Spinoff companies manage real estate for teams, outside projects
THE INNOCUOUSLY NAMED Strategic Property Partners real estate development firm in Tampa is a 50-50 joint venture between Tampa Bay Lightning owner Jeff Vinik and Cascade Investment, the private investment arm of Microsoft co-founder Bill Gates. The company was created to oversee the $4 billion redevelopment of more than 9.5 million square feet of Water Street and other areas near and around Amalie Arena, where Vinik’s Lightning play hockey.
Through the Water Street project, the 40-employee SPP created a core team, networks, systems, and processes, as one employee explained. So, while the Water Street work has at least five more years to run, it made sense for SPP to take on unrelated projects, starting with the construction of a Four Seasons hotel in Charleston, S.C.
As the sports industry grows savvier about mixed-use development and more interested in the long-term benefits of owning real estate around stadiums and arenas, owners and teams that in the past would have relied on real estate development partners are increasingly thinking about launching separate businesses to control their efforts.
These businesses enable teams to keep their real estate holdings, and any financial success, firewalled from league revenue sharing or collectivebargaining agreements. But “you need to have the capital and the risk tolerance to do it yourself,” said Erin Talkington, who oversees real estate consultancy RCLCO’s sports practice and is working on mixed-use projects with the Tampa Bay Rays and the Metro NashvilleTennessee Titans project.
For teams or entities focused on one or a handful of developments, a stand-alone business increasingly makes sense, and not just for sports owners with real estate backgrounds, such as AEG or Kroenke Sports & Entertainment.
The Atlanta Braves, who formed Braves Development Co. to oversee The Battery Atlanta, the 60-acre development surrounding Truist Park, offer a successful blueprint. BDC, which sits alongside Atlanta Braves Baseball under the Braves Holdings umbrella corporation (which is owned by publicly traded parent company, Liberty Media), has 17 full-time employees but uses the baseball side’s help, including the sponsorship sales team. BDC uses third parties for services like security and landscaping, but it sources commercial office and retail tenants on its own. Development revenue has grown from $15 million in The Battery’s first year, 2017, to $53 million last year.
Marquee Development was created after its employees worked on the Chicago Cubs’ Wrigleyville development and helps bridge the real estate and sports worlds, whose investment timelines often vary greatly. Marquee is currently helping FC Cincinnati with a mixed-use development next to TQL Stadium.
Other sports teams with separate real estate-focused businesses include the Green Bay Packers, San Diego Padres and Boston Red Sox. With 81 home games, at least, MLB teams are often better suited to taking on total control of real estate projects because they have the most sports-anchored developments. But, “it’s kind of all over the map,” said St. Louis Cardinals President Bill DeWitt III, whose team partnered with Cordish Companies on Ballpark Village. “You’re probably going to find a slightly different arrangement in each market.”