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Speaker 1: Thanks for joining us on the Bloomberg Business of Sports,

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Speaker 1: where we explore the big money issues in the world

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Speaker 1: of sports. I'm Michael Barr, along with my colleagues Scarlett

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Speaker 1: Fou and Damien.

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Speaker 2: Sassou and NFL league owners approve the sale of two

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Speaker 2: teams selling ten percent stakes to private equity firms.

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Speaker 3: That's right, Scarlett. The Buffalo Bill sold a ten percent

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Speaker 3: stake to Arctos Partners and the Miami Dolphins sold the

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Speaker 3: ten percent steak to Ares Management.

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Speaker 1: And we're expecting a lot more similar moves down the

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Speaker 1: road as more private equity firms look to get a

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Speaker 1: foothold in sports. Here now to take us through the

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Speaker 1: growth of private equity in sports is Velocity Capital Management

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Speaker 1: founding partner David Abrams.

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Speaker 2: We're also joined by Texas Permanent School Fund CEO and

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Speaker 2: CIO Bob Borden, who recently invested into Velocity's flagship opportunity fund.

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Speaker 1: David, Bob, Welcome to the Bloomberg Business of Sports.

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Speaker 4: Thank you for having us.

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Speaker 1: I'm going to start with David if I may, the

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Speaker 1: Velocity Capital Management founding partner. This must be great news

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Speaker 1: because we're going to see more and more of this

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Speaker 1: of the capital of the small equities coming in and

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Speaker 1: eventually maybe we can afford some of these big old two, three,

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Speaker 1: four billion dollar teams.

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Speaker 4: Well, we are both humbled and grateful for our partnership

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Speaker 4: with Bob and the Texas Permanent School Fund Corporation. Bob

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Speaker 4: will talk a little bit about our history and some

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Speaker 4: of the things we've done together, but we really believe

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Speaker 4: that this is the first time that we've seen where

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Speaker 4: an institutional allocator has said, we don't want to just

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Speaker 4: invest in a specific fund and be in private equity

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Speaker 4: or credit, but we want to build a platform to

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Speaker 4: take advantage of the disruption and commercialization we're seeing across

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Speaker 4: the broader entertainment, sports, and media ecosystem. With the partnership

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Speaker 4: we have, we think that we can be you know,

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Speaker 4: of a you know, an operationally intensive partner for the

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Speaker 4: middle market, which where we believe there's you know, the

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Speaker 4: most attractive risk adjusted opportunities.

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Speaker 2: So, Bob, let me bring you into the conversation. What

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Speaker 2: have you seen take place in this sector that convinced

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Speaker 2: you that you want to bring the Texas PSF into

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Speaker 2: this part of the business. Was it a specific deal,

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Speaker 2: was it a specific sport well, you know, when I look.

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Speaker 5: At it, over a long period of time, you know

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Speaker 5: this this.

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Speaker 6: Really evolved from you know, franchises that were owned by

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Speaker 6: dynasty families for decades on ends, and really the revenue

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Speaker 6: sources were primarily around you know, cable television contracts.

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Speaker 5: And now we have a brave new world of all

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Speaker 5: kinds of.

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Speaker 6: Delivery of the experience, not only through media and streaming,

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Speaker 6: but through surrounding entertainment and functions broader around the entire

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Speaker 6: sports event. And it's really a disruption of an ancient

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Speaker 6: model that is creating a world of opportunity. And it's

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Speaker 6: it's still in its nascent stages of you know what,

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Speaker 6: what are ultimately going to be the best mechanisms to

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Speaker 6: monetize the entire experience. And David's assembled a top flight team.

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Speaker 6: And David and I have experienced going back to the

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Speaker 6: Great Financial Crisis, that has given me great confidence in his.

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Speaker 5: Ability to execute. And you know, I think that it's it's.

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Speaker 6: A good time to to really assemble teams and back

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Speaker 6: them with capital while there is this consolidation opportunity in

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Speaker 6: this sector.

