Investing in Sports Teams feat. Justin Papadakis

Hello, future billionaires. We've got a really fun interview today with Justin Papadakis. He is the Chief Operating Officer and Chief Real Estate Officer at USL, United Soccer League. And a very interesting interview. Admittedly, I'm not a big, you know, soccer follower, so a little bit out of my realm, but it's really cool to kind of hear what's going on in kind of the world of soccer. And they've actually been building this league alongside the MLS in the United States and getting some major traction and really kind of democratizing access from an ownership standpoint to, you know, own part of these teams in these different markets. And so one of the cool things and obviously part of our theme is investing like billionaires. And we know billionaires a lot of times will own sports teams. It's kind of a fun thing to learn about. And so we had a lot of different angles. We talked about how they go pick their markets, how they actually develop these really cool entertainment centers and districts around the stadiums and really what they're doing in kind of changing the monetization models of sports teams and very exciting stuff. So hope you enjoy this episode. Again, I always got to give the disclaimer, you know, for those that may be raising money is that we have not done any due diligence. You have to do your own due diligence if that's something that you are interested in. By bringing them on our podcast, we are not promoting them necessarily and just more out of curiosity and of, you know, bringing interesting topics to our listener base. So do your own due diligence if you are interested. And finally, if you are enjoying this show, we really appreciate you leaving a review on whatever platform you listen to this podcast on. It really helps us promote the show and get in front of more Audiences to share the wealth of knowledge about Investing Like a Billionaire. So with that, enjoy the show. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Welcome back to the Invest Like a Billionaire podcast. I am your co-host Ben Fraser, joined by fellow co-host Jim Muffuccio. And today we are joined by Justin Papadakis, and he is the COO and Chief Real Estate Officer of the USL Soccer League. And we're really excited to have you on, Justin. This is really interesting for our listeners. And you know, the name of our podcast is Invest Like a Billionaire. And if you think of what's one thing that most billionaires have that most of us, you know, non-billionaires, they don't have, it's investment and ownership of sports teams. And so we thought it'd be really fun to bring you on, talk about the landscape of sports ownership. And so You are an executive at the USL, which is a soccer league, and really I kind of view it as democratizing ownership into sports, and it's a really cool model and wanted to bring you on to talk about this. So thanks so much for joining.

Thanks for having me. And yeah, that democratization of sports investing is something we think a lot about. And I think as you mentioned in the opener, Sports, the sports asset class is something that is common among billionaires. And I think now there is a proven track record in the sports asset class. So it's, you know, it's not a yacht, it is a true asset class. And I think that's been proven by, you know, the sophisticated investors that are getting into the space. And now, really are, you know, we're really seeing a wave of, you know, very smart, smart money coming into the sports sector.

Well, it's also kind of fun too, right? So you, you are part of a sports team. We were talking about it before. What, what was Mark Cuban's initial investment into the, the Dallas Mavericks? Do you remember those numbers? We talked about it before, but it was, oh man, it was in the millions and now hundreds of millions and now it's multiple billions of dollars of value if the team was valued at, right? So it's, Obviously done very well for him along side being a very fun investment. So talk a little bit about the USL. You know, this is a league that, you know, I'm admittedly not, you know, super big into soccer, so, you know, I don't know all the different leagues and things, but it was cool to kind of hear you talk about how you guys are building this league, and it's actually been around for quite a long time.

So the league has been around for over 20 years. In its current form, it's about 12 years old, And so when we, my family bought the league back in late 2009, it was kind of more of a quasi-adult professional league. So teams were $50,000 just for points of context. And now teams are trading $50 to $70 million. So we've come a long way in 10 years. But excitingly, I think we're just early on in where we can go. And I think soccer is early on in where it, you know, where it is as a sport. Right.

I mean, globally it's the most played and most watched sport in the world, right?

