Friday's column on Manchester United (MANU) generated some interest on the subject of owning a stake in a professional sports team, so today's column focuses on another opportunity in that arena -- one that is more indirect, but perhaps more interesting.
You, too, can own a piece of New York sports, namely the Knicks and Rangers, by owning shares in Madison Square Garden (MSG). MSG happens to own both of those teams, along with a whole host of other assets. While the company no longer owns the media side of the business, which was spun off in October as MSG Networks (MSGN), there's still a compelling pile of assets left.
First, the Knicks, which were recently named as the NBA's most valuable franchise, are valued at $3 billion, a 20% increase over last year. The Rangers, in turn, were named the most valuable NHL franchise (for the first time since 2004) with a value of $1.2 billion. If you put any faith in Forbes' estimates, the combination is worth $4.2 billion.
Among MSG's other assets, perhaps the most compelling is the Madison Square Garden complex itself, along with the associated air rights, one of New York's most iconic pieces of real estate. Additional assets owned by MSG include the New York Liberty of the Women's National Basketball Association, the Hartford Wolf Pack of the American Hockey League, as well as long-term leases on Radio City Music Hall, and other venues.
Here's where things get interesting: MSG's current market cap is just under $4 billion. When you subtract out cash ($1.567 billion) and add back debt (there is none), you get an enterprise value of just $2.42 billion.
Keep in mind, this is a "back of the envelope analysis. It is dependent on the Knicks and Rangers' valuations being close to reality, and does not account for the fact that while MSG owns the teams, while MSGN owns the associated media rights.
Still, MSG is a compelling package of assets, and another potential way for the New York sports fan to own a piece of two marquee franchises, and Madison Square Garden itself. To the extent that the value of major professional sports franchises continue to appreciate in value MSG should benefit.
This is not your traditional investment, however, that can be accurately valued based on traditional earnings metrics alone. For instance, on a price-earnings ratio basis, MSG appears very expensive, at more than 110x 2017 consensus estimates.
This is an asset play, one that is dependent on the underlying assets maintaining or increasing their values. Payoffs in these cases can take years to develop and the prices of such plays rarely, if ever go straight up.