Publications

- November 1, 2021: Vol. 8, Number 10

Hitting home runs with sports venues

by Kristi Waterworth

There’s something magical that happens to a city with a resident sports team. No matter if it’s a farm-league baseball team or a top-rated NFL team, there’s a power there that brings people of all walks of life together under one banner. They cheer together in the stadium; they gather in the parking lot; they have dinner in nearby restaurants; they check out abutting retail shops.

Sporting venues create a lot of synergy for all types of other real estate investments, which is why they’re drawing more developers and landlords to the neighborhoods immediately around them. Whether you’re interested in buying into existing investments or developing new ones, considering locations near sporting venues may be a great move.

BRINGING MORE OPPORTUNITY TO OPPORTUNITY ZONES

Although sporting venues can be located almost anywhere there are people, many well-loved facilities, as well as brand-new ones, are located in opportunity zones. An opportunity zone is an economically distressed area that has been given a special designation that can help encourage redevelopment (or initial development) through tax incentives and the potential for reduced capital gains taxes.

Brett Johnson, founder and partner in Fortuitous Partners, which helps develop opportunity zones, as well as co-chairman of soccer team the Phoenix Rising Football Club in Phoenix, saw a unique opportunity to move his team to a larger stadium while also developing real estate around the new facility using the opportunity zone program.

“As we’ve grown, we started to recognize that we will need to build a bigger stadium,” Johnson explained in a Real Assets Adviser podcast. “In order to kind of make it all pencil out, you want to have additional real estate, you want to develop office space, hotel, multifamily, retail, commercial, etc. So, automatically, that lends itself toward the question ‘Where’s a good place to build?’

“This program [opportunity fund], it kind of bends the laws of economic gravity in the most positive sense,” Johnson added. “It takes private capital that might otherwise not go into these areas … and it gives an incentive for those pieces to come together.”

Although there’s plenty of incentive for developers such as Johnson to build sports stadium-anchored developments in opportunity zones, these projects do a lot for the community at large, too. The added points of interest give visitors an experience that can’t be duplicated elsewhere, keeping more tourism dollars within the new stadium zone. LA Live is a good example of this type of district, providing plenty of entertainment, shopping and dining for both visitors and residents of Los Angeles without needing to leave the immediate area.

TRADITIONAL SPORTING VENUES AND ESPORTS

Of course, the traditional sports that people think of when they think of sports stadiums — such as football, soccer, baseball, and the like — aren’t all that exist today. In fact, esports are also making powerful strides as entertainment options all on their own. As with professional sports, professional esports attract people who want to watch their favorites compete. In the case of esports, the difference is that they’re competing in virtual worlds.

According to Deloitte, in 2018 alone, more than $4.5 billion was invested in esports. It’s an industry driven by males aged 21 to 35, but a not-insignificant percentage of females 21 to 35 are also part of the global fan base worth about $380 million. Companies such as Electronic Arts have been investing heavily in esports for years and have created quite the buzz.

But these throngs of fans of esports need somewhere to gather, to discuss their favorite gamers and games, buy official esports merch, and the like. As this population ages, they may take their kids for a day out at the esports stadiums that have yet to be built, creating yet another fandom ecosystem that could generate its own financial gravity.

TO SPORT OR ESPORT?

Developing real estate near popular sporting venues is never a bad idea, provided you’re in the investment at the right price point. These facilities tend to attract a huge range of people, with a large range of needs, including both travelers and residents of an area.

When the real estate in question is clearing up blight, so much the better, as the increased demand for the zone may prove exactly what your investment portfolio is looking for, as well as give a real estate value bump as the zone gentrifies.

Investing in and around traditional sporting venues, then, is almost a given, especially when done using tools like opportunity funds. What’s the far more intriguing question is whether esports will generate the same sort of synergy and, if so, what the yield could be in the future.

Since most cities don’t have dedicated esports domes, this definitely falls into the world of speculative investing, but as interest seems to not be slowing down, esports may be a good place to see a significant return for early adopters who can afford to wait for the sector to catch fire.

 

Kristi Waterworth wrote this article for Millionacres, a Motley Fool service. Read the original article at this link: https://bit.ly/3hNncAd

 

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