For sure. And that is now coming to the United States in a big way. I think from, you know, you go into a bar on a Saturday morning, afternoon, you see the Premier League on. And so now a lot of millennials and Gen Zs, they played soccer growing up. And so now they're coming in and starting families. And so I think that generationally is a big factor, but also you see it in pop culture, right? Where, you know, Hulu has a new show, Welcome to Wrexham, Apple, you know, you kind of go down the line, Amazon. Where they're really, you know, showing soccer. And I think that's also increasing the exposure that people have to the game. And that's translating down into attendance at the USL, MLS, and NWSL level. And I think, you know, really exciting when we look forward to 2026, when the World Cup is coming to the United States, you'll see just the massive The massive rise in the game compared to 1994 when we had the last World Cup here, which was brought here specifically to kind of launch professional soccer in the States. And from then, from then to 2026, just in the USL ecosystem, we'll have over 100 professional clubs. So it's exciting. And Most importantly, you know, for our investors, that popularity is translating into asset growth year over year for them.

How many teams are there currently in the USL?

So between our two divisions, we have 36, and we'll grow that to around 75 on the men's side and then 30 to, you know, 75 on the women's side. About 90+ percent of those clubs on the women's side will also have a men's team with them. So it's not, you know, we have crossover there in terms of markets. But, you know, again, the exciting part is we have fan interest, which is translating into investor interest and investor return. So there's, as a sport, for any sport to grow, there has to be investment. And for there to be investment, there has to be the return profile. And so we've kind of crossed that chasm of, you know, showing consistent returns and outsized returns that's leading to more and more investment. Which is great for the sport and great for the fans.

So talk a little bit about that model. You know, how, how do you generate returns, right? And how do you decide, you know, when a team is created and where it's created and how it kind of breaks down the model a little bit?

So the model has a couple of different components at the early stage, which is kind of where we are now until about 5 years from now. The significant majority of the income comes from, you know, let's call it the four-wall revenue of tickets, sponsorship, concessions, parking, merchandise. But as we look 5+ years from, you know, 5+ years from now, then we start to activate the revenue streams that the more mature properties in the United States and soccer clubs abroad have. So that's media, sports betting, and player transfers. And so that, that is about 5 to 10 years away in a meaningful way. And then within the USL model, like, like other sports, but we have, I think, a larger opportunity and definitely in terms of number of projects, we also have the real estate component. And so we really think of our, our stadiums as anchor for an entertainment district. And we're able to, you know, really develop these districts, you know, in a very profitable way, but also in, and equally important, in a way that really enhances the overall fan journey, which makes the team better and, you know, more attendance. But more importantly, again, it's that journey. Before, during, and after the game that we can create value. Within the real estate component, we, it's, you know, these entertainment districts, you know, really create differentiation. So whether it's an apartment building, a hotel, office, there's a lot of apartments in a city, but very limited number that overlook a stadium. And so we can, you know, really create differentiation, which increases the demand and the price for those units, which again makes the economic model for the owner very, very positive.

That's really cool. So that kind of plays into your title of Chief Real Estate Officer, which you don't immediately think of for a sports league. But so you guys are basically taking, when you're building a stadium, you're not just doing a kind of singular development here, you're actually looking at the whole surrounding area. What can we do from a residential standpoint? What we can do from a retail standpoint and actually draw more people to it so that the experience is more than just like, to your point, inside the four walls. And so are you actually developing the apartments or multifamily, for example, or the other mixed-use part of it, or do you sell that off to other developers or what's, how do you kind of do that?

So for historic, you know, now analog, think of a department store around a mall, right? And so that's how you drove the traffic around. And in this case, in the present-day analog, what we're using is the stadium as the way to bring in traffic every day. And so we program it with men's soccer, women's soccer. Later on, we can look at lacrosse, rugby. Concerts, festivals, graduations. We really, you know, think a lot about how to program the stadium. Then in terms of your question, the development around the stadium can take a couple different forms, but it is really important to have a degree of joint ownership because that enables the, you know, the project to do things that wouldn't be possible in fragmented ownership. And what I mean by that is, you know, take a concert for example, where if you have fragmented ownership, the stadium operator really has to have strong economics within just the concert to make it work. If you have a holistic joint ownership, you can bring in a concert that, you know, is breakeven or makes a little bit of money on an operating basis, but it generates 10,000 people for the bars, restaurants, hotels, you know, around the project. And so that's what we really like to, you know, have that cohesive ownership mix. But depending on the project, they can take different forms. Yeah.

