Inflation will not affect the funds of sports team owners.
In fact, it can help.
While the super-rich will have to pay a little more for eggs at the grocery store — just like everyone else — inflation is unlikely to affect the bottom line of their sports facilities.
“I rest pretty easy when I’m the owner,” said Tim Clark, a senior analyst at PitchBook who researches private financial markets. “That’s how people view the assets of the professional sports industry. They just don’t fall.”
Inflation has soared this year to levels not seen in four decades, slowing the economy and raising prices for consumers from the till to the gas pump. For the most part, sports are no exception, with rising costs making it more expensive for fans to attend games, for families involved in youth sports, and for college athletic departments trying to stay on budget.
But the millionaires and billionaires who own sports teams won’t feel pressured, whether it’s the day-to-day costs of doing business or the sale price, if they decide to move on. On the contrary: a franchise can be a safe place to store money and ride out a bear market.
PHOTO: Inflation or not, the price of professional sports teams continues to rise
“I do think there is some fencing,” 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 have been doing this for 30 years. We’ve been through many business cycles and valuations have been strong. I don’t see it being any different now.”
Most sports owners are also capitalized enough to keep their team’s budget separate 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 is worth nearly $52 billion and is the 23rd richest person in world, according to Forbes magazine.
(One exception: losses in Bernard Madoff’s Ponzi scheme reduced 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 squeezed elsewhere, it’s more or less a rounding error for their clubs,” said Tom Pitts, European head of LionRock Capital, a private equity firm that has one a third of the interest in the Milan football team “Inter”. “Most of these guys weren’t looking to buy the club. It’s an expensive hobby.”
Rising interest rates could make it more expensive for potential owners to buy into the club if they have to borrow money to pay for the new prize. “It just costs a lot more money in absolute dollars to service the debt,” Pitts said.
There are several high-profile teams in the market right now.
Washington Commanders owner Dan Snyder, under pressure to sell his team after an investigation revealed a toxic corporate culture, says he would consider all or part of the once-proud NFL franchise. It is expected to fetch even more than the $4.65 billion that Walmart heir Rob Walton, who with a net worth of $61 billion, is the 16th richest man in the world, paid for the Denver Broncos this summer.
Robert Sarver put his teams, NBA Phoenix Suns and WNBA Phoenix Mercury, on the market 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 been rumored to be selling. The NHL’s Ottawa Senators are also available for a reasonable price.
Two of the biggest names in English football, Manchester United and Liverpool, are also represented in the market. Forbes valued Man U. at $4.6 billion in September – slightly higher than Liverpool; Both are expected to surpass the $3.2 billion price paid this spring for Chelsea, which was briefly the highest ever for a sports team.
That record was less than two weeks old when the Broncos deal was announced.
“You have the likes of the Waltons and that’s a drop in the bucket,” Clark said. “This is a club. It’s like, “When will the next Picasso be sold?” … The value sector has nothing to do with the economy. The demand is always there, and the supply is always low.”
