Teams Become Landlords Amid Sports-Centered Real Estate Boom
America’s sports teams are turning into landlords.
Pro sports team owners are developing millions of square feet of retail, office and residential space, extending their influence—and revenue streams—outside the turnstile at a quickening pace. If development plans in cities stretching from San Diego to Boston come to fruition, pro sports teams, as a group, will be one of the largest commercial property owners in the nation, controlling 28 million square feet of non-game-related space.
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“Control is an incredibly important word in this,” said Derek Schiller, president and CEO of the Atlanta Braves. “The issue a lot of teams have is that somebody who has nothing to do with their professional sports team, or their facility, is making determinations about what is going on directly outside their venue.”
Schiller led the Braves in constructing The Battery Atlanta, a 2 million-square-foot development around Truist Park, the team’s 41,000-seat ballpark that opened in 2017. Among the tenants that give the Battery its 99% occupancy: Comcast’s regional headquarters, a restaurant from celebrity chef Ford Fry and whimsical paper store Sugarboo & Co. Last year, Gabelli, an investment firm, estimated the development adds $636 million to the team’s value. “Why should a developer have control and take profit off the table?” Schiller asked.
“Having venues that are used just for 30, 40 nights a year just isn’t going to work anymore,” said Steve Vogel, managing director of the sports finance group at U.S. Bank. While Vogel’s group typically finances stadium construction, it is finding increasing demand from mixed-use projects from teams. “It can drive enterprise value appreciation and diversification of revenue that just hasn’t existed. Owners realize that in order to stay relevant and maximize opportunity they need to be in it.”
The idea of mixed-use development next to a stadium isn’t new. The current trend jump-started in 2013, when the St. Louis Cardinals broke ground on their next-door Ballpark Village while in Buffalo, Terry and Kim Pegula did the same with Harborcenter, adjacent to their NHL franchise, the Buffalo Sabres. But over the last couple of years, the concept has proliferated wildly. Most recently, Churchill Downs reportedly is negotiating to sell a horsetrack outside Chicago to an undisclosed sports tenant that would construct a new venue and mixed-use property on the 326-acre site. The team is probably the Chicago Bears, given that last month the team tweeted it submitted a bid to buy the property (a Churchill Downs spokeswoman didn’t respond to a request for comment).
In Jacksonville, Shad Khan is proposing a development called The Shipyards on vacant land between the Jaguars football stadium and the St. Johns River. The “downtown experience” would include apartments on a new marina, the city’s first five-star hotel, as well as a hub for medical tourism. In San Diego, the Padres have been approval to pursue a 2 million-square-foot development beside Petco Park. In Boston, the Red Sox and the D’Angelo family, owners of ’47 Brand and much of the real estate abutting Fenway Park, plan to build 2.1 million feet of commercial space. Across town, the NHL’s Bruins just finished 1.9 million feet of retail, restaurants and luxury condos on what used to be the TD Garden player parking lot. The grandest plans to date come from Arte Moreno, who wants to erect as much as 8 million square feet of building space on 150 acres of parking lot surrounding the Angels’ Anaheim home. Across the U.S. and Canada, at least 20 teams in the big four leagues are currently building or planning mixed-use developments in tandem with their sports facilities, on top of a dozen that already have such facilities, like the Braves.
“Are they the next bastion of significant revenue for teams? Yes,” said Shawn Quill, the national sports industry leader at KPMG, who has consulted with a number of teams on real estate. “Legalized sports betting may be the No. 1 priority, but for teams looking at new real estate development and have the luxury of space, ballpark villages are a key consideration in terms of revenue maximization.”
The change in owner attitudes is profound. A generation ago, franchise holders demanded bowls surrounded by parking, preferably out in the suburbs. Even America’s most iconic teams longed for it. In 1994, both the New York Yankees and Red Sox proposed moving out of their urban homes, to the New Jersey suburbs and a “megaplex” with the New England Patriots, respectively. That was shortly after NBA icons the Bulls and Pistons left for the Chicago and Detroit suburbs. What teams eventually found is that while the facilities themselves could be top-flight, fans were left wanting for pre- and post-game fun, according to Brandon Schneider, the president and chief operating officer of the Golden State Warriors.
At the Warriors’ former arena, in Oakland, the nearest restaurants—a Denny’s, McDonald’s and local pizzeria—were a quarter-mile walk away, across parking lots and six lanes of thoroughfare. When the team decided to build a new facility, they realized the best-regarded experiences in sports include more than just better seats and bigger arena displays.
“Think about the door-to-door experience, from the time someone buys a ticket until the time they’re home after the event. We want to curate what experiences are available to people, not only before and after events, but to become a community asset as well,” explained Schneider.
The Warriors opened a new arena, Chase Center, in 2019 in San Francisco’s Mission Bay district and with it, Thrive City, a 125,000-square-foot development of restaurants and retail, including a local farmer’s market and waterfront dining from Tyler Florence, the chef and Food Network host. As Schneider tells it, ownership’s thinking was, “Let’s flip the script: I want to go to Chase Center and Thrive City because it’s the place to be, and there’s always something fun going on.”
Mixed-use real estate development isn’t just a vanity project, however. While few admit it, stadium financing is probably the Achilles’ heel of the otherwise booming sports franchise world. Evidence shows the claims that stadiums by themselves improve local economies are greatly exaggerated, according to a 2017 Federal Reserve look at the topic. Public sentiment for financing has soured.
In the case of the Warriors, the team didn’t pursue public financing, instead opting to look for creative ways to finance a billion-dollar project in a way that wouldn’t hobble the team’s finances. That came from adding the office space component—two office towers at Thrive City, totaling about 586,000 square feet. The space is anchored by Uber Technologies, which splits 90% ownership of the fully occupied office buildings with the Warriors, according to information contained in a mortgage-backed debt ratings note. A developer, Alexandria Real Estate, owns 10%. The office component also helps create a critical mass of people to sustain restaurants and shops around the arena, explained Schneider.
Yet, more than just a near-term economic opportunity, the emphasis on pre- and postgame experiences also reflects the changing nature of fandom. Fans today range from diehards who want to watch the game in their seat, to casual supporters who prefer to absorb the game atmosphere at a bar, to parents with young children who want a manageable taste of excitement outside the stadium, say executives.
“There is insistence on having an experience that is more than just watching a game—it starts well before and ends well after,” said the Braves’ Schiller. “They want to take a larger moment of time out of their lives and spend it with family, friends, business associates and have a much more enriching experience. That stuff that happens outside the ballpark is much more critically important to what defines a successful day.”
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