So do you typically own the real estate then when you come into it? Like, let's just say, take an example, because you mentioned Colorado Springs, which happens to be where I'm located. And I know right where the stadium is and it's really, really cool looking. It's like to see that thing spring up. So you guys bought the land or do you lease the land on a long-term lease or what? How does, how does that work? And I know it may not be the same everywhere, but what's your, what's your typical model? Like what, what happened in the Springs, for instance?

So as you said, we have about 40 active stadium projects and everyone is a little bit different, but taking Colorado Springs as an example, There, the team, you know, on the south side of downtown really saw an opportunity for transformational development. So they started with the stadium, which opened up about a year or so ago. And now you'll see, you know, $500+ million of multifamily development that is, you know, being developed by one of the owners. Of the club around the stadium. So again, it's something that we think a lot about is, of course, again, it has to make money for our owners, which it does. But we're equally excited about the fact that our projects are resulting in really transformational development in our communities. And so it's, it's that when it's a win-win, That's what gets our city partners really excited. And that's what the benefit has the community. Our teams are community assets in a lot of ways. And so when we can bring that, you know, triple bottom line to our investors, that's what gets them really excited.

Okay. So again, the team though owns the actual real estate that the stadium's built on. Is that right? So is that one of your criteria when you're, when you're looking at a, at a city that, you know, we want to be able to find a, you know, the right property that we can own and build stadium and do the synergistic stuff around it? Or, you know, what kind of goes back to Ben's question, what drives the decision on where to promote and try to start a team?

So when we look at potential projects, the stadium is the central starting point that we have to look at, right? It's a, you need a stadium to have a team. Then when we look, you know, phase 2 is how do we enhance the fan journey and how do we create the economic structure to support the stadium? The larger the project, meaning the stadium plus the ancillary development, and a lot of times the easier it is to actually finance the stadium because of TIF financing and other tools that can generate the revenue to support the bonding on the stadium. And so additionally, the larger the project, the more economics that our ownership have, the more that, you know, they typically will want to invest into the stadium, which creates a better stadium experience, which creates more economics, right? So it is a flywheel effect, but that's why, you know, we really have to, you know, think and study the markets and work with our city, county, and state partners to identify that, that, that real estate. Additionally, you have opportunity zones and other, you know, type of tax incentive zones that can— it doesn't make a bad site a good site, but it can make a good site a great site. And again, we have to think about holistically. At the end of the day, it is a business. But for owners, the more of a business, the more that we can make the business case, the more that they'll want to invest in their communities, which has a positive effect on the overall valuation of their clubs because of the revenue drivers that can be built into our stadium infrastructure.

So how does this kind of play into the landscape of kind of soccer in the States here. So we have the MLS and obviously they're in a lot of kind of major metros. So are you guys targeting, you know, smaller metros, tertiary markets? How do you determine, does it have to have other sports teams or you want to go after a market that has no sports teams and kind of build kind of a grassroots kind of following? How do you kind of look at a market and where do you kind of fit into the system, kind of the broader landscape?

It's a great question. And when we, uh, when we acquired the league, uh, back in, uh, late '08, '09, there was an education process because at the time in the United States, there was only a major league and minor league construct between leagues. And so we wanted to, um, have a different, uh, system and soccer has unique factors. That enable us to do that. So for example, our teams, the USL teams, play the MLS teams in a tournament every year. That dynamic doesn't exist in, in baseball, basketball, football, hockey. And not only do we play them, but we're very competitive on the field. The final is actually coming up on September 7th. and it's an MLS team versus a USL team. And so, we're competitive on the field and we're very competitive off the field. They, the MLS, you know, have great people that work there and great clubs. They're doing a great job of really growing the game in the United States. But we are, as a league, we're touching more markets. They have, generally speaking, larger stadiums. But in aggregate, when we get up to, you know, our 75, 80 clubs, I think we'll have, you know, we'll be very competitive in terms of number of tickets, for example, sold. And so I think we're both playing our parts. And at the end of the day, the more people coming to professional soccer in the United States, Makes the sport better. And so when in terms of looking at markets, they're generally speaking going to be in the top 30 markets. We will have teams in those markets as well, but we will also have teams in, you know, markets 30 through 100. And there really isn't that we see correlation between your traditional metrics of household income, population, corporate base and the success of a team. So as an example, New Mexico United, who, which play in Albuquerque, New Mexico, had no history of soccer. And, you know, New Mexi— New Mexicans like to say out of 50 states, they're 51st in everything, those traditional metrics. And so, but despite that, their first season, you know, they're doing 15,000, 16,000 people a game. Outdrawing many MLS teams. And that's just because that's how big the stadium was. So they're in the process of building their own stadium because they're playing in the minor league baseball stadium until theirs is built. But again, that shows the, I think the passion, the excitement that markets have for a team that represents them across the country. And that's where, you know, we, we, I really believe, and as we are showing, there's a pathway to do this in, you know, 80 markets. And I think it's very relevant for this conversation because, you know, the traditionally is, again, as you say at the top, there are only, you know, 32 NFL teams. And so those are all owned by billionaires. When we can democratize that and our price points are lower and we feel because one, because we have a lower starting base, but because of the revenue generation opportunities that we have and that those businesses are more mature from a return threshold, we think that, you know, for investors that we can give them access to professional sports. At a lower price point with, you know, the upside and asset class exposure that, you know, billionaire investors have at the top 5 leagues.

