Don’t cut off your nose to spite your face. – 12th Century Idiom
I am a fan of prenuptial agreements. As a banker you come to realize that money, divorces, and emotions are a Molotov cocktail waiting to explode. A former associate of mine allowed car loans that both she and her now former husband purchased new vehicles with to be all in her name because of his poor credit. As the marriage dissolved and headed for divorce she just wanted it over and was willing to sign whatever to expedite the divorce. By the time she came to her senses she realized that she was stuck with a bundle of debt for two cars, her car was upside down, no recourse, and an ex-husband who basically got a vehicle free and clear. The point is that emotions of the short-term moment often end with long-term consequences that are more detrimental to the injured parties. Enter, Donald Sterling.
For those who are unaware Donald Sterling is a lawyer who made his wealth not through litigation, but through leveraging his earning into real estate holdings. According to Nadja Brandt of Bloomberg, “He owns at least 160 apartment buildings, office properties and single-family homes in the area, many of which he purchased with cash, according to county records compiled by data provider LexisNexis.” In addition, over the past eighteen months she reports, “They’ve purchased at least 12 houses and three multifamily buildings from the beginning of 2013 through last month for a total of $58.7 million, according to Los Angeles County Office of the Assessor records.” Now, with the NBA forcing the sale of the Clippers amongst public pressure, Mr. Sterling is about to be let loose with $1 billion in capital, the expected sale price of the team, to go on a real estate buying spree. Currently, the Los Angeles Clippers produce about $15 million net income per annum according to recent Forbes assessment. A significantly less amount of capital to accumulate property than a sale thanks to having to keep significant capital tied up in the operation of the team.
Two significant items of importance to consider with a man who owns 160 apartment buildings before you let him loose with a billion bullets. He has already paid according to Housing Wire’s Trey Garrison, “The longtime Democrat and NAACP donor agreed to pay $2.625 million to a fund for tenants and prospective tenants injured by his discriminatory practices, plus $100,000 in fines” in 2009. Before that according to Garrison, “in 2005 after a settlement was reached, wherein a judge ordered Sterling to pay nearly $5 million in attorney’s fees to the plaintiffs.” Remember, he already owns at least 160 apartment buildings. Has anyone given any thought to how many he potentially could own by forcing the sale of the Clippers? No, because we are caught up in the emotions of the moment.
There are 12 players on the Los Angeles Clippers roster. The NBA is comprised of 30 teams with 12 players on each for a total of 360 players. So let us take a good hard look at the number of people potentially impacted by the sale because right now we are only talking twelve. Initially, Donald Sterling was going to fight the forced sale of the team, but I am sure he, his lawyers, and financial advisers may have come to the same conclusion I have looking at the numbers. He could arguably double his real estate holdings, which means he could potentially be the landlord of as few as 30 000 or potentially as many as 300 000 plus Los Angeles citizens versus the grumblings of twelve basketball players and staff. My math is still pretty sharp and the last I checked 12 is less than 30 000, so for the sake of the greater good please let this man keep his team. Most often it is best to take a step back and let the emotions clear the room to be sure a rational decision is being thought out and made. Otherwise, get out the scalpel.
HBCU Money 