In his work with the owners of United Soccer League teams, Justin Papadakis has gained insight into family offices’ approach to investing.
“I don’t think that there is another sector that has a higher concentration of family offices as a percentage of ownership groups,” says Papadakis, who is deputy CEO and chief real estate officer of the United Soccer League, the largest professional soccer organization in the United States.
Investors in USL teams expect, like any investor, a competitive return on their investment. They may also be interested in the opportunities to invest in real estate — another area that has traditionally attracted family office investors — that often come along with owning a USL team. But the family offices that are drawn to sports team ownership are often also looking for investments that connect them to the community and allow the whole family to participate.
“I think family offices are getting very sophisticated, wanting to understand the entire financial picture — not just at the team level, or at the real estate level, but at the level of how this is going to impact the community,” Papadakis says.
Still, Papadakis says, owning a sports team is first and foremost an investment — and it can be a good one.
“Our family offices have many, many investment options, so getting a required rate of return is just the start of the conversation,” he says.
The sports-real estate connection
A soccer team needs a stadium to play in — and getting a stadium built can take years. The USL works with partners at the city, county and state levels to get stadiums approved, zoned, entitled and built.
“We tried to solve one of the hardest parts of sports ownership, which is putting these stadium deals together,” Papadakis says.
Once there is a stadium, family offices can acquire the rights to the team and management rights to the stadium — and they may also invest in real estate development surrounding the stadium. Stadiums for USL teams typically seat between 5,000 and 15,000 and can be used for concerts, festivals and graduations in addition to sports events.
“We build commercial stadiums, which have the million-dollar scoreboards, the full LED lights — it’s not a high school football stadium with concrete benches,” Papadakis says. “In the premium areas and around the stadium, we can have wedding receptions, bar mitzvahs and quinceañeras, and business meetings.”
Community connections
Sports teams are privately owned, but in many ways, they are a community asset, Papadakis says. And since family offices and foundations are often big drivers behind civic organizations and cultural institutions such as museums, it should come as no surprise that they are also major investors in both local sports teams and the real estate development that comes with them.
Having restaurants and retail stores near the stadiums for fans to patronize before and after games creates a better fan experience — and it helps the local economy.
“We’re talking about billions of dollars of economic development that our family offices are bringing to their cities,” Papadakis says.
Family participation
Families may also use sports team ownership as a way to engage family members. This can be particularly important for family offices whose family owners no longer manage an operating business together. Even for families that still have an operating business, a sports team can provide an outlet for family members whose interests lie outside the operating business.
“People who have family offices really want to understand how they can be involved – with their time and, increasingly, with members of their family,” Papadakis says.
Papadakis notes that investors typically invest in both a men’s and a women’s team.
“The women’s teams are not only of interest to female members of family offices — they are also of very high interest for all family offices from an investment perspective,” Papadakis says. “They believe in the long-term thesis of women’s professional sports and particularly women’s professional soccer.”