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Speaker 3: Well, Bob our audience, we know David all too well.

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Speaker 3: We know him from Harris Blitzer an apollo. I mean,

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Speaker 3: forget about David. We want to hear more about you,

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Speaker 3: and we need to bring you in properly. You're the

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Speaker 3: CEO and CIO of the fifty two billion dollar Beast,

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Speaker 3: the Texas Permanent Fund, and you're investing in a sports

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Speaker 3: focused private equity fund. And I'm going to pitch yourself, well, Bob,

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Speaker 3: I really am here, Collar Capital saying eighty one percent

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Speaker 3: they surveyed one point nine trillion in assets under management

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Speaker 3: pension funds like yourself. Eighty one percent reported the risks

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Speaker 3: of sports funds are too great, too great to invest

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Speaker 3: in these trophy assets as you put them. Talk to

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Speaker 3: us about what makes Velocity different in your mind?

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Speaker 6: Yeah, well, yeah, the risks of doing it with the

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Speaker 6: wrong team are certainly high. And I that's not a pun.

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Speaker 6: I mean the you know, the wrong management group. You know,

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Speaker 6: this is somewhat analogous to the early days of you know,

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Speaker 6: internet search engines, you know, and there was a lot

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Speaker 6: of viable ideas and competitors, but you know, once the

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Speaker 6: industry really coalesced, you know, you had two or three

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Speaker 6: obvious leaders. It's also a very bifurcated industry, you know

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Speaker 6: where at the very you know top, you have these

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Speaker 6: you know, multi billion dollars you said earlier, two or

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Speaker 6: three billion. I think the check sizes now are going

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Speaker 6: to be five to ten billion for certainly for NFL franchises.

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Speaker 6: And that's hard to play in because you know they're

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Speaker 6: big checks and very liquid. But all of the infrastructure

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Speaker 6: in and around major sporting events has got a great

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Speaker 6: opportunity for consolidation and scale, and you know, Velocities put

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Speaker 6: together a really good team. My experience with David dates

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Speaker 6: back to the financial crisis and really exploiting the opportunities

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Speaker 6: and non performing loans in Europe, and I saw the

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Speaker 6: way that he and his team were able to execute.

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Speaker 6: And knowing that in that interim time, you know, he

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Speaker 6: was a key figure running the Harris Splitzer enterprise, I

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Speaker 6: think it is really positioned him well to capitalize on

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Speaker 6: this opportunity set. And in my mind, you know, the

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Speaker 6: risk is involved in you know, backing the wrong team

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Speaker 6: or some some firm that's trying to do this just

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Speaker 6: as an adjunct to other things they do, or in

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Speaker 6: a more you know, really venture fashion and you know

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Speaker 6: this this kind of mid market area. I think is

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Speaker 6: where the risk adjusted returns are very attractive, and you know,

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Speaker 6: we're investing in teams that have deep experience and you know,

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Speaker 6: have some traction, and really what we're doing is unlocking

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Speaker 6: their skills by trying to solve the capital puzzle for

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Speaker 6: them so they can focus on value creation more than

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Speaker 6: capital raising.

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Speaker 3: Well, Bob, I think he hit nail on the head here.

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Speaker 3: You're not buying a sports franchise, per Se. You're buying

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Speaker 3: into Velocity in their holdings like Perrella, Motorsports, Elevate. David

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Speaker 3: tell us a little bit about what's going on with

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Speaker 3: X games, some of the you know, portfolio holdings, how

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Speaker 3: the fund is structured, and you know what whise ahead.

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Speaker 4: Well, I think Elevate is a perfect example of this

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Speaker 4: partnership and why we're so excited. There was some news

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Speaker 4: out the other day about both Velocity and Texas Permanent

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Speaker 4: School Fund and Levy putting significant capital on the balance sheet.

