The Rise of Sports-Anchored Mixed Use Districts
Sport-Anchored, Mixed-Use Districts (SMDs) are on track to be one of the largest growth engines for the future of sports, attracting $100B in investment over the next 15 years. KLUTCH Sports Group in collaboration with RBC has written a new white paper that unpacks the data and what it means for investors, fans, and communities.
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SMDs will transform the entiresports industry.
The building of new sports venues and the surrounding commercial, residential, retail, and community developments will transform how sports teams generate revenue and increase their enterprise values — not to mention how people live in, work in, and travel to these areas.
Professional sports-team ownership, long considered a symbol of wealth and success, has a new “teammate” in the form of out-sized financial returns from adjacent real-estate developments that are lifestyle-focused and designed with “live, work, and play” in mind. These SMDs bring an important new dimension to professional sports ownership.
Anatomy of an SMD
What It Means
Sports-Anchored
Stadiums, arenas, venues, practice facilities, corporate offices, or training centers anchored by a sports tenant
Mixed-Use
A combination of residential housing, retail and dining, commercial offices, and/or conference venues
Districts
Generally comprising several acres of land, these areas include community-focused facilities and venues such as park space, amphitheaters, community centers, and recreational facilities
Why It Matters
Sports-Anchored
There’s a guaranteed, reliable calendar of events, plus association with a sports brand that fans and consumers are passionate about
Mixed-Use
Mixed-use locations heighten consumer experiences by increasing (and concentrating) foot traffic and dwell times around games and events
Districts
These are important components for people who have active lifestyles and prioritize live-work-play communities
A Closer Look
In December 2023, Mark Cuban sold 72.3% ownership of the Dallas Mavericks to the Adelson family for $3.5B – an impressive sum, but likely undervalued. Cuban knew that, however, and he understood that the biggest play in pro sports was including real estate development.
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That’s just not me. I wasn’t going to put up $2B to get an education on building. If we’re able to build a Venetian-type casino in Dallas with an American Airlines Center in the middle of it, the valuation is $20B.
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Dallas is not an isolated situation. Many other existing SMDs leverage sports venues as anchors of larger development projects, including The Battery Atlanta and the Green Bay Packers’ Titletown.
Factors That Positively Impact Team Valuations
Long-Term, Consistent Revenue
Innovation
Cost Certainty
Demand Limitations
Ownership of pro sports teams used to be about prestige and on-field performance. But the game is changing.
SMDs are turning pro sports teams into an increasingly attractive asset class. Revenue streams for major and minor professional teams (think media rights, sponsorship, ticketing, etc.) are increasingly maturing, thus making the districts surrounding sports venues an attractive way to grow team valuations.
The Ross-Arctos Sports Franchise Index (RASFI) analysis of the largest North American leagues reveals sports franchise ownership generally drives higher returns than equity, fixed income, and commodities asset classes. They also have low value volatility, are uncorrelated with equities markets, and have largely proven to be recession- and disaster-proof.
The Big Revenue Play
Traditional revenue streams are well-known, have largely matured, and have already been priced into future team valuations.
League-Led Revenues
(National & International)
Generally shared amongst all league teams
Team-Led Revenues
(Local)
Varying levels of league-share and team-level capture and retention
Sports-Anchored,
Mixed-Use Districts
Returns are fully retained by the owner/developer
Women’s sports are exploding and represent long-term SMD opportunities.
Despite 37 SMDs in the U.S. pipeline across men’s sports, few investments dedicated to women’s sports have been announced. Monarch Collective is one example of a fund that wants to change that by investing in women’s sports teams, leagues, and rights-based adjacencies.
Women’s sports teams have not yet experienced many of the revenue maturation concerns facing men’s teams. Growth in the core team and league revenue streams is rapid, so stagnating growth is less of a motivator.
Jasmine Robinson
Monarch Managing Partner
A Closer Look
Women’s sports often have immediate needs for new facilities given the historic underinvestment in teams and leagues. SMDs typically require longer lead time planning than a standalone venue or practice facility. While men’s teams can use venue and facility upgrades, their need for the facility is not as urgent as for women’s teams.
The Success of the Kansas City Currents’New NWSL Stadium
$117M
Private financing for the first ever stadium purpose-built for a professional women’s sports team
10 years
Naming rights agreement with railway giant CPKC
~$40M
Revenue generated in 2024, a 200% increase over 2023
$800M
Investment into announced 20-acre SMD featuring waterfront retail, entertainment, restaurants, 1,000 residential units, and 20,000 square feet of office space
Number To Know
+99%
How much revenue retail locations at SMDs drove compared to same-chain locations in the surrounding market, during the season
The Big Idea
Any team that does not have non-sports revenue will not be as valuable as one that does. This adds value to the team whether it is performing well or not.