Yeah, that's really cool. Talk a little bit about, we mentioned at a previous call we had just about the concept of selling players, right? Which is not something that really any other sports leagues have as kind of a way to create monetization channels. So talk a little bit about that, that whole concept and how you kind of create value by nurturing and growing these players.

So it's a really interesting concept, right? So in other American sports, you trade players. That concept doesn't exist in soccer. In soccer, you buy and sell players. And so the leagues with the most money, they pay the most for for players, of course. And so in, in Europe, uh, the Premier League, which, you know, a lot of people are familiar with, you know, players will go from, you know, uh, you know, player on the bench will cost $10 million and players go to the hundreds of millions of dollars. And so what's really exciting, um, with the USL is that we have, you know, we believe United States has some of, if not the best athletes in the world. Historically, we haven't developed them right for soccer, uh, for a variety of reasons. Uh, one being that we haven't had a league for them to play in. They went to college, then they turned pro. Uh, but that's, you know, way, way too late for the, the sport of soccer. That's changed now. And so, uh, our clubs in our markets now, uh, are, are having first-class academies. And so they're going to be developing professional players that they can then sell on the world market. And so we had our first $750,000 transfer a couple months ago. And we think that we'll have our first million-dollar transfer by the end of the year. And so that will start escalating very quickly. That is a major future revenue stream for our clubs in Europe. So even outside of the Premier League, player transfers can be 30 to 50% of their revenue. And so for USL right now, because of the reasons I just mentioned, it's very small. But if we can start approaching those numbers and you have, you know, one really good player every 10 years, we're talking, you know, very, very significant new revenue coming into our clubs, which is, you know, very exciting from an investor perspective.

Yeah, very interesting. So going back to what you said earlier that you have 40 different stadium projects under development right now, I mean, that's way bigger than I thought this was. I mean, how do you, how are you managing that and how are you kind of, again, you talked about how you identify you know, the, the top 100 markets, but then how do you create kind of that groundswell movement, both from an investor standpoint, a fan base standpoint, you know, kind of creating these almost farm leagues and academies like you're saying. I mean, it, that's a lot of, a lot of work it seems like. I mean, how do you, how do you go about like in each of those markets creating that, that groundswell?

