The NBA’s Minnesota Timberwolves are finally good, yet now they must pay for it
It’s been two decades since the Minnesota Timberwolves last had a postseason win. They’re finally good again but for their new owners, contending for an NBA title will come at a hefty cost.
In the two decades since their last postseason series victory, the Minnesota Timberwolves have felt their fair share of pain. They’ve lost the most games in the NBA, cycled through 10 coaches and watched homegrown icons leave town to win championships elsewhere.
But this season, the Timberwolves are back with a formidable defence, a soaring young superstar and one of the best records in the league. It should be the best of times for this downtrodden franchise.
It comes with a question mark.
The Timberwolves have a new ownership group incoming, headlined by entrepreneur Marc Lore and Alex Rodriguez, a former pro baseball superstar-turned-businessman. The players they’ll inherit will be due sizeable salaries in the coming seasons, likely forcing the team to choose between paying the league’s luxury tax or letting key pieces go. Privately, some current and former executives in the league have questioned the pair’s ability to fund a winning, soon-to-be expensive roster, according to people familiar with the matter.
Lore and Rodriguez have been purchasing the franchise from current majority owner Glen Taylor in stages, and are scheduled to assume control of the team during the first half of this year. According to people with knowledge of the transactions, the new owners borrowed or fundraised much of the money used to manage their personal finances and make the purchase to date. After inking a deal that valued the team at $1.5 billion in 2021, they’ve bought parts of the team in instalments: 20% in 2022 and another 20% in 2023. They aim to buy another 40% for around $600 million this year to take majority ownership of the team. Taylor, an 82 year-old native Minnesotan, will remain a minority owner under the plan.
“Our ownership transfer process with respect to the Minnesota Timberwolves and Lynx remains ongoing,” NBA spokesman Mike Bass said, referring also to Minnesota’s WNBA franchise.
Borrowing to purchase an asset using collateral is “common and makes smart economic sense,” said a spokesman for Lore and Rodriguez. The pair have “demonstrated meaningfully successful business track records which provide them with significant purchasing power.”
It is common to take on debt when purchasing a pro sports franchise, but buying an NBA team one piece at a time isn’t, said Scott Rosner, the director of Columbia University’s sports management program. When Miriam Adelson’s family agreed to buy a majority stake in the Dallas Mavericks from Mark Cuban in November, they sold $2 billion in Las Vegas Sands stock to purchase their share all at once.
The structure of the deal between Lore, Rodriguez and Taylor came together after a speedy initial agreement between the parties. Taylor wanted to remain owner a bit longer and Lore and Rodriguez wanted to learn the business and raise money, according to some of the people familiar with the situation.
The spokesman for the pair disputed the notion that a phased transaction is unusual in the sports world. “It allows for a gradual management transition,” in partnership with Taylor, he said.
In the meantime, the Timberwolves turned into something unexpected: a winning team. Anthony Edwards, a cannonball of a guard drafted first overall in 2020, has bloomed into a superstar. Karl-Anthony Towns and Rudy Gobert, 14 feet of frontcourt muscle, have become a complementary tandem.
That trio has paced the Timberwolves to a 31-13 record, tied for the best in the Western Conference. The looming cloud for the team’s new owners is that keeping this team together and successful is about to cost a fortune. Once a contract extension for Edwards kicks in this summer, the team is set to spend more than $129 million a year on those three players alone.
Under the league’s collective-bargaining agreement, teams are subject to a luxury-tax penalty if they surpass a certain salary threshold — one projected to be approximately $172.5 million next season. According to analysis by Keith Smith of Spotrac, bringing back roughly the same roster — including the veteran point guard Mike Conley and a slew of ranging defenders — could cost the Timberwolves about $210 million in salary payments and trigger another $124.5 million in tax penalties next season.
The league’s wealthiest owners are sometimes willing to dip into their personal wealth to help fund such extravagance. Steve Ballmer’s Los Angeles Clippers, for example, have incurred years of tax penalties in pursuit of the franchise’s first championship. About a third of teams do so.
Around the NBA, executives and observers question whether Lore and Rodriguez will have the means to finance one of the league’s most exciting teams. “As with any owners, Marc and Alex will aim to make smart and disciplined financial decisions,” said their spokesman. “They will evaluate the luxury tax like every team and will pay it if it makes sense.”
Rodriguez and Lore, an eCommerce entrepreneur who has sold companies to Amazon and Walmart, borrowed much of the roughly $280 million used to purchase their first piece of the team in 2022 from their banks, according to people familiar with the situation and documents reviewed by the Journal. To buy the next portion and manage their own finances in 2023, they borrowed again, this time leaning on Dhiren Jhaveri, the founder of a Chicago-based health insurance investment firm, according to some of those people. Jhaveri owns about 4% of the team. His stake hasn’t previously been reported.
Before Lore and Rodriguez made their first payment in 2022, Rodriguez had around $227 million in debt, primarily in the form of loans from J.P. Morgan, and a net worth of around $490 million, according to some of the documents viewed by the Journal. As the payment deadline for the first instalment drew near, Lore covered part of Rodriguez’s portion after the former New York Yankee didn’t have the capital to move forward, according to some of the people familiar with the matter. Rodriguez later made payments that moved their respective ownership percentages closer to even, said a separate person familiar with the situation.
Lore, who has earned hefty payouts through sales of his start-ups and will be governor of the team after the next payment, has told the NBA his net worth is about $3.3 billion, according to people familiar with the situation.
The pair are talking to investors to partially fund the final payment for the team, including private equity firm Carlyle and former Google Chairman Eric Schmidt, according to people familiar with the situation.
As majority owners of the Timberwolves, Lore and Rodriguez will likely see an enormous windfall down the line. Team values across professional sports have risen exponentially over recent decades, and the NBA will soon sign a new media-rights deal that will find still more cash flowing to the pockets of an exclusive club of 30 NBA ownership groups.
“We’re used to seeing teams selling for 3x, 4x what they were bought for,” Rosner said. “Now we’re seeing 12, 13x.”
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What owning an NBA franchise would mean to Lore and Rodriguez is clear. It is an asset nearly certain to appreciate in value, riding a wave of rising valuations. The future of the product on the court — a winning Timberwolves team — is less certain.
“Marc and Alex’s number one focus,” their spokesman said, “is bringing a championship to the fans in Minnesota.”
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