Mat Ishbia
Mat Ishbia
The mortgage company owned by Phoenix Suns owner Mat Ishbia reported a nearly half billion-dollar loss for the second quarter of this year. That announcement came on the same day United Wholesale Mortgage said it was entering into a more than $2 billion capital partnership with an investment firm called Oaktree Capital Management.
These moves have raised questions about Ishbia’s finances — and what it could, potentially, mean for his ownership of the Suns and Mercury.
Corina Vanek has written about this. She’s the development reporter for The Arizona Republic, and she joins The Show now to talk more about what’s going on here.
Full conversation
MARK BRODIE: Corina, good morning.
CORINA VANEK: Good morning. Thanks for having me.
MARK BRODIE: Thanks for being here. So, what happened with United Wholesale Mortgage? That’s a pretty, seems like a pretty big loss.
CORINA VANEK: It is a big loss, especially following a quarter where they had a net gain, so kind of a pretty stark difference between Q1 and Q2 for United Wholesale Mortgage. I think they attribute it to kind of a number of different factors, but you’re right that after the announcement of the partnership with Oaktree, the losses were posted, but the stock price also dropped pretty rapidly.
MARK BRODIE: And am I right that Ishbia and his representatives and the company are saying that the two are not necessarily related, like they’re not entering into this partnership with the other firm to make up for the loss, right?
CORINA VANEK: So, yes and no. I think that the partnership kind of was related a little bit more to a failed merger that United Wholesale Mortgage was trying to enter in with another company called Two Harbors. It wasn’t actually a merger, United Wholesale Mortgage was going to acquire Two Harbors. And then kind of later down the line after it had been announced, Two Harbors backed out of that deal and then decided to merge with another company.
And that’s now in litigation, but it does make sense that some of this loss kind of closely mirrors what they were expecting to get out of the Two Harbors acquisition. So, there could be accounted for that way.
MARK BRODIE: Is there also a role in interest rates in what’s going on with United Wholesale Mortgage?
CORINA VANEK: At large, yes. Nationally, home sales are down. So, when your company is solely based off of mortgage lending and fewer people are buying houses and taking out mortgages because of interest rates and because of home pricing and just kind of wider factors in our economy, obviously that makes sense that a wholesale mortgage company would suffer because of higher interest rates and fewer home sales.
MARK BRODIE: So obviously, Mat Ishbia has a good amount of money. He owns this company, he owns the Suns and the Mercury. How big of a hit was this to United Wholesale Mortgage? Is this concerning to them?
CORINA VANEK: I think it is probably concerning more so than they probably want to say. But Ishbia did kind of, during his earnings call, allude to the idea that he personally could have funded this $2 billion influx that they got from Oaktree. As it stands, he actually already is putting in about 550 million of his own money.
So, he alluded to the idea he could have funded it himself, but chose to partner with Oaktree for a strategic partner and kind of what they bring to the table. That’s kind of for them to decide what the value is that Oaktree brings, but that is what he mentioned in the earnings call.
MARK BRODIE: OK. And am I right that he has also said that this in no way impacts his role and ownership of the Suns and Mercury?
CORINA VANEK: Yes. They have been quite clear about that, that these are kind of unrelated issues to his ownership of the teams. In fact, a spokesperson from UWM said and confirmed that Mat is kind of in the later stages of buying out many of the minority owners of the Suns and Mercury, which will bring his ownership, I believe it’s to 99%, so he will own nearly all of the teams himself.
MARK BRODIE: Is that — I mean, obviously nobody knows his finances better than he and his team do, but like in the world of finance and maybe even in the world of the NBA, are there people who are questioning whether he can continue owning the team and spending the kind of money that one needs to spend to own a team?
CORINA VANEK: I think I’ve seen some speculation kind of one way or another, but I haven’t seen, you know, widespread concern from the NBA or any other team owners saying that this is, you know, a major red flag or anything that needs to be immediately dealt with.
I think that obviously a company, a publicly traded company at that, is going to have its ups and downs. But I think that to suggest that it’s going to affect the ownership of the team might be a little bit premature. And who knows, maybe this deal will right the ship.
MARK BRODIE: Sure. Yeah, so how significant is the deal with Oaktree Capital Management? Is United Wholesale Mortgage saying, like, “This is all we need, we’re good now”?
CORINA VANEK: They’re saying that this deal will help them kind of fortify their finances for now and pay down a lot of existing debt. So I don’t know that it means that they’ll be totally in the clear after this deal is done.
But Oaktree does get some representation on the board after this deal is done, and then they’ll have a little bit of voting power as far as the future of UWM. So there will be kind of some shifts there. But yeah, they did say that this is mostly to pay down debt and kind of strengthen their balance sheets right now.
MARK BRODIE: I would imagine the future of the company is kind of tied, as you referenced earlier, to the future of the housing market and how many people are buying and how many mortgages they need to take out and what the interest rates are on those mortgages, yeah?
CORINA VANEK: For sure. And that’s something that Mat Ishbia also kind of mentioned in his call, and they’ve kind of echoed that sentiment in the last couple of days, has been that mortgages are typically cyclical. They kind of follow economic cycles. If people don’t have the extra money to spend, they might stay in their house longer or they might not want to get a mortgage at the interest rates that are being offered right now.
So, the idea being as the economic cycle kind of shifts and change and maybe rates change, people will be more willing to buy houses. It would help a company like United Wholesale Mortgage.
MARK BRODIE: Sure. All right, that is Corina Vanek. She covers development for the Arizona Republic. Corina, thanks as always. Appreciate it.
CORINA VANEK: Yeah, thanks so much.
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