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Speaker 4: But I think one of the big differentiators of this

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Speaker 4: partnership is how Texas Permanent School Fund is not just

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Speaker 4: a typical asset allocator. And the reason they'll bring that

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Speaker 4: up is we have the ability to provide holistic solutions

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Speaker 4: to various intellectual property rights holders. And if I think

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Speaker 4: about Elevate, you know, one of the big initiatives for

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Speaker 4: us as a company is what the disruption is going

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Speaker 4: to lead to and colle athletics, and so there's lots

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Speaker 4: of different ways to figure out how to work with

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Speaker 4: the university, whether it's the NIL space, whether it's helping

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Speaker 4: build the stadium, whether it's helping monetize their ticketing inventory.

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Speaker 4: Elevate can do a lot of different things, but Texas

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Speaker 4: Permanent School Fund can provide capital that's private equity oriented, credit,

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Speaker 4: real estate, and do let Bob talk talk about the

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Speaker 4: last point, which is the name Permanent is there for

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Speaker 4: a reason because it's permanent capital where you can hold

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Speaker 4: an asset for thirty years. There's very few examples of

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Speaker 4: other investment firms who had access to that capital, and

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Speaker 4: that allows us to solve problems for rights holders. Bob

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Speaker 4: will let you talk about why we're so excited about

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Speaker 4: that aspect of the partnership.

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Speaker 6: Well, you know I was mentioned earlier, what you know

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Speaker 6: our peers do of the largest educational endowment in the

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Speaker 6: country and actually knocking on sixty billion today.

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Speaker 5: The lessons that.

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Speaker 6: I learned over the years when you've got you know,

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Speaker 6: good partners and investment firms, and I think that you know,

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Speaker 6: we're where my peers have you know, left a lot

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Speaker 6: of meat on the bone. Is putting everything in boxes,

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Speaker 6: you know, hiring talented firms to manage one, you know,

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Speaker 6: very narrowly defined aspect of the fund, and you know,

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Speaker 6: kind of report back on that. And I found that,

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Speaker 6: you know, there's incredible talent at some of these firms,

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Speaker 6: and they're doing a lot of interesting things, not just

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Speaker 6: the little slice that you may have hired them for.

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Speaker 6: And necessity being the mother of invention. In the mid

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Speaker 6: two thousands, I was tapped to run the South Carolina

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Speaker 6: Investment Commission. It was thirty five billion dollars and I

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Speaker 6: was hired and given an attorney and an admin and said,

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Speaker 6: build a cutting edge endowment style pension solution. And I

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Speaker 6: realized that we were going to have to really leverage

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Speaker 6: partners a lot more than have traditionally been done, and

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Speaker 6: by providing more free form capital that can be put

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Speaker 6: to use, and not only in funds, but in co investments,

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Speaker 6: direct investments, both in debt, inequity and real assets, seating platforms,

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Speaker 6: ET cetera. A much more fungible form of capital that

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Speaker 6: makes you a true partner with that group is a

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Speaker 6: key to success there. It's a way to access a

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Speaker 6: lot of opportunities and using those lessons along with the

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Speaker 6: experience that I had with David, you know, I see

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Speaker 6: this space as ripe for development.

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Speaker 5: Consolidation is almost you know, a late stage word.

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Speaker 6: You know, this is still very nascent in some of

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Speaker 6: the technologies and other services in around entertainment, just not

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Speaker 6: only the hospitality, but you know, the branding and naming

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Speaker 6: rights and a lot of these things. And those who

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Speaker 6: who figure it out and can do it at you know, reasonable.

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Speaker 5: Scale, you know well, will.

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Speaker 6: Come out ahead. And so what we want to be

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Speaker 6: able to do is have this fungible capital to back

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Speaker 6: a variety of opportunities that come out of the greater

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Speaker 6: Velocity platform, of which I expect and are already seeing

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Speaker 6: evidence that they're going to be numerous.

