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Bad Vibes: The Story of Houston Dynamo's Ownership (Part 2)

This is Part 2 of Dynamo Theory's ownership series, retracing the past to understand why the Dynamo fan feels hard done by AEG. Part 1 can be found here

Bob Levey

Take a snapshot of MLS in 2007. If "sustainability" is the buzzword a few years earlier then "growth" is the theme now. New investors in Colorado and New York, new franchises in Salt Lake and Toronto, and David Beckham (with a little rule-flexing) have brought unprecedented attention to the sport in the United States. As the only owner left with stakes in multiple teams, AEG is having a good year.

In one market, AEG gave a remarkable amount of money (in MLS, anyway) to secure possibly the most celebritized sports figure of the decade. The jersey sales were extraordinary and, even though the team and Beckham's ankle were struggling, the Galaxy on the road were selling out stadiums across the nation.

In Houston, AEG had finally transitioned from San Jose, retaining most of the staff and players along the way. The newly minted Dynamo (after a brief cultural lesson on 1836) picked up where the Earthquakes left off, winning their inaugural championship and, in 2007, were on the cusp of a repeat. But not unlike San Jose, the team was profitless so long as they kept playing in an aging college football stadium.

Since arriving in Houston, AEG had launched a committed effort to build a stadium near downtown. They had the spot (where BBVA Compass stands today), the funds ($60-70 million) and a duo of skilled negotiators in Tim Leiweke and Dynamo President Oliver Luck. The stadium would provide AEG a Houston staging venue on their growing list of world-class arenas -- a massive component of their entertainment business. After using Houston Dynamo as a vehicle to building the stadium, the team could be sold (satisfying the league and AEG) and the venue would trickle cash flow into AEG's coffers.

Throughout the 2007 season, AEG had been holding fruitful negotiations with the City of Houston. After footing the bill on Minute Maid Park, Toyota Center, and Reliant Stadium, the city had a keen awareness on arena politics and AEG was aware they'd need to put forth a significant private investment. After getting the city to commit to providing infrastructure updates, a handshake deal was in sight. Then, it stalled.

Several times that year, Don Garber would reiterate to the media that, for the sake of a professional league image, MLS was urging AEG to sell Houston. In April, he expressed hypothetical disappointment should AEG own multiple teams by the end of the decade. Garber would repeat these sentiments about the future even as AEG made progress on the stadium deal which would ultimately lead to an ownership sale.

Then, in November, Don Garber delivered a perplexing quote to the New York Times:

"Houston will soon have a new owner."

Bad Timing: Part 1

Oliver Luck would claim to have no knowledge of a sale and AEG spokesman Michael Roth rejected any speculation on changes to ownership. It seemed Don Garber was speaking outside his realm of knowledge. A few weeks later, Garber would backpedal his statement as "merely another instance of urging owners to own only one team." He added it would be "very speculative and inappropriate" to suggest an imminent sale.

But the damage was done. Andy Icken, who led the negotiations on the City's behalf, was paying attention. Nearing the end of negotiations, the City of Houston decided to stall. With tens of millions of infrastructure dollars on the table, the city was spooked by their soon-to-be-partner looking to get out of Houston. Shifting course, Icken decided to postpone a finalized deal until after the ownership situation was worked out. Instead, the City provided "letters of intent" that acknowledged ongoing negotiations and essentially stated they would follow through if a deal could be reached.

AEG was in a rough spot. A stadium would serve their needs but also increase the value of the team for sale. In order to finalize negotiations with the City, AEG would have to sort its ownership and satisfy the league. Tim Leiweke found a compromise.

Enter the Golden Boy

Circle back six months to May. Oscar De La Hoya's Golden Boy Promotions, the leading boxing promotion company, announces that Gabriel Brener is joining its shareholders. Golden Boy already operates heavily in and around the Los Angeles area, promoting matches in many AEG stadiums across the country. Brener and his private investment firm want deeper into the sports and entertainment world, particularly Hispanic communities.

When the relationship materializes several months later, it feels like a proper fit. AEG secures two partners looking for a ripe Hispanic city and (between soccer, boxing events, and concerts) everyone reaps the benefits of a new stadium. In exchange for an ownership stake, AEG also becomes a 20% shareholder in Golden Boy.

In February 2008, Brener and De La Hoya officially become owners, taking 25% each. With everything settled into place, AEG presses on as the primary owner in private stadium negotiations. Mostly private, anyway.