Kelli Fischer
Texas Rangers CFO
SMDs can attract private credit and public financing.
Public financing remains a viable option, too. Towns, cities, states, and countries have typically relied on debt, such as municipal bonds, to finance these projects. Local governments can also increase taxes and use this money to provide a low or zero interest loan to sports organizations
Private credit is becoming more popular thanks to advantages like flexible valuation methods, unique fee structures and capital requirements (compared to banks), and potentially longer-term time horizons.
A Closer Look
Traditional banks have historically struggled to finance SMDs given their risk tolerance; however, that does not mean they won’t participate in financing. Loans may look more like the following:
Provide on average $200M-$300M in debt capital with a five-year term, though we note substantial variances on amounts and term lengths
Participating banks will often use their own balance sheets with a view to refinancing after 3-5 years by other lenders once the SMD build is complete. These other lenders are typically institutional investors (insurance companies or private credit firms) that come in via private placement
Local officials and team owners will collaborate to directly impact local communities.
SMDs can serve as catalysts for further community investment by helping maximize the value of existing real estate investments, driving increases in tourism, and building awareness for a local community. The area surrounding an SMD can be boosted by investors funding a variety of non-gameday activities in their communities, such as youth tournaments, concerts, festivals, farmers markets, and other events.
Team
Owners
Public
Officials
Local
Leaders
Citizens
Organizations
There is now a much greater willingness by ownership groups to invest [additional] capital in real estate and infrastructure. This direct investment approach allows for the ability to unlock new revenue streams both in premium experiences and mixed-use development.
Tim Katt
Managing Director, Sports & Entertainment, Transwestern
Case Study
New York City FC
Willets Point, Queens was a long-neglected area of New York City until the New York City FC broke ground on its new stadium there. The Etihad Park project is a novel SMD that combines critical community needs with state-of-the-art infrastructure.
When the stadium opens in 2027, entirely privately financed by New York City FC, it will serve as the cornerstone of the landmark $3 billion redevelopment of Willets Point, including:
- Etihad Park: New York City FC’s 25,000-seat stadium
- 2,500 units of all-affordable homes
- A brand-new 650-seat public school
- 115,000 square feet of public space
- A new 250-key hotel
- Neighborhood-serving, ground-floor retail shops
The stadium was designed to be a resource for the surrounding community, inspired by the club’s core belief of empowering better lives through soccer. Whether it’s providing meeting space for community organizations, hosting farmers markets and other businesses that will be open on non-match days, or other events, Etihad Park will bring tremendous benefits for Queens and New York City.
$6.1B
Estimated economic
impact over 30 years
A Closer Look
IRR ranged from 9.88%-27.3% depending on the combination of input variables
Operating margins hit as high as 85% depending on residential and commercial occupancy rates
The combination of margins and tax benefits associated with amortization/depreciation can generate generous levels of free cash flows
SMD growth rates can materially outpace traditional sports revenue streams.
KLUTCH Sports developed a 10-year discounted cash-flow model using data from The Battery Atlanta — an SMD located approximately 10 miles northwest of Atlanta, Georgia — as the foundation, as well as publicly available information from the Atlanta Braves Holdings, Inc. and Cobb County, Georgia.
We ran plan scenarios on a host of different variables such as dwell times, visitor density, revenue per dwell minute, and more. The data, purely illustrative, represents a range of upside and downside scenarios.
Maximizing Sponsorship Return from SMDs
SMDs capitalize on a full calendar year of events, reach a net-new audience, and create new inventory.
~80%
New venue naming rights increase
~50%
New venue sponsorship increase
~20%
Potential impact of major partner deals
58%
Increase in naming rights by selling the campus (venue + district)
More Reasons to Root for SMDs
New builds and major transformations have led to substantial commercial upside thanks to a variety of factors including the enhanced attractiveness of expanded event schedules and broader audiences, as well as additional community engagement and increased dwell times.
SMDs also broaden the aperture of potential brand targets: Sports teams can use districts as a more budget-friendly entry point for brands that want to tap into team associations but can’t fund a traditional sponsorship. SMDs create more opportunities to unlock brands’ budgets across retail, OOH, community and more.