Leveraging an MBA into the NBA
For Edwards resident Bob Hernreich, however, it’s more of a performance review.
Hernreich owns the National Basketball Association’s Sacramento Kings, who are taking on the Dallas Mavericks in the second round of the playoffs after besting the Salt Lake City Jazz earlier this week.
Hernreich, 57, bought into the team two years ago with members of the well-heeled Maloof family, owners of a business empire that includes banks, casinos in Las Vegas and other ventures.
“It’s a vanity investment,” he says, flashing his trademark smile earlier this week over coffee at an Edwards restaurant.
Hernreich hit the big leagues about two decades ago after selling a group of radio and television stations that stretched across Arkansas. At that time, broadcast facilities were hot properties, selling for many multiples of their earnings. He doesn’t deny his luck.
“It was a good return on investment,” he says. “As close to the top (of the market) as you can get. I’ve been very fortunate.”
Hernreich moved to Vail in 1984, like everyone else, for just for a year, but ended up building a house and settling in. He entered the real estate development market in 1992 after acquiring key commercial land in Edwards and developing Edwards Village. His timing again was excellent. It happened to be a smoking-hot real-estate market.
He’s quick with a quip on his fortune and a lot of other things.
“Some people believe in serendipity,” he says. “I depend on it.”
In college, Hernreich was a little indefinite regarding his future, earning an MBA from Washington University in St. Louis and, true to fashion, he says, cramming four years of education into seven.
The Vietnam War was on, too, and he was drafted into the Army. He says he spent two years “storming the beaches of Carmel, Calif., as a company clerk.”
After he was discharged he hitchhiked his way to Arkansas to visit his family. His father was a nationally recognized gem appraiser.
It wasn’t long before Hernreich got into the television market.
He attributes his business successes to “clarity of thought” and “willingness to make decisions.”
“I think I’m a clear-thinker. Business is the most scientific of all disciplines,” he says. “It isn’t brain surgery. The smartest business people I know don’t let their intellect get in the way of their business judgement.”
But his first brush with what he calls the high-profile “glare” of owning a professional sports team came in 1991, when he had an opportunity to acquire the NBA’s Houston Rockets for a paltry $61 million by joining the Maloofs. That deal did not work out, but he kept his eye out for a proper investment.
He also took a look five years ago at acquiring Ascent Entertainment, which owned the Nuggets and Avalanche. But after some analysis – and apparently clear thinking – he backed out. Along the way he learned a thing or two about human nature.
Two years ago the Maloofs asked him to join them in acquiring the Sacramento Kings. He hesitated – then leaped.
“I realized I had to stick with decent, upright people that I could trust,” he said.
Once again, his timing was serendipitous. He got out of the stock market and into the NBA before stock prices tanked.
Big profile; medium business
Despite the “glare” and hype, most professional sports franchises don’t measure their worth in billions. The Sacramento Kings generate a modest $125 million and employ 260 full-timers and up to 1,400 part-timers, he says.
“We don’t make money on team operations,” he says. “We make money from concessions.”
Helping drive the modest profitability of the team, he says, is ownership of its own arena. Another advantage in Sacramento, which is roughly the size of Denver in terms of television households – the Kings are literally the only game in town.
“There’s just one mouth to feed,” Hernreich says.
By contrast, Denver has five professional sports teams playing football, baseball, basketball, hockey and soccer.
Branding of merchandise, that intangible image fans carry, is a very fragile thing, Hernreich says.
“It’s extremely important to maintain the integrity of brand,” he says. “It’s critical to the success of the franchise.”
With the average salary of an NBA player at the $4 million mark, maintaining brand can be challenging.
One downside to being close to the Bay Area is the dilution of the potentially lucrative TV and cable viewership rights, Hernreich says. The upside is that the team manages to fill every seat in its arena at game time.
Basketball and television are a match that makes an investor’s eye gleam, Hernreich says.
“Basketball’s a great television sport; spectators can see what’s going on.” he says. “Hockey is so fast it’s hard to televise the puck. It’s small. It tests the speed limit of the spectator’s ability.”
Somebody’s gotta do it
Hernreich says he will become more involved in the team because it has been a fun venture. He’s able to attend half of the teams’ home games and is attempting to make all of the team’s playoff games, he says.
He recently purchased a home in Sacramento.
And the best part of the job? Deciding who among the 300 applicants will become the next 16 Kings cheerleaders.