Just two months later, Don Garber sends a letter to Dynamo ownership. In that letter, he expresses his concern "about the lack of progress in [discussions] with the City of Houston" along with veiled threats of relocating the team. The letter appears to derail talks. For a city that has undergone painful relocation of NFL's Houston Oilers, Garber's threats are not taken kindly and the talks would become politicized from that point forward.

It would take more than two years before the deal is eventually finalized. Shortly after Garber's letter, the 2008 economic collapse provided a difficult credit and banking environment for AEG (also reeling from a lagging entertainment industry) to finalize funding for the deal. After securing funds in 2009, AEG and the City of Houston would navigate legal and political waters until the summer of 2010, when the arduous deal was finally concluded.

Planting a new stadium in prime Houston real estate seemed to cool tensions between AEG and Don Garber. Using a softer tone in 2011 (a year beyond his "disappointment" deadline), Garber spoke about local ownership as "something we want to achieve over time." Six months later, he would boast about how great of an ownership group AEG was:

"And frankly while it doesn't fit with our one-team, one-owner strategy,
it's hard to imagine that we could have a better ownership group than what we have here."

Bad Timing: Part 2

Seemingly without Commissioner pressure, AEG did eventually sit down in 2012 to sell with Houston Rockets owner Les Alexander in a move that seemed to check all the boxes. Local owner to purchase all three shareholders' stakes and a 30-year lease on BBVA Compass Stadium. It was the whole package. In early September, Rockets CEO Tad Brown even remarked about his optimism in completing the deal. Everything suggested that Alexander and AEG would fulfill Garber's rare ownership dream by bringing in a local investor.

But on September 18, news that AEG's patriarch Philip Anschutz was putting the company on the market shocked the business world. Four days later, the sale to Alexander was declared dead. It seemed, for the time being, that the Dynamo would be absorbed again and submitted for consideration as part of AEG.

Anschutz would deliver more shocking news in March 2013, when AEG was removed from sale negotiations during a process that was called "too noisy." Taking a more active role in the company, Anschutz would also let Tim Leiweke go. Forbes would report that Leiweke had become too influencing when choosing a potential buyer and that Anschutz was upset at this power posturing.

Leiweke would ultimately land at Toronto FC but the Dynamo ownership picture had gone through a whirlwind over the last few months. Leiweke had been a figurehead for ownership in MLS and, without him, a valuable negotiating partner and acute businessman was missing. What role the Dynamo and BBVA Compass Stadium have in AEG's future remains unclear today.

The role for Oscar De La Hoya remains unclear, as well. Just three weeks ago, at the request of AEG and Gabriel Brener, De La Hoya bought back the combined 32% stake in his Golden Boy Promotions. As of now, De La Hoya is retaining his 25% ownership in the Dynamo and there has been no indication of a potential sale. After trudging through years of hard-fought victories for a Dynamo stadium, the ownership picture is now submerged in turmoil. Involved parties are no longer aligned with interests and the Dynamo are caught in the middle.

That said, a challenging 2014 season for the Dynamo also saw milestones that pointed to an involved core of ownership. A women's franchise was established in mere weeks, the first true and pedigreed Designated Player in DaMarcus Beasley was signed, and the wheels began spinning on a USL team. Critics of ownership are increasingly hard-pressed to offer a legitimate discourse on the state of the team.

Gradually, blame for team performance seems to have shifted to the coaching staff and individual players. With Dom Kinnear out of the picture, a fan's scapegoat more easily becomes the people in charge of the players and less the people in charge of ownership. Frugality is the chief complaint lobbed at owners and that is less relevant for a multi-DP, salary cap-strapped team.

* * *

Dynamo fans are certainly a vocal group. They have argued with each other, the Front Office, and toward a faceless ownership group. And maybe that's the whole point. Having three investors that base out of Los Angeles run your team provides few opportunities to have that discussion. AEG, Gabriel Brener, and Oscar De La Hoya are not like Merritt Paulson or Drew Carey; accessible, talkative (sometimes to a fault), and explanatory. And when your team is failing to record results during a difficult summer, sometimes you need that face to argue with. The future of the Dynamo, now more than ever before, is uncertain. As of right now, there is no season, no coach, and no guarantees. Despite all that AEG, Brener, and De La Hoya have provided for the Dynamo, cracks seem to be forming in the ownership. There's a jolt of excitement in venturing into the unknown but also a distinct worry.

Standing on a stage on Sunset Blvd. in Los Angeles with twenty-two investors, Don Garber seems to have a lot less to worry about these days.