December 21, 2024 • 23 mins
On this special bonus edition of the Bloomberg Business of Sports, Velocity Capital Management founding partner David Abrams and Texas Permanent School Fund CEO and CIO Robert "Bob" Borden detail the latter's recent anchor investment of $200 million into Velocity’s flagship Opportunity Fund. They also react to the news of legendary NFL coach Bill Belichick agreeing to terms with the University of North Carolina Tar Heels, and what it signals about future investments in the college sports landscape.
They speak with hosts Michael Barr, Scarlet Fu and Damian Sassower.
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Episode Transcript
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Speaker 1 (00:00):
Thanks for joining us on the Bloomberg Business of Sports,
where we explore the big money issues in the world
of sports. I'm Michael Barr, along with my colleagues Scarlett
Fou and Damien.
Speaker 2 (00:10):
Sassou and NFL league owners approve the sale of two
teams selling ten percent stakes to private equity firms.
Speaker 3 (00:16):
That's right, Scarlett. The Buffalo Bill sold a ten percent
stake to Arctos Partners and the Miami Dolphins sold the
ten percent steak to Ares Management.
Speaker 1 (00:23):
And we're expecting a lot more similar moves down the
road as more private equity firms look to get a
foothold in sports. Here now to take us through the
growth of private equity in sports is Velocity Capital Management
founding partner David Abrams.
Speaker 2 (00:39):
We're also joined by Texas Permanent School Fund CEO and
CIO Bob Borden, who recently invested into Velocity's flagship opportunity fund.
Speaker 1 (00:48):
David, Bob, Welcome to the Bloomberg Business of Sports.
Speaker 4 (00:51):
Thank you for having us.
Speaker 1 (00:53):
I'm going to start with David if I may, the
Velocity Capital Management founding partner. This must be great news
because we're going to see more and more of this
of the capital of the small equities coming in and
(01:13):
eventually maybe we can afford some of these big old two, three,
four billion dollar teams.
Speaker 4 (01:21):
Well, we are both humbled and grateful for our partnership
with Bob and the Texas Permanent School Fund Corporation. Bob
will talk a little bit about our history and some
of the things we've done together, but we really believe
that this is the first time that we've seen where
an institutional allocator has said, we don't want to just
(01:43):
invest in a specific fund and be in private equity
or credit, but we want to build a platform to
take advantage of the disruption and commercialization we're seeing across
the broader entertainment, sports, and media ecosystem. With the partnership
we have, we think that we can be you know,
(02:04):
of a you know, an operationally intensive partner for the
middle market, which where we believe there's you know, the
most attractive risk adjusted opportunities.
Speaker 2 (02:15):
So, Bob, let me bring you into the conversation. What
have you seen take place in this sector that convinced
you that you want to bring the Texas PSF into
this part of the business. Was it a specific deal,
was it a specific sport well, you know, when I look.
Speaker 5 (02:31):
At it, over a long period of time, you know
this this.
Speaker 6 (02:34):
Really evolved from you know, franchises that were owned by
dynasty families for decades on ends, and really the revenue
sources were primarily around you know, cable television contracts.
Speaker 5 (02:47):
And now we have a brave new world of all
kinds of.
Speaker 6 (02:51):
Delivery of the experience, not only through media and streaming,
but through surrounding entertainment and functions broader around the entire
sports event. And it's really a disruption of an ancient
model that is creating a world of opportunity. And it's
(03:16):
it's still in its nascent stages of you know what,
what are ultimately going to be the best mechanisms to
monetize the entire experience. And David's assembled a top flight team.
And David and I have experienced going back to the
(03:36):
Great Financial Crisis, that has given me great confidence in his.
Speaker 5 (03:39):
Ability to execute. And you know, I think that it's it's.
Speaker 6 (03:45):
A good time to to really assemble teams and back
them with capital while there is this consolidation opportunity in
this sector.
Speaker 3 (03:56):
Well, Bob our audience, we know David all too well.
We know him from Harris Blitzer an apollo. I mean,
forget about David. We want to hear more about you,
and we need to bring you in properly. You're the
CEO and CIO of the fifty two billion dollar Beast,
the Texas Permanent Fund, and you're investing in a sports
focused private equity fund. And I'm going to pitch yourself, well, Bob,
I really am here, Collar Capital saying eighty one percent
(04:18):
they surveyed one point nine trillion in assets under management
pension funds like yourself. Eighty one percent reported the risks
of sports funds are too great, too great to invest
in these trophy assets as you put them. Talk to
us about what makes Velocity different in your mind?
Speaker 6 (04:33):
Yeah, well, yeah, the risks of doing it with the
wrong team are certainly high. And I that's not a pun.
