The billionaire who is bringing NFL football back to Houston like horses, charity, and taking chances.
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The billionaire who is bringing NFL football back to Houston likes horses, charity, and taking chances. Bob McNair looks serenely happy. No, that doesn’t quite describe him. He looks transcendently happy, standing in the hot, late-summer sun on a stage that has been constructed in the middle of a street in downtown Houston, surrounded by hundreds of adoring fans who are waiting for the formal unveiling of their brand-new hometown football team, the Houston Texans. At this moment, in September 2000, McNair, who is the majority owner, chairman, and CEO of this new NFL franchise, is very likely the most beloved man in Houston. He is wearing a blue “NFL 2002” polo shirt, signifying the year the Texans will play their first game, and sipping from a bottle of water. He is approached by fans who tell him how wonderful he is. “Thank you, Bob,” they say, with a sort of breathless gratitude. Others shout, with deep sincerity, “Bob, you’re the best!” At this moment, it is good to be Bob McNair.
Now he steps forward to the microphone. “I don’t have to ask you,” he says, flashing a knowing smile, “but are you ready for some football?”
They are. Oh, how they are ready for some pro football in Houston. They have been dying for it ever since Bud Adams, in a fit of pique because the city of Houston wouldn’t build him a new stadium, up and moved the Houston Oilers to Tennessee in 1997 and renamed them the Titans, as though to wash away any memory of the old Oilers and all the glory days of Bum Philips and Earl Campbell and Dan Pastorini and Warren Moon. The 63-year-old McNair has made a career out of taking big risks. And now he has taken another one by putting up an eye-popping $700 million for the new franchise. It is a bet many observers feel is his riskiest yet.
That’s just fine with him. The Texas transplant has made a career out of taking chances. Born on New Year’s Day in 1937 in Tampa, Florida, he was brought up in what he describes as a lower-middle-class family in Forest City, North Carolina. His passion was playing sports. In high school he was a three-sport athlete, and when he graduated, the Chicago Cubs offered him a professional contract. He turned it down to go to the University of South Carolina on an academic scholarship. In college he played basketball but quit after his freshman year. “I decided that once I could play at that level, I sort of had obtained my goal,” he said. “I knew I wasn’t going to play professional basketball.”
McNair couldn’t seem to make up his mind about academics either. He started out studying civil engineering but later switched to liberal arts, earning a bachelor of science degree in psychology while working a series of jobs, including waiting tables, sacking groceries, and selling insurance. After graduation, he went to work for a friend at an automobile-and-equipment-leasing company. Five months later the company went broke, and the newly married McNair suddenly found himself unemployed. So he headed to Houston to start his own auto-leasing business. All he had was $700 in his pocket and the promise of a $3,000 loan from a former employer.
Over the next twenty years, McNair built the company into a substantial business, which included truck and equipment leasing as well. But he did it on a shoestring, with few cash reserves, and when deregulation hit the trucking industry in the early eighties, creating stiff competition and lower rates, he was forced to declare bankruptcy. It was a dark period for McNair, but it taught him an important lesson. “I worked for twenty-some years with no capital, so I never had any liquidity,” he says. “Managing my loans alone wouldn’t do it, and working hard twenty-four hours a day seven days a week alone wouldn’t do it. You have to be properly capitalized.”
You also have to have a good idea. In 1984 McNair started a company called Cogen Technologies on the simple but remarkable premise that he could build plants that would generate power more cheaply than utilities could. It turned out to be an extremely good idea. Over the next fourteen years he built five electricity facilities around the country, mostly in the northeast. Cogen became the largest privately held power company in the country. McNair got rich. When an expansion-minded Enron came knocking at his door in 1998, McNair got obscenely rich, selling three power plants in New Jersey to the energy giant for $1. 4 billion. He kept the other two, which were (and are) also hugely valuable.
Awash in cash and having failed at a halfhearted attempt at retirement, McNair soon found himself swept up in the pursuit of a new NFL franchise for Houston. It wasn’t totally out of the blue: In the early nineties he had looked at buying the Miami Dolphins after owner Joe Robbie died, and he had considered buying the St. Louis Cardinals after the team lost its principal backer. But in the end he did not bid on either team. So when John J. Moores, the wealthy founder of Houston-based BMC Software and the owner of the San Diego Padres, stepped out of the race to win Houston the next NFL team, McNair suited up. “I guess it was more of a civic responsibility I felt to pursue it,” he says. “I thought I was in a better position to get a team than anyone else in Houston.”
