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The talk of the town in private equity circles at the moment is the potential for the NFL to allow private equity groups to own stakes in NFL teams. This has obviously been in the news for a while, but according to Bloomberg article in early May, there is a meeting in Nashville later this month where a committee will present information to the league with regards to potentially advancing this issue.
The article suggests that any one fund could own only 10% of a specific franchise, with the potential for that fund to have stakes in multiple teams. It also says that any one team could sell up to 30% of the equity to buyout groups (so a minimum of three funds for a team).
It’s likely that only the largest funds could play in this space. According to Statista, the Dallas Cowboys are worth $9bn – that’s a $900m check that needs writing to Jerry Jones – if he were to sell, of course.
What I find just as interesting as the thought of buyout shops owning a stake in a football franchise, however, is the real estate play here.
I figure that the main opportunity – from the perspective of private equity firms – is in teams that need a stadium redevelopment, or one where an entirely new one needs building.
Being a part of the ownership group means that the PE investor can look to build hotels or other real assets (perhaps not offices, though…) around any development, and they’ll be able to obviously sell them at some future date, when the fund is nearing end of life, or moving it into a continuation fund if it wants to continue receiving rental income (or just not be a forced seller).
But for teams that have newer stadiums, with little opportunity for development, then it’s likely a more straightforward minority equity investment play. A fund buys a stake in a team, and then sells it at a future date.
A couple more things. Will the NFL allow stakes to be bought with leverage or do they have to be cash-only investments? What about LPs in funds – will the NFL take any issue with a limited partner because of geopolitical concerns, perhaps?
I’m sure there are many more questions; questions that will be answered when (it’s surely a matter of when, not if) the NFL votes to allow private equity to own minority stakes in teams. But for a real estate enthusiast like me, I’m most interested to see where the smart money really goes after a stake is sold.
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Gregory Poapst is a Managing Partner at Fundviews Capital. Connect with him on LinkedIn here.
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