Manchester United’s Old Trafford stadium after the owners of the Glazer family announced they were considering selling the club in Manchester, England. (AP Photo/Jon Super)
Inflation will not hurt the bankrolls of sports team owners.
Actually, it might help.
While the super rich will have to pay a little more for eggs at the grocery store like everyone else, inflation is unlikely to affect the bottom line of their sports venues.
“I’m pretty relaxed if I’m the owner,” said Tim Clark, a senior analyst at PitchBook who researches private financial markets. “This is how people view the assets of the professional sports industry. They just don’t fall.”
Inflation has jumped this year to levels not seen in four decades, slowing the economy and pushing up prices for consumers from the checkout to the gas station. For the most part, sports are no exception: Rising costs are making attendance more expensive for fans, for families who participate in youth sports, and for college sports departments struggling to stay on budget.
But the millionaires and billionaires who own a sports team won’t feel the need, whether it’s the day-to-day costs of running the business or the price of a sale, when they decide to move on. On the contrary: a franchise can be a safe place to keep money and ride out a bear market.
“I really think it’s sort of a hedge,” said Inner Circle Sports CEO Rob Tillis, who has worked to sell dozens of teams in all four major U.S. professional sports and major international leagues. “I’ve been doing this for 30 years. We have gone through many business cycles and the valuations have been strong. Now I don’t see any difference.”
Most sports owners are also well capitalized enough to separate their team’s budget from outside business and other sources of wealth. So while rising interest rates have cooled the housing market, it’s unlikely to affect Cleveland Cavaliers and Rocket Mortgage owner Dan Gilbert, who, with an estimated net worth of nearly $52 billion, is the 23rd richest person in the world, according to the magazine. Forbes.
(One exception: losses in Bernard Madoff’s Ponzi scheme slashed the Mets payroll and forced owner Fred Wilpon to sell first part and then the rest of the team.)
“These guys have so much money that I think if they start getting pocketed elsewhere, it will be more or less a rounding error for their clubs,” said Tom Pitts, European head of private equity firm LionRock Capital. one third of the interest in the Milanese football club Inter. “Most of these guys didn’t reach out to buy the club. It’s an expensive hobby.”
Rising interest rates could make it more expensive for potential owners to buy a club if they have to borrow money to pay for their new prize. “Debt servicing costs a lot more money in absolute terms,” Pitts said.
There are several high-end teams currently on the market.
Washington Commanders owner Dan Snyder, who is being forced to sell his team after an investigation uncovered a toxic corporate culture, says he will consider getting rid of all or part of the once-proud NFL franchise. He is expected to fetch even more than the $4.65 billion paid for the Denver Broncos this summer by Walmart heir Rob Walton, who, with an estimated net worth of $61 billion, is the 16th richest person in the world.
Robert Sarver fielded his teams, the NBA’s Phoenix Suns and WNBA’s Phoenix Mercury, after an investigation found evidence of racial and sexual insensitivity in the workplace. The Washington Nationals baseball club is up for sale, and the family that owns the Baltimore Orioles has also made a fuss about the sale. The Ottawa NHL Senators can also be purchased at a reasonable price.
The market also features the two biggest names in English football, Manchester United and Liverpool. In September, Forbes valued Man Wu at $4.6 billion, slightly more than Liverpool; Both are expected to eclipse the $3.2bn price paid for Chelsea this spring, which was briefly the highest in the sports team’s history.
This entry was less than two weeks old when the Broncos deal was announced.
“You have people like the Waltons and that’s a drop in the ocean,” Clarke said. “This is a club. Like, “When will the next Picasso painting be up for sale?” … The value sector has nothing to do with economics. There is always demand and there is always little supply.
AP Sports columnist Jay Cohen contributed to the story.