So again, with, with that many number of, of projects, there are a lot of different ways, but What we've done, and you know, again, hence the real estate part of my title, is we tried to approach this opportunity to grow the game of soccer in the USL in a very different way. And that is that we have a large real estate team at the league that we go out and we'll work for 4, 5, 6 years in all these markets to find the right piece of property, to work with all the local stakeholders and work on entitlement zoning and the myriad of other, you know, kind of logistical aspects of making a stadium entertainment district a possibility. So that's what we do in many sites, in many markets. In certain markets. And we work with, of course, just naturally a lot of real estate developers or people who have an interest in real estate development that have access to land that they'll come to us and say, hey, we like the thesis of soccer. We like the thesis of professional sports, and we like combining sports with the traditional asset class of real estate. And so let's combine forces and then we'll work with them to whatever degree that they need us to because building a stadium, you know, has unique aspects to it even for experienced developers. But we can lend our expertise and work with them on that journey to get a stadium project over the line. And so, and then Cities, counties, states, those partners, our municipal partners, are also coming to us and saying, we see the transformational development that USL is bringing to markets. We have this piece of land, we have this historic structure that we don't know what to do with, but it's great real estate and we want to activate our downtown. Is, can we, can we work on bringing a USL team to, to help us do that? And so, you know, our, our scope of, of sourcing projects is, is different in every market. But that's what makes it so much fun. And we, we, we, we, we do have a lot of airline miles because we're, we're traveling probably 3 weeks a month, but it's so exciting. We just announced. Our latest project yesterday up in Jacksonville, 2 weeks ago was, you know, a $400+ million stadium-anchored development in Rhode Island. And you'll see a couple more in the coming months. So it's just really the most exciting time to be in soccer and get to work with these amazing communities all around the country.

Do you have a cap, a number of, and maybe you're not able to share this, but you know, I mean, you can't have a league with 300 teams in it probably efficiently, because then it becomes hard to sort out the rankings and all that. But I mean, I don't know anything about this, so I'm just a totally green question, but yeah, to me, I mean, so you're at 30-some teams now and in 5 years expect to be at 70 and you've got 40 projects in the wings already. So I mean, is that pretty much it? Are you setting a cap? Like, no, once we hit this number of teams, That's it. The league's closed, or how does that work?

So I think we'll probably end up in that 70 to 80 number of markets. And again, the women's side, most of our women's professional clubs will be joint. So in Jacksonville, they're doing a men's team and a women's team. However, not all of the 40 will work for a variety of reasons. Maybe the zoning doesn't get approved. However, you know, that's what we're thinking. We have two men's leagues and a women's property. And so we'll have about 35 in each. That's where we want to be. But, you know, again, we, every month or so, you know, a new potential opportunity kind of comes online for a variety of reasons. And so it's that, that's what makes it fun. And again, the really for, for these types of projects to happen, all of the stars have to align. There's always another election coming, you know, within 6 months it feels like. So, you know, if, you know, if we find the right local partners that, you know, really care about the community, that, you know, have a great piece of property, that we can have really transformational impact on, those are the properties we like to look at. And again, we have a lot of examples around the country of how we've been able to achieve that.

Do you have a sense of directing the, spreading the teams across the geography so that, or is it strictly let the market drive it? I mean, if you have, 5 cities in Houston, in Texas that say we want teams and it's compelling and it's feasible and they're ready to go. I mean, would you do 5 teams in Texas or would you say no, we really want, we really want to want more geo spread on this to, to, you know, spread the reach across the country? Or is that, is that your business or is it not your business? How do you approach that?

It's a great question. And I'll answer a couple of ways is we, we are a National League already, so we, we have true National League footprint, but we also really like regional aspects in particularly regional rivalries. And so that what one differentiating factor that we have from the MLS, for example, is that we have now, and especially when we get fully rolled out, we will have very significant regional rivalry games. And so looking at Europe, for example, where every country has its own league, which makes them more geographically compact just because they're smaller, the countries are smaller geographically, you naturally have those regional rivalries, which makes games really, really exciting. That's what we can replicate here in the United States. And not only from an investor perspective, it's great because those games sell more tickets. They have a higher viewership, which has a higher media deal, but they're also cost less because they're typically, you know, a bus game rather than a flight game. And so it really, you know, makes that come together. And then what we're also looking at is ways to really enhance each game, you know, the game of consequence, right? So when we're, we, we have two leagues, but what we're looking at is rather than, you know, for example, have, you know, the, the, the midweek match early in the season, let's maybe look at having an Interleague Cup where, you know, for example, Lexington is a new club that we have in League One. Louisville is a great team we have in Championship. Let's have an Interleague Cup where, you know, Lexington plays Louisville and all these other regional rivalries around the country that they're playing for, you know, for a tournament. We have that in the Open Cup, which is where League One plays Championship plays MLS. So we're constantly really evaluating How do we make the consequence of the game higher, which piques fan interest? And there's a lot of cool things that we're working on to really elevate that consequence in the coming years.

