For Sports, Commercial Real Estate Leads to Big Wins

Commercial real estate offers the potential for exponential growth in revenue and fan engagement, broadening team franchises into new products and driving value upwards.?

• Real estate provides new opportunities for teams to engage audiences beyond game days by giving them places to congregate and experience brands year-round.?
• Real estate allows teams to capture a new audience - those who don’t actually purchase tickets - and grow their fanbases.?
• Real estate can improve on-field performance. Additional revenue increases the ability for organizations to pay top athletes and provide the support system they need to thrive.?
• Today's real estate offers a better mix of uses as well as a better integration of the built environment within the local community; a big difference from yesterday's stadiums which were surrounded by a sea of parking.

Ten years ago the Atlanta Braves announced that a new $672 million baseball stadium and $1 billion mixed-use development would rise out of 60 acres of land in Northwest Atlanta. At that time, I led an influential organization in the submarket that would be the home to the new development. Our organization was a partner in the Braves deal, and I had spent years working with business and government leaders to improve the area's infrastructure with the hopes that we could draw a project of this magnitude. This role gave me a front-row seat leading up to that warm spring night when Hank Aaron threw out the first pitch in the beautiful, new SunTrust Park (now Truist Park) four years later.

While it's exciting to experience a state-of-the-art arena or sleek restaurant concepts in an up-and-coming district, the role these projects play in their communities and within sports organizations has led to a seismic shift in the business of sports. Commercial real estate development and ownership have become de facto for teams who want to succeed on and off the field, providing an additional asset class beyond traditional business model revenue streams.?

In the case of the Braves, their mixed-use development, The Battery Atlanta, allowed them to leverage their wildly popular brand and monetize it in new ways with audiences they had not typically served. Braves’ CEO and president Derek Schiller, in an interview with the Atlanta Business Chronicle, stated that revenue from The Battery directly boosted payroll, increasing the team’s game performance. This is clearly evident in the Braves’ five straight National League East division championships and their 2021 World Series win.

Real estate is a force multiplier of fan engagement and revenue, providing teams with new ways to measure success. A Braves executive noted that Opening Weekend of the 2023 season wasn’t measured by the 40,000 tickets sold each night to sell-out crowds. Instead, they measured ticketholders PLUS the 31,500 fans who enjoyed the cafes, concert halls, and village green surrounding the stadium.

Dual Role: Sports Executive and Real Estate Developer

We're seeing sports teams venture into commercial real estate development on a big scale, some worth upwards of billions of dollars. In Nashville, the Tennessee Titans have plans for a $2.1 billion stadium at the center of a new mixed-use site where fields of parking lots currently sprawl. Similarly, the Milwaukee Brewers announced their desire to redevelop 35-acres adjacent to American Family Field, including new residences, offices, and a boutique hotel. And the list goes on.

As I can attest, developing commercial real estate is complicated, especially on this scale. It requires strategic foresight and thoughtful execution over many years. The financial, political, technical, and promotional tracks that ensure success require careful consideration.?

Front office executives are suddenly expected to become savvy developers, knowledgeable about commercial real estate, bond markets, transportation initiatives, and urban growth. If this sounds like an effort you're involved in, are you prepared to tackle what's to come?

Rethinking your organizational chart is an important first step. This necessitates creating a real estate development arm responsible for your strategies and transactions. Front office executives are excellent at what they do best (sports) so continue to focus on your core business. Designate others with experience to handle real estate development while adhering to your team’s desired outcomes.?

Based on my previous work with the Braves and my current work with the Atlanta Hawks and their development team as they build out the 50-acre Centennial Yards development around State Farm Arena, I've compiled some tips to help you break down these complex situations and help you move forward.?

Infrastructure, Real Estate Cycles, & Politics: Key Members of Your Strategic Roster

First, your team should look beyond its property lines. What are the adjacent assets, especially infrastructure, such as highways, transit corridors, or other transportation facilities? If the site isn't well-connected or needs better access, don’t despair. Aligning with neighboring businesses and commercial property owners is a powerful way to get what you need. When combined, voices and resources from the private sector multiply and can persuade local and state governments to help, especially if agencies are seeking to revitalize the area or better manage growth. Strategies can be shaped, executed, and quantified to show a return on investment for all partners involved. Don’t overlook the power of partnerships.?

