Either way, prospective investors are likely to find a tightly controlled market with towering barriers to entry. Deals are usually struck through networking and relationship building; most introductions are made via a handful of sports development and consulting outfits, law firms with a sports practice and a select group of financiers with contacts and expertise in this niche field. While Huber hopes for 20 percent returns, many would-be investors find that tracking profits becomes murky because teams are loath to divulge financial information; the sports business makes hedge funds look downright transparent by comparison. But profits and losses can vary widely depending on a team’s market size, the league it plays in and many other factors. Ironically, the variable that might have the greatest bearing on the success or failure of a new stadium investment, at least in the short term, is the one that an outside investor is least able to influence: a team’s success on the field, court or ice rink. Lousy teams with poor attendance can suffer rapid erosion of revenues and value.
 | | THE AMERICAN Airlines Center, home of the NBA’s Mavericks and NHL’s Stars,
is surrounded by relatively unused real estate in downtown Dallas. The city
plans to take advantage of the land by creating a mixed-use urban center
around the stadium to promote economic activity year-round. |
In the early 1990s, three years, $140 million and Nashville Mayor Phil Bredesen’s reputation went into building the Nashville Arena, which opened in 1996. Two years later, the Nashville Predators launched the team’s first NHL season there to great fanfare. By the second season, the team was averaging more than 16,000 fans per game, and Gaylord Entertainment, which owns the Opryland Hotel, paid $80 million for naming rights to the arena. Since then, crowds have dipped sharply. In the 2003-2004 season, the Predators averaged just 13,000 fans a game, despite making the playoffs for the first time. This season, of course, NHL owners have locked out players in an acrimonious labor dispute. The Gaylord Entertainment Center continues to host other events—college basketball, concerts and such—but its primary revenue stream is on ice for now.
“I think these investments can be just as risky as the stock market because there are items out of your control, like with any stock,” offers Bill Rhoda, a principal with CSL International, a Dallas-based business plan developer for sports venues.
Property that sits adjacent to sports facilities offers indirect access to investing in the sports venue construction boom. “The real estate around these buildings is often the most valuable part of these venues,” says Jim Grinstead, publisher of the Milwaukee-based trade publication Revenue From Sports Venues. Sports facilities draw crowds, and nearby restaurants, bars, hotels and other entertainment-oriented businesses can benefit from game-day masses going to and from the stadium. “The best part of it is that someone else is spending the money to drive that crowd to your neighborhood,” Grinstead says.
Denver offers a case study of this halo effect. Coors Field, home to baseball’s Colorado Rockies, opened in 1995 and helped spark a revival that turned the formerly moribund lower downtown area into the lively LoDo entertainment district. Commercial vacancy rates in the neighborhood plunged dramatically, roughly 1,500 housing units went up within a mile of the ballpark, and the impact of Coors Field and accompanying redevelopment helped boost area property values eightfold. Coors Field is often cited by developers and team boosters as an example of how a sports venue can help revive an existing urban area.
Recent sports-based urban development projects, however, are taking on more grandiose aspirations. In Dallas, the sparkling brick and glass American Airlines Center looks like a brightly wrapped box marooned on a strip of asphalt desert. Fans of the NBA’s Mavericks and NHL’s Stars love being able to find easy parking when the teams are playing, but developers lament this waste of valuable downtown real estate. The arena opened in 2001 with the promise of turning a 72-acre tract into a mixed-use urban complex called Victory. After several delays, the project’s second phase is finally getting ready to take shape. W Hotels has broken ground on a combined hotel and residential campus next to the American Airlines Center, and planners are designing or constructing buildings to house several high-end retailers, nightclubs and restaurants.
 | THE VICTORY mixed-use urban complex in Dallas is a three-stage plan to transform
the existing American Airlines Center into the heart of a shopping,
business, residential and tourism community. The center will be a prototype for a community that complements the sporting venue, but is not dependent upon
it. |
Developers elsewhere are trumpeting equally bold visions for mixed-use developments comprised of hotel, retail, entertainment, residential and office space surrounding existing sports venues. In Los Angeles, Anschutz Entertainment Group is working on a long-planned, oft-delayed $1 billion project on mostly vacant land next to its highly successful Staples Center, home to the NBA’s Lakers and Clippers and the NHL’s Kings. In the Phoenix suburb of Glendale, Steve Ellman, a developer and majority owner of the NHL’s Phoenix Coyotes, is, after a year’s delay, finally moving dirt on Westgate City Center, an $850 million development planned around the Coyote’s new home, the Glendale Arena.
Depending on the project, investment plays in these types of developments can
vary from simple appreciation of real estate purchases to coming in as a prime
commercial tenant. “We’re open to joint ventures, and we even have a couple of
outright land sales,” says Kenneth Reese, senior vice president of Hillwood
Capital, the Dallas-based majority owner and developer of the Victory project.
Hillwood is headed by former Dallas Mavericks owner Ross Perot Jr.
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