Very cool. So are you generally partnering with larger institutional investors to fund kind of the equity portion or family offices, or do you also work kind of with high net worth or accredited investors for portions of, you know, the equity? Or how does that kind of work from the financing side? Is there opportunity for, you know, say a high net worth to be able to invest in a team that's maybe in their local city and all that?

I'd say professional sports investors, we at USL, we think we can democratize it. That said, this is still an investment for high net worth individuals. Largely speaking, we do have some fan ownership portions that they'll break off. But generally speaking, you know, this is still a high net worth individual type of investment. So we work with, you know, family offices, with high net worth individuals directly. On the team structure itself, on the ancillary real estate, That's where you have more diverse capital sources. And so, you know, as Jim mentioned, and, you know, for each asset class is a little bit different because of the financing that's different between an apartment and a hotel, for example. But, you know, for in the hotel space, there are a lot of operators, national operators, regional and super regional operators that, will own and, or that will manage the hotel for one of the flags. And in that case, some of that might have a different ownership, some different investors than the team. But generally speaking, we would like to be some common commonality, even if it's not proportionally the same as the team. Because of a lot of factors, you know, the team owner might already have enough exposure to hotel or to multifamily. So they want to, you know, keep more of their exposure in this case to the asset class of sports.

Got it. So the teams themselves may be a higher, you know, level of investor or have, you know, more net worth generally. But then on the ancillary kind of real estate and development, there's opportunities. Like what's kind of a minimum investment if you even have one on like the team side of things for if there's a high net worth individual, you know, is it $5 million? Is it $500,000? Is it way beyond that?

You know, it is a great question. It does vary. One thing that we have made a very concerted effort though is that we do really like groups as our team ownership. Not for the money, but because individuals bring different relationships, different expertise to the table, and they become, you know, if you have 1% or 20%, you generally speaking are, you know, level of fandom and the being an ambassador for the team is equally there. And so what we've seen more and more of, and what we're encouraging from the league office, is to, you know, bring in people at lower equity percentages. But that enables us to do, you know, six-figure type of, you know, we can have six-figure type of pieces that we can break off for ownerships. Again, there's so many just different levels, whether it's the team. Typically we have the team in the stadium together, but whether they break off the ancillary real estate and how big the ancillary real estate is, that would force effect the check size. But generally speaking, in the mid-six-figure range, someone can participate in one of our teams at a smaller level. So again, it does democratize, you know, that, you know, access to professional sports.

Very cool. Well, Justin, this has been super, super fascinating and definitely I feel like I got an education hearing about this and obviously very exciting about where it's going. You know, definitely can sense the excitement from you and obviously the kind of development in the pipeline is indicative of, you know, some pretty cool growth and movement there. What's the best way for folks to kind of get on a mailing list or hear about these upcoming announcements and even potentially participate, you know, in learning about the actual opportunities themselves with USL?

Of course, you know, our social channels will follow all of our public announcements. But if, you know, if, if, you know, one of your listeners really want to learn more about the space, contact my team, Dan Holman, Matt Rita, Chris Bjorgen on our real estate expansion team. Please reach out to them and, you know, love to, you know, have a conversation and see whether, you know, USL is right for their portfolio and their market.

Great. We'll put some of that in the show notes for those that want to Check it later. But Justin, thank you so much for coming on. This has been really fun to have you and share about your expertise here.

Thanks for having me.

Awesome. Well, that was a really fun interview. Definitely. I learned a lot and pretty cool what they're doing and really both from the standpoint of finding the different markets, developing kind of these entertainment districts around the stadiums and really creating new monetization models for their sports teams. And so it's, a cool kind of thing that really seems kind of for the elite investors of the, the ultra billionaires of the world to be able to own sports teams, you know, but there is a way that they're really trying to bring this more in a democratized way to more investors and really kind of creating interest from local investor groups. So very cool. Again, obviously we're not promoting them. We haven't reviewed any of the investment documents or anything. So do your own due diligence if that's of interest to you. And again, we do appreciate you listening to this show. If you are interested in finding out about the latest investment opportunities that we have with our private equity firm, Aspen Funds, you can go to our website at aspenfunds.us and you can find the investor club list. Sign up for that list and you'll get first access to our deals before they go live to our broader community and investor base. So thanks again for listening.