In August, the NFL approved new ownership rules that allow private equity firms to buy passive minority stakes in franchises. The decision came after franchises appreciated nearly 40x over the past 30 years and reached $5.93 billion on average, according to Sportico’s calculations.
But NFL team values still have a long runway, according to one team owner. “These funds can get liquid in six years,” Jonathan Kraft, New England Patriots president, said at Sportico’s Invest in Sports Event at Nasdaq. “You probably won’t get 3-4x your money, but my guess is you’re going to get returns that beat the stock market over that period and without taking that much more risk.”
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Kraft then joked that he is not an investment advisor, in case “the SEC is listening.”
The August decision approved a handful of PE firms to buy up to 10% of individual teams. No single fund can invest in more than six teams, and the minimum hold period for each investment is six years. Kraft sees a future where the PE firms will all raise follow-on funds, and “they’ll just be rolling it.”
Kraft highlighted the NFL’s international opportunity from a media standpoint as it expands to a potential 16 games that can carve out another TV package.
Kraft and his father, Robert, have made the Patriots one of the NFL’s most successful clubs on and off the field. Robert Kraft paid a then-record $172 million in 1994 for the team. The Patriots have made 10 Super Bowls under Kraft ownership and won six titles. In August, Sportico valued the Patriots at $7.31 billion.
Opening up NFL ownership has created potential liquidity for limited partnership stakes in the NFL. LP stakes have traditionally sold at a 20-30% discount to control transactions, but Jonathan Kraft sees a world where LP stakes sell at par or even premium to control deals. “Something that used to be completely illiquid and not something most family offices would look to play, and it has been completely flipped on its head,” Kraft said.
Yet, Kraft highlighted the one big economic advantage with control ownership in sports team sales that historically has justified the premium. “Uncle Sam becomes your partner in buying the asset,” Kraft said based on the idea that current tax laws allow you to offset income in other businesses through depreciation rules.
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