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Speaker 2: So, David, can you give us some more of an

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Speaker 2: idea of what specific opportunities look like as we head

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Speaker 2: into twenty twenty five. I think about the college space

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Speaker 2: because Velocity focuses on middle market companies, so we're not

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Speaker 2: talking NFL teams, right, that's no longer middle market. But

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Speaker 2: if you're talking about businesses or opportunities within college athletics,

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Speaker 2: obviously that space is growing by leaps and bounds. You

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Speaker 2: have Bill Belichick, who led the Patriots to multiple Super

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Speaker 2: Bowl victories, now join using the United Excuse me, the

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Speaker 2: University of North Carolina's football team. College athletics is becoming

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Speaker 2: more and more professionalized. It's no longer going to just

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Speaker 2: be middle market anymore.

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Speaker 4: Well, I think the Belichick announcement is interesting, but it's

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Speaker 4: a lot more than just hiring a football coach to

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Speaker 4: build the football program.

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Speaker 2: You and c is what do you see then, starting

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Speaker 2: with Bill Belichick joining UNC and how what kind of

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Speaker 2: opportunities does that open your eyes up to?

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Speaker 4: Well, I think it's a perfect example of like you said,

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Speaker 4: college athletics this you can use it. We're professional sports,

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Speaker 4: but they're entertainment and media businesses. It just so happens

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Speaker 4: that the talent is also going to get a college

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Speaker 4: education at the same time, Bill Belichick is away for

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Speaker 4: North Carolina to build a global brand which will attract athletes,

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Speaker 4: which drives the revenue. Generation of the intellectual property rights

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Speaker 4: of university and North Carolina. So when people want to

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Speaker 4: come to North Carolina, now it's I get access to

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Speaker 4: one of the most successful NFL coaches of all time

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Speaker 4: his network of contacts around the world. So if I'm

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Speaker 4: coming to play, they have a fantastic women's soccer team,

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Speaker 4: I'm going to get access to Bill Belichick. Maybe you

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Speaker 4: can't build my brand even And that is where college

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Speaker 4: sports is going. You just saw the example of what

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Speaker 4: happened at University of Michigan, where all the resources was

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Speaker 4: Tom Brady and Dave Portney were put into attracting talent

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Speaker 4: for the university. It's the same exact reason why this

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Speaker 4: happened at North Carolina because it's a way for them

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Speaker 4: to present an opportunity to talent that other universities can't match.

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Speaker 1: I want to go to I know we're running out

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Speaker 1: of time, but I want to go to something that

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Speaker 1: Bob said if you can explain more of it, you

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Speaker 1: said Velocity needs operating partners while the school needs capital partners.

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Speaker 1: Can you explain that more.

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Speaker 5: Well.

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Speaker 6: Our purpose in life is to provide a perpetual stream

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Speaker 6: of earnings to fund public education in state of Texas.

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Speaker 6: We're one hundred and eighty year old enterprise that was

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Speaker 6: founded at the beginning of the dawn of the state

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Speaker 6: of Texas, so as pivoted from a republic, and the

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Speaker 6: founding fathers of Texas had the foresight to say, education

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Speaker 6: is going to be critical for the state's success, and

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Speaker 6: we're going to set aside a lot of the large

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Speaker 6: s that we've acquired in the form of millions of

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Speaker 6: acres of land that presumably, you know, you could get

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Speaker 6: revenue from timber or cotton or cattle grazing. Little did

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Speaker 6: they know a great majority of that was sitting on

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Speaker 6: top of the Permian basin and has been a perpetual

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Speaker 6: source of cash inflows. We are able, therefore to you know,

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Speaker 6: invest with a very long term view of you know,

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Speaker 6: creating franchise value over time. I think one of the

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Speaker 6: problems in the industry of institutional investing for pensions and

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Speaker 6: endowments has been the fund format that you know, has

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Speaker 6: a ten year contractual life, and you have these great

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Speaker 6: entrepreneurs that are building platforms that are creating enterprise value,

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Speaker 6: but a bar around year seven or eight, you know,

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Speaker 6: they're kind of forced to go sell the firm to

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Speaker 6: monetize it, to you know, get everybody liquid and that happens,

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Speaker 6: you know, regularly for firms you know that might have

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Speaker 6: forty to fifty year plus lives, but you know every

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Speaker 6: seven or eight years are having to go through a

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Speaker 6: liquidation event. That's a distraction, that's a huge cost erodes

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Speaker 6: a lot of enterprise value, and being able to invest

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Speaker 6: with a much more open ended view is an advantage

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Speaker 6: for both, you know, the capital provider and the investment partners.

