Valuing the Commercial Real Estate Industry | Whats It Take to Own an NFL Team?

What's it take to own an NFL team?

Photo Credit: Alex Benison

When I graduated college I was hired.  Yeah, that’s a big deal now, and I hear it’s not getting much easier anyway.  I met a leading producer in the commercial real estate industry with an interest in risk (pun intended – and if you understand that, you’re doing fine).  I was interested in anything.  It worked out well.

I was to create a decision-making, risk-analysis engine (from scratch) to identify the real cost of risk associated with commercial real estate as compared to, say, the S&P 500.  What?  That’s what I said.  I worked with Perry (the analyst), we called the project: “The Stunt”.  Why?  Because we decided that’s a pretty cool name for a pretty lame project.  And although formatting personalized engines to isolate very specific variables can be tedious at times (not to mention conversationally equivalent to lead [the soft, malleable poor metal]), they’re highly useful.  For instance, did you know the relative cost of commercial real estate risk is well below the cost of any stock option, bond option, or fund?  I can prove that now.  And if you don’t know the cost of risk, it’s what you’re paid for every time you invest, risk is your reward (hopefully!), and it’s better to get paid a lot for it.  For now, the only other variable to watch out for is time, time is valuable.

So what’s this have to do with you or me?  Let me get to the point of this first blog: when I decided to take the time and throw my lot with Perry into REsheets, I thought, how am I going to write something interesting enough to both entertain and prove that your time is as valuable to me as my time is to me? Here’s the relative version: as an agent in commercial real estate you have one job: to present the value of your time to a prospective client.  You must prove that you will list/find a multi-million dollar property and that the value of your time will equate to either the greatest compensation or the most favorable bargain your client can expect in a timely manner!  Your client’s risk is what you do with your time.  If you can entertain the thought that your time comes with less risk (more activity, higher prices, better bargains, more professionalism!) than any other agent, by economic law, your time is more expensive and more sought after than any other agent – good for you, it’s not easy.

But it’s a standard in the service industry, that’s how we can charge for our spreadsheets, analysis, and software: it’s better than what you have, and it allows you to entertain that thought.

So if I want to make you better, what’s in it for me? (feel free to skip this section if you’re running low on time, or your mind is particularly sensitive to prodded combustion): your client’s risk in hiring you is the value of his time as he invests in your time, your risk in visiting REsheets is the value of your time as you invest in our time, my risk in writing this is the value of my time as I entertain you and how well that translates into your consideration of our products and services, your relative position in any form of business, and my promise, in the interest of time, is to never bring that up again.

However, if you did just read that, feel free to make it your own with a client.  If you understand what you’re really selling (or think you do!) you might just be convincing enough to get someone else to believe in you, and that’s a majority of your business.

So how do we maximize the real value of our time?

It’s football season, more importantly, it’s fantasy football season, and I drafted a team this year… let me tell you… a winning team (if you keep up, yes, Arian Foster is on my team, and yes I expected him to rush for 231 yards and 3 touchdowns first week out).

Anyway, on the topic of giving my ‘team staffing-choices’ far more credit than deserved (as some members of my league have suggested), I extrapolated.  I thought, well, how would I do with staffing a real NFL team?  I’d have to say probably pretty well (no humility here).  So I extrapolated again: what’s it take to own an NFL Team? Thought I would never get there?  Is the value of my time beneficial to an NFL franchise?  Well, I Wikipedia’d it:

Six team majority owners, nearly a fifth of the NFL, originated in the game as players or coaches.  Wow, very cool statistic.

At least another six majority owners founded successful businesses (Home Depot, Ford, Johnson & Johnson, etc.) – probably expected.

There are four professionals (lawyers, financiers, film types).

And the rest owed their substantial financial investments into NFL ownership in part or fully attributed to Real Estate!  That’s more than half the NFL teams (valued between 800 million and 1.6 billion each!).  Five have ties to oil and energy, but arguably, eight additional owners found success purely in the commercial real estate industry!

In fact, owning an NFL Team is a form of Real Estate: quite an income producing property.

Writing this first blog post for REsheets, I’d impress upon you one thought: commercial real estate is not little money.  You’re in this industry for the real thing, that first big carrot, and hopefully plenty more.  If you’re playing for the big money, step it up, understand the scope of the business, show value in your time, and whether you have to start out small, like most of us, or you’re given the chance to work with something much larger, know you’re the one that can handle it.

There’s a lot to come, welcome to REsheets, we hope you enjoy it here.