you take all of this into consideration, there were signs to show Fertitta wasn’t necessarily equipped with the financial resources to be an NBA owner.
Granted, Fertitta is certainly loaded and set for generations and generations, he’s not necessarily drenched in wealth to the magnitude of Los Angeles Clippers owner Steve Ballmer, who was the last owner to purchase a franchise before Fertitta. In fact, Ballmer is so financially endowed that he just dropped a cool $400 million on The Forum, despite the NBA being on a hiatus. Maybe Ballmer is an unfair comparison, as he’s the NBA’s wealthiest owner, and has a net worth of $51.4 billion, but there are more examples.
As outlined by Kurt Badenhausen of Forbes, Fertitta is also behind Los Angeles Lakers owner Philip Anschutz, Denver Nuggets owner Stanley Kroenke, Brooklyn Nets owner Joseph Tsai, Memphis Grizzlies owner Robert Pera, Cleveland Cavaliers owner Dan Gilbert, Detroit Pistons owner Tom Gores, and Miami Heat owner Micky Arison, who are the NBA’s wealthiest owners. Everyone ahead of Fertitta on this list have a net worth of at least a billion more than Tilman, and half of them have a net worth of five billion more than the Houston Rockets owner.
Ballmer, Anschutz, Kroenke, and Tsai all have a net worth of at least five billion more than Tilman, and the Houston Rockets make up two billion of Fertitta’s net worth. Perhaps an even bigger issue regarding the Houston Rockets owner is the fact that he’s remained insistent on being the sole owner of the Rockets, as explained by ESPN’s Tim MacMahon.
Tilman Fertitta’s companies have furloughed about 70% of employees. He’s the sole owner of the Rockets and will not consider minority partners as a matter of pride. https://t.co/H6mocBpF11
— Tim MacMahon (@espn_macmahon) March 25, 2020
MacMahon explained that the reasoning behind Fertitta’s opposition to investing in minority owners is simple: pride. It’s something he should certainly consider, and it’s not like it’s an uncommon thing either. In fact, there are currently six teams in the NBA that have ownership groups, and that’s certainly a number that will increase in the near future.
We’ve heard alot from Tilman about how the coronavirus has negatively affected him and his businesses, and understandably. But we’ve not heard nearly as many other owners speak about this negative impact as much as Fertitta has, as he recently complained about being unable to sell off his mansion, yachts, and/or jets, during an interview with Michael Hardy of Texas Monthly.
In this regard, he’s made being a billionaire look like a peasant, which is strange to put in the same sentence. These days, you don’t even have to be a Houstonian to notice Fertitta’s financial woes.
Tilman Fertitta is the NBA’s brokest boi https://t.co/PoyoofLm9o
— Duncan Smith (@DuncanSmithNBA) March 25, 2020
If money was an issue for Fertitta, it wasn’t necessarily the best decision to buy an NBA team. There are obvious costs associated with running an NBA team, and cutting back isn’t the way to go. Fertitta knew he wasn’t in the best position to buy the Houston Rockets so he should’ve passed on the opportunity and resisted the urge.
Or perhaps the NBA should’ve intervened and not allowed the purchase to go through. We’ll have to see how long his ownership lasts, but it’s worth questioning which move will happen first: Fertitta selling the Houston Rockets or simply investing in a minority ownership group.