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Speaker 4: And Bob, I want to expand on that. You know,

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Speaker 4: one of the areas about this partnership is that because

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Speaker 4: of this capital and the connectivity with Texas Permanent School

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Speaker 4: Fund the State of Texas, we can actually drive value

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Speaker 4: for our portfolio companies that I've never been able to

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Speaker 4: see in this industry in in my past. So I'll

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Speaker 4: give two examples. The Amian related to what you asked

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Speaker 4: about the portfolio. So, we are the controlling shareholder in

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Speaker 4: a location based entertainment business called camp which licenses intellectual property.

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Speaker 4: It's really for young children and families, and we're opening

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Speaker 4: our second location in the state of Texas in Houston

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Speaker 4: in about a month. Well, the Texas Permanent School Fund

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Speaker 4: Corporation sole purpose is to provide funding for the K

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Speaker 4: through twelve school system in the state.

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Speaker 2: Of Texas Synergy.

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Speaker 4: I have done this for a long time, and when

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Speaker 4: I worked at Apollo, we had some unique competitive advantages.

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Speaker 4: I put this at the top of the list. Second example,

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Speaker 4: talking about the disruption in college athletics Elevate, which is

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Speaker 4: an investment that both ourselves and Texas Permanent School Fund

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Speaker 4: have a large stake in. And if you recall when

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Speaker 4: I was at Harris Splitzer Sports, I was part of

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Speaker 4: the group that founded Elevate eight years ago. And so

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Speaker 4: the college space is one of our biggest initiatives. We

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Speaker 4: have a very big secondary ticketing platform, one of the

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Speaker 4: biggest in the college football space. So we work with

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Speaker 4: the rights holder UNC for example, and help them monetize

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Speaker 4: their tickets primarily football or basketball in the secondary marketplace. Well,

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Speaker 4: given what's happening in college sports, ticket is a piece

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Speaker 4: of inventory, It's an asset they're trying to sell to

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Speaker 4: bring talent in to grow their metia ites. Well, imagine

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Speaker 4: if you could walk into university and say this has

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Speaker 4: been great to do this year over year, We'll give

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Speaker 4: you X amount of dollars for the right to monetize

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Speaker 4: your tickets over the next decade. There's very few organizations

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Speaker 4: that could compete with what we are willing to offer

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Speaker 4: to universities because of Texas Permanent school funds capital.

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Speaker 3: You know, you know, Michael bar I got to just

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Speaker 3: say it's amazing that Bob Borden didn't come to New

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Speaker 3: York State features Retirement System because then, David, I mean,

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Speaker 3: then we'd be getting some like Yankee fans, Jet fans instead.

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Speaker 3: It's gonna Ben, it's gonna all go to Texas. It's

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Speaker 3: gonna be to go Daryl K. Royal, you know, Memorial Stadium.

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Speaker 3: I mean, it's gonna be right in their backyard. And

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Speaker 3: we lost it. We lost it up here.

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Speaker 1: Well, see now, Bob, this is when you can like

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Speaker 1: set the trend man and help come on up. You

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Speaker 1: know right now, Dabie and Scarlet and I we're gonna like,

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Speaker 1: you know, invest in like marble racing and that's about it.

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Speaker 1: But see, you guys are really setting the trend here.

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Speaker 6: We have a couple of ke people on our staff

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Speaker 6: from the New York Retirement System and my president and

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Speaker 6: Deputy Chief Investment Officer, Stu Bohart, was former president of

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Speaker 6: Morgan Stanley asset Management and partner at Fortress. So we're

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Speaker 6: we're bringing, we're recruiting.