It was a long shot: Los Angeles was the favorite, with real estate magnate Ed Roski and Hollywood superagent Michael Ovitz behind two separate bids for a new team. Though the process dragged on for two and a half years, McNair hung in there, lobbying hard for the team. He established relationships with officials at the NFL (Adams had introduced him to NFL commissioner Paul Tagliabue at an Oilers game in 1992), members of the NFL expansion committee, and the other owners, many of whom he already knew, including Texans Jerry Jones of the Dallas Cowboys and Billy Joe “Red” McCombs of the Minnesota Vikings. He also enlisted the support of city leaders such as Mayor Lee Brown and Harris County judge Robert Eckels. Most important of all, he offered to pay an astronomical sum for the mere privilege of owning the franchise: $700 million. It was more than anyone expected. (The bids from Ovitz and Roski were estimated to be in the $500 million range.) And, of course, that amount did not include players, equipment, a stadium, or corporate jets. It’s a sum he doesn’t particularly like to repeat out loud. “I try to go right by that,” he says. “It was certainly more than anyone thought.”
Finally, in October 1999, McNair clinched the deal with a vote of 29-0, with two owners abstaining. “The NFL is fortunate to have him as an owner,” says McCombs, a billionaire San Antonio car dealer and radio station investor. “With his background in the community and in business, it was a very good fit.”
After his winning bid for the new team, McNair has been busy. He has successfully raised $117 million in private funds to help finance a new football stadium that, at $402 million (according to the Houston Chronicle), has been called the most expensive in the United States, with a glass exterior and a translucent-fabric retractable roof, natural grass (no AstroTurf for this team), and seating for 69,500 fans (8,190 of them in club seats). Then, this past October, he persuaded Houston-based electric utility Reliant Energy to pitch in approximately $300 million over the next thirty years to get its name plastered on the stadium. (Reliant has refused to confirm the amount, perhaps to avoid further enraging ratepayers.) McNair’s coup de grâce came on November 1, when he quarterbacked Houston’s winning bid—$10. 3 million—to host Super Bowl XXXVIII in 2004. It will take place thirty years after Houston’s first Super Bowl, in which the Miami Dolphins beat the Minnesota Vikings 24-7 at Rice Stadium.
McNair and his team, which includes general manager Charley Casserly, who spent 23 years with the Washington Redskins, have been at work building the Houston Texans. They’ve been looking for a name-brand coach and have hired fourteen scouts to scope out promising players. They’ll have a little help: The Texans have the first picks in the NFL collegiate draft in April 2002. Before then, McNair will be able to sign free agents in fall 2001 and pick off players from existing rosters in February 2002. “Long-term, where we’ll really build the team is in the draft,” he says.
McNair still has his hand in businesses of the more traditional sort. He owns a private investment company, Palmetto Partners, which currently has about $300 million in assets. The company, which is run by former Texas banker Bob Dussler, has money in sixty private equity funds, including those of Texas firms such as Tom Hicks’s Hicks, Muse, Tate, and Furst of Dallas and David Bonderman’s Texas Pacific Group of Fort Worth as well as those of New York investment banks such as Credit Suisse First Boston (USA), Morgan Stanley Dean Witter, and Goldman Sachs. He has plowed $50 million into Houston venture capital firm CoGene Biotech Ventures, whose mandate is to invest in early-stage biotech companies. It’s run by C. Thomas Caskey, a renowned geneticist from Baylor College of Medicine and a college buddy of McNair’s from the University of South Carolina. So far, the firm has invested in four companies: Athersys in Cleveland, Ohio; Informax in Bethesda, Maryland; and Genometrics and Lexicon, both of Houston. Ever the eclectic, McNair also has a successful horse-raising business. His Paris, Kentucky, horse farm, Stonerside Stable, was ranked number one last summer by trade publication The Thoroughbred Times, quite a feat for a stable that has been operating for only five years. And one of the horses bred at the farm, Fusaichi Pegasus, won the Kentucky Derby last spring.
He has given away tens of millions of dollars, mostly in the field of education. Recipients include his alma mater, Rice University, and needy students in his hometown of Forest City as well as in Houston. “If you’re going to have a satisfactory standard of living, you’re going to have to be competitive in this world,” he says. “And you can’t be competitive if you don’t have a good education.”
Considering how long, arduous, and costly the process was, if he had the chance to do it all over again, would McNair bid on an NFL franchise? After a long pause, he says that he would. “In a way, I regret I don’t have more free time to play golf and take care of myself,” he says. “But I’ve been more than compensated by the enthusiasm of the city, and I guess that has been the nicest thing in the whole process.” Now all he has to do is win football games.