For the Braves, their announcement accelerated ten years of transportation improvement projects into three, with my organization at the helm of many of these capital improvements. The Braves, neighboring businesses, and the general public benefitted greatly through these strategic public-private partnerships.

Real estate trends are another essential watch-out. Like most things in life, real estate moves in cycles, and these trends are heavily shaped by macro environments we can't control but must understand. Three years of a worldwide pandemic resulted in significant changes to how and where we live, work, and recreate. Consider data points carefully.?

For instance, if you are planning apartments or offices, recognize the difference between ‘home’ and ‘office’ is increasingly blurry with hybrid work becoming more prevalent. Further, companies are rethinking office lease requirements. Cushman & Wakefield recently reported that 330 million square feet of office space are projected to be back on the market at the end of the decade. How will this impact your commercial product mix?

While real estate is a powerful way to add value to portfolios, these macro trends require careful consideration. How are trends affecting your region and, more specifically, the submarket you are doubling down on, or relocating to? Recognize that what were once tried-and-true formulas are in the throws of change as real estate fundamentals undergo a major shift.

Politics should be another important component of your real estate development strategy. Back in 2013, the world was still recovering from the effects of the banking and mortgage crisis. Fiscally conservative social movements strongly opposed taxpayer-funded engagements. This sentiment extended to the Braves' Park, which was in part paid for through a partnership with the local government. Both groups learned from past failures in other markets and municipalities that sent public costs skyrocketing while capping the investment from the team. Key to the structure for the Braves deal was that the roles were flipped, placing overages on the team and capping the public investment.?

The decision by the county to bypass a public referendum in favor of a vote by the five-member commission board was controversial but ultimately proved to be the best choice. The Braves and the local elected officials were steadfast in this path forward and the results are evident. Both private and public investment poured in with more than 40 projects, including five new Class A office towers, built in the submarket as part of the ‘halo effect.’

Today, the political environment has shifted more towards public-private partnerships, a recognition that government and businesses can achieve big things when they work together.?

Centennial Yards is a 50-acre, $5 billion project anchored by the Atlanta Hawks' State Farm Arena and neighboring sports and conference facilities. It is one of the country’s most ambitious redevelopment projects, sitting dead center in the heart of a major American city. When fully built out, the 8 million square foot district will quite literally repair Atlanta’s urban core. That sounds like hyperbole, but it’s not. Anyone familiar with the current property’s configuration knows it as a vast, multi-level hole in the ground complicated by freight rails, parking lots, and a spider web of roadway viaducts. For decades it has separated gleaming office towers in the city’s central business district from historically underinvested neighborhoods, a painful effect of the past’s destructive policies.?

Now, we are developing strategies to combine the needs of the private sector (the team and their development partners) with the needs of the public sector (the government). By carefully considering opportunities for public-private partnerships, we will build a more valuable real estate development through the help of public funding. In turn, we’ll positively contribute to critical social needs, such as workforce engagement, social mobility, and economic equity. We’re also keeping innovative technologies in mind by scoping partnership strategies around electric vehicle charging infrastructure and other strategies that help reduce carbon emissions.

Looking Ahead

The past 10 years were an exciting time that resulted in many lessons learned in the sports vertical of commercial real estate. Looking forward, it’s just as exciting to be part of new projects that change businesses, communities, and lives.

As your team explores real estate development, consider how to maximize returns on investments while recognizing the opportunities at hand through less obvious means. With careful consideration and thoughtful planning, you can ensure success in your real estate development initiatives and create a vibrant, mixed-use place for your fans to congregate, spend time, and spend money all while expanding revenue streams and benefitting communities.

About the Author: Malaika Rivers specializes in building commercial real estate portfolios and communities through strategic public-private partnerships between CRE owners, developers and governments. She is a leading expert in Community Improvement Districts (CIDs) and advises on their best use as powerful tools for real estate and economic development.