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Speaker 7: From New York, I can tell you that. But you know, yeah,

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Speaker 7: and you know, we have a we have an ace

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Speaker 7: in the hole with uh no income taxes in our state.

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Speaker 6: He Uh. The David didn't mention that this activity on

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Speaker 6: monetizing tickets is already something that Elevate has been doing

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Speaker 6: with the University of Texas and Texas A and M.

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Speaker 5: So you can connect the dots there.

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Speaker 6: Uh, and you know, to say the NFL is maybe

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Speaker 6: too big of a ticket, there's still a lot surrounding that,

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Speaker 6: you know, where Elevate was responsible for the naming rights

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Speaker 6: for the change from FedExField to Northwest for the Commanders now.

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Speaker 6: So that's just an example of there's an entire opportunity

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Speaker 6: set in and around those franchises for boarding services that

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Speaker 6: you know, has incredible growth opportunity and if you can

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Speaker 6: scale it, you know, I think the success becomes success.

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Speaker 6: And let's be frank. You know, college football is now

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Speaker 6: professional football. It's and it's different than any other It's

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Speaker 6: not a feeder league or farm team like you think

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Speaker 6: in baseball. You know, arguably college football's popularity and eyeballs

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Speaker 6: and you know, just loyalty is on par and perhaps

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Speaker 6: even higher the NFL. So it's just phenomenal. You know,

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Speaker 6: once in a generation opportunity to you know, figure out

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Speaker 6: ways to roll out, you know, a holistic entertainment and

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Speaker 6: promotional solution for college sports. And you know, folks like

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Speaker 6: Bill Belichick realized that for sure. So this is a beginning.

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Speaker 6: We're on the front end of I think a new frontier.

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Speaker 6: And you know, college athletics and you know, Velocity and

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Speaker 6: Elevate and others are well placed to take advantage of that.

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Speaker 6: And we haven't talked about and I know we have

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Speaker 6: time constraints here, but you know in the motorsports world

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Speaker 6: that things like putting perrella motorsports are involved in, and

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Speaker 6: Elevates involved in the promotion of Formula one in Texas

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Speaker 6: and Moto GP in Texas. And we have this first

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Speaker 6: class facility, the Circuit of the Americas, which has hosted

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Speaker 6: Formula one in the US, you know for now fifteen

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Speaker 6: seventeen years, I think, and was responsible for bringing Formula

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Speaker 6: one back to Texas.

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Speaker 4: Bob's not telling you that he in his spare time

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Speaker 4: is likes to race. I think that might be for

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Speaker 4: the for the next discussion.

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Speaker 6: Yeah, it's bubbling up.

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Speaker 1: You got a fellow motorhead over here. Man, really, what

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Speaker 1: is your favorite? Man? If you you know and you

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Speaker 1: get in the car.

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Speaker 6: Oh boy, well, my favorite form of sports.

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Speaker 1: My favorite car? O, favorite car? Favorite car.

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Speaker 6: Okay, I've had over one hundred my children. We can

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Speaker 6: answer this question. You asked my third grade er, what's

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Speaker 6: your dad's favorite car? The next one?

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Speaker 1: We run a full service show, folks man, no half

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Speaker 1: step in here, David, Bob Man, what a pleasure to

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Speaker 1: talk to you, guys. Thank you for joining us on

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Speaker 1: the Bloomberg Business of Sports.

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Speaker 4: Thank you for having us. We look forward to coming back.

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Speaker 6: The pleasure is ours.

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Speaker 1: Our thanks to both Velocity Capital Management founding partner David

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Speaker 1: Abrams and Texas Permanent School Fund CEO and CIO Bob

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Speaker 1: Borden for joining us, and thank you for joining us

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Speaker 1: for my colleague Scarlett Pooh and Damian Sasaur. I'm Michael Barr.

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Speaker 1: You're listening to the Bloomberg Business of Sports from Bloomberg

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Speaker 1: Radio around the world.