Dan Gilbert Selling a Share of the Cavaliers to Chinese Investors? An Inside Look at the Cavs' Ownership Group

LeBron James has always talked about becoming a "Global Icon," a declaration that has only fueled the speculation about whether or not Cleveland is a big enough city for him to accomplish his off-court goals.Now, one of the largest overseas markets -- the Chinese market -- could be getting involved with the Cavs for that sole purpose: Expanding the franchise's appeal and marketability in the world's largest country.From our boy Brian Windhorst at the Cleveland Plain Dealer:According to multiple sources within the Cavs, franchise majority owner Dan Gilbert has a tentative agreement in place to allow a group of Chinese investors to purchase a significant stake in the Cavaliers Operating Company, the entity that owns the Cavs and operates Quicken Loans Arena. The group is led by JianHua (Kenny) Huang, a Chinese businessman who has become successful by linking American and Chinese companies......The direct impact of the move is securing the future of the franchise, which has been in a minority ownership flux for the last couple years as it loses millions in attempting to build a championship-quality team around James. It will not only mean an injection of capital but will open the Cavs to business in China. The move, which has been kept mostly secret in America, is being supported by the NBA as they have encouraged development in China.The other effect, which is surely the more interesting side to Cavs fans, is how vital this new link could be for James -- providing a huge tie-in with an economy James is eager to tap.Any team ownership transfer of more than five percent must be voted on by the NBA's Board of Governors following background and financial checks. If the deal comes to fruition and is approved by team owners, it could help to remarkably strengthen James' relationship with the Chinese fans and consumers that he's been working to reach for the last four years.Huang, who has been working with the Cavs for the last two years in securing Chinese sponsorship through one of this companies, would represent a direct link between hundreds of millions of Chinese basketball fans and James. If the deal comes off, Chinese fans could start to feel a connection to James and it could expand his business interests by remaining with the Cavs past next season when his contract with the team expires.In other words, there is great potential in being with a franchise that has a deep relationship to China -- likely even more so than just playing in the largest market in America. There has been intense speculation that James will be attracted to playing in New York because of the business opportunities."You have to think globally," James said recently of his business interests. "I have a lot of fans in China and they're important to me."James and Nike, by far his largest sponsor, have been on a mission to create a bond with the Chinese over the last three years in the run-up to the Beijing Olympics. James has made four visits to China, one with the Cavs as part of a preseason trip in 2007.With basketball exploding in popularity among millions of young Chinese with exponentially growing buying power, James has targeted opportunities in the Far East to make the same kind of marketing impact in modern China that Michael Jordan had in the United States in the 1980s and 1990s. Only the market there operates on a dramatically larger scale.Becoming the Jordan of China from a marketing standpoint would allow James to reach his goal of someday becoming the first billionaire athlete.Windhorst continues in this extremely juicy article behind the Cavaliers ownership and business operations. Ever wonder what happened to R&B star Usher, who was a minority owner at one point, before he started popping up for the playoffs?Despite being the Cavs' majority owner, Gilbert's ownership team is perhaps not what he thought it would be when he purchased the club, its debt and the rights to run The Q for $375 million in 2005. At the time, former majority owner Gordon Gund and Gilbert's cousin and longtime business parnter David Katzman were believed to have taken a combined ownership stake of more than 30 percent. Gilbert also had a deal to sell a piece of the team to music star and actor Usher Raymond IV.But over the last several years things have changed. Gund has begun to pull back on his desire to remain a part owner and focus on his foundation, the Foundation Fighting Blindness. He's already reduced his stake in the team from the initial investment.Usher remains a part owner, but did not invest the amount he and Gilbert agreed to at the beginning and has taken a low profile after being on the dais with Gilbert, Katzman and Gund on March 1, 2005, the day the ownership transfer took place......Over the last four years, the Cavs have spent around $20 million in upgrades to The Q, invested $25 million in a practice facility in Independence and spent wildly on players. The Cavs have paid the luxury tax in each of the last two seasons and this year will commit to more than $100 million in payroll and taxes.Even with record-shattering revenue -- including one of the most rewarding local television deals in the NBA despite being in the 17th-largest market -- the Cavs are still believed to be losing millions. Their current owners are also heavily invested in industries that have suffered losses over the last two years.The Cavs ownership group currently consists of three faces. Coach Mike Brown now routinely refers to the team's "three owners" which include Gilbert, Jeff Cohen and Nate Forbes. Cohen is a wealthy builder of homes and commercial properties in Michigan and Florida. Forbes is a Detroit-based mall developer. Gilbert made his fortune mostly in mortgages.What's interesting is that I have never looked at the Cavs as a franchise in some sort of financial trouble. Gilbert seemed like a shrewd businessman, and the upgrades he had made all throughout the franchise since taking over in March 2005 were just astronomical in their magnitude. There were tremendous arena upgrades, to the seats to the hardwood floor to the tremendous state-of-the-art scoreboard.Then there was his huge investment in the team's new practice facility, the Cleveland Clinic Courts in suburban Independence, Ohio. That facilility has been referred to as the elite practice facility for any team in the NBA and has been said to set the standard for practice and team headquarter facilities in professional sports.But an article by ESPN.com's Bill Simmons in mid-February planted the seeds of doubt:You need a team with a dwindling fan base and/or bailing sponsors and suite/courtside customers. (I count 11: Indiana, Memphis, Milwaukee, Sacramento, New Jersey, New Orleans, Miami, Orlando, Minnesota, Charlotte and Philly.) You need a team trapped in an aging stadium that can't drum up local money for a new one. (I count three: Sacramento, Jersey and Milwaukee.) You need an owner who purchased his team because he was worth a ton of money ON PAPER ... only now, he's worth significantly less and might even be worth $10 for all we know. (Consensus candidates for this list: Phoenix, Hijack City, Jersey, Memphis, Indiana, Atlanta, Milwaukee, Charlotte ... and, surprisingly, Sacramento and Cleveland.) You need cities with NBA-ready, modern arenas either finished or about to be finished that would love nothing more than stealing a team. (Definitely Kansas City, Anaheim, San Jose, Louisville, Tulsa and Pittsburgh; possibly Columbus, St. Louis; and just for fun, let's throw in Montreal and London.) And you need a struggling team that can actually extricate itself from its lease.With the state of the mortgage industry, which has been blamed by many as the start of the current economic recession, it's easy to put two and two together and see how Gilbert can be in financial trouble. It's absurd to think that in a league in which over half the owners are having a financial crisis, the Cavs and Gilbert are bulletproof.In an article published earlier this month, Gilbert was named one of the five best owners in the NBA by Sports Illustrated, who had this to say about the founder of Quicken Loans and Rock Financial:In 2005, Gilbert inherited a woeful franchise. The lottery-doomed Cavs were riding a six-year playoff drought, but they did have a draw in a rookie named LeBron James from nearby Akron. After a rough start to his tenure, Gilbert began a process that included surrounding his marquee star with complementary talent, adding an able GM in former Cavalier Danny Ferry and installing a players' coach in Mike Brown. Cleveland made the playoffs in 2006 and hasn't looked back since. A year later, Gilbert funded a state-of-the-art $25 million practice facility for King James & Co. that is among the best in the NBA. The attempt to tie in a Chinese group as a part of the ownership team could also end up saving Gilbert cash, as the sale would bring in a steadier cash flow at its onset. As far as the Cavs' roster is concerned, even with Wally Szczerbiak's expiring contract coming off the books this summer, the Cavaliers will still be far above the salary cap. If they re-sign Anderson Varejao, it could once again put the team above the league's luxury tax threshold.