S.E.C. Real Estate Observer

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While watching the National Basketball Association draft of college players recently, it occurred to me that there are a lot of analogies between professional sports teams and real estate investors. Both have inventory (players or buildings), an owner, a CFO (CPA), a general manager (attorney), and a director of player personnel (spouse). In order to trade a player they have to get all the decision makers to come to agreement. A sports team has inventory (players) with benefits and detriments. Big scorers, rebounders, and dribblers are assets, while big salaries with little production and head cases are detriments. Sports teams have “can adds” and “must takes” when they are crafting a deal. Different teams and coaches have different needs and value players differently, just like your clients value properties differently depending on their changing circumstances.

A GM will try to improve his particular team’s needs through drafting, trading, or hiring through free agency (hiring a player whose contract with another team has expired). Sometimes all of these come together at one time.

In the recent NBA draft, 60 new players were drafted. They mostly came from college, but a few were just out of high school or from overseas teams. Most of the teams stayed with their draft position and selected a player that would fill a need for their team. Just like the RE market, most deals are straight-up cash deals. But there were 12 draft choices traded that included 8 current NBA players. Leading up to the draft, 11 were players traded. One player, Luke Ridnour, was traded 4 times in 24 hours (Minnesota, Memphis, Charlotte, and Oklahoma City). There were also multi-leg deals.

The day after the NBA draft was the NHL hockey draft. The Colorado Avalanche signed a player from Boston (Soderberg) , then traded two of their players, O’Reilly and McGinn, to Buffalo for 4 players and the 31st draft pick. Then, that same day they drafted Rantanen, from Finland, 10th and then traded the 31st pick for a 2015 39th pick, a 2016 second-round pick, and a 2017 sixth-round pick. Ironically, the Avalanche previously owned these two future picks and had traded them last year, but reacquired them this year. Have you ever owned a piece of real estate twice? Reminds me of a little house in Whittier.

Professional sports team owners would make great real estate exchange clients. As you are working on our deals, keep in mind your favorite sports team. Get all the decision makers to agree and look for value trades that will maximize your clients’ benefits and minimize their detriments. Also, you may need to consider a multi-leg transaction.