I mean the you know, the wrong management group. You know,
this is somewhat analogous to the early days of you know,
internet search engines, you know, and there was a lot
of viable ideas and competitors, but you know, once the
(04:57):
industry really coalesced, you know, you had two or three
obvious leaders. It's also a very bifurcated industry, you know
where at the very you know top, you have these
you know, multi billion dollars you said earlier, two or
three billion. I think the check sizes now are going
to be five to ten billion for certainly for NFL franchises.
(05:19):
And that's hard to play in because you know they're
big checks and very liquid. But all of the infrastructure
in and around major sporting events has got a great
opportunity for consolidation and scale, and you know, Velocities put
together a really good team. My experience with David dates
(05:42):
back to the financial crisis and really exploiting the opportunities
and non performing loans in Europe, and I saw the
way that he and his team were able to execute.
And knowing that in that interim time, you know, he
was a key figure running the Harris Splitzer enterprise, I
(06:07):
think it is really positioned him well to capitalize on
this opportunity set. And in my mind, you know, the
risk is involved in you know, backing the wrong team
or some some firm that's trying to do this just
as an adjunct to other things they do, or in
(06:28):
a more you know, really venture fashion and you know
this this kind of mid market area. I think is
where the risk adjusted returns are very attractive, and you know,
we're investing in teams that have deep experience and you know,
have some traction, and really what we're doing is unlocking
(06:50):
their skills by trying to solve the capital puzzle for
them so they can focus on value creation more than
capital raising.
Speaker 3 (06:59):
Well, Bob, I think he hit nail on the head here.
You're not buying a sports franchise, per Se. You're buying
into Velocity in their holdings like Perrella, Motorsports, Elevate. David
tell us a little bit about what's going on with
X games, some of the you know, portfolio holdings, how
the fund is structured, and you know what whise ahead.
Speaker 4 (07:14):
Well, I think Elevate is a perfect example of this
partnership and why we're so excited. There was some news
out the other day about both Velocity and Texas Permanent
School Fund and Levy putting significant capital on the balance sheet.
But I think one of the big differentiators of this
partnership is how Texas Permanent School Fund is not just
(07:39):
a typical asset allocator. And the reason they'll bring that
up is we have the ability to provide holistic solutions
to various intellectual property rights holders. And if I think
about Elevate, you know, one of the big initiatives for
us as a company is what the disruption is going
to lead to and colle athletics, and so there's lots
(08:03):
of different ways to figure out how to work with
the university, whether it's the NIL space, whether it's helping
build the stadium, whether it's helping monetize their ticketing inventory.
Elevate can do a lot of different things, but Texas
Permanent School Fund can provide capital that's private equity oriented, credit,
real estate, and do let Bob talk talk about the
(08:26):
last point, which is the name Permanent is there for
a reason because it's permanent capital where you can hold
an asset for thirty years. There's very few examples of
other investment firms who had access to that capital, and
that allows us to solve problems for rights holders. Bob
(08:48):
will let you talk about why we're so excited about
that aspect of the partnership.
Speaker 6 (08:55):
Well, you know I was mentioned earlier, what you know
our peers do of the largest educational endowment in the
country and actually knocking on sixty billion today.
Speaker 5 (09:07):
The lessons that.
Speaker 6 (09:10):
I learned over the years when you've got you know,
good partners and investment firms, and I think that you know,
we're where my peers have you know, left a lot
of meat on the bone. Is putting everything in boxes,
you know, hiring talented firms to manage one, you know,
very narrowly defined aspect of the fund, and you know,
(09:32):
kind of report back on that. And I found that,
you know, there's incredible talent at some of these firms,
and they're doing a lot of interesting things, not just
the little slice that you may have hired them for.
And necessity being the mother of invention. In the mid
two thousands, I was tapped to run the South Carolina
Investment Commission. It was thirty five billion dollars and I
(09:54):
was hired and given an attorney and an admin and said,
build a cutting edge endowment style pension solution. And I
realized that we were going to have to really leverage
partners a lot more than have traditionally been done, and
by providing more free form capital that can be put
to use, and not only in funds, but in co investments,
(10:17):
direct investments, both in debt, inequity and real assets, seating platforms,
ET cetera. A much more fungible form of capital that
makes you a true partner with that group is a
key to success there. It's a way to access a
(10:37):
lot of opportunities and using those lessons along with the
experience that I had with David, you know, I see
this space as ripe for development.
Speaker 5 (10:50):
Consolidation is almost you know, a late stage word.
Speaker 6 (10:53):
You know, this is still very nascent in some of
the technologies and other services in around entertainment, just not
only the hospitality, but you know, the branding and naming
rights and a lot of these things. And those who
who figure it out and can do it at you know, reasonable.
Speaker 5 (11:13):
Scale, you know well, will.
Speaker 6 (11:16):
Come out ahead. And so what we want to be
able to do is have this fungible capital to back
a variety of opportunities that come out of the greater
Velocity platform, of which I expect and are already seeing
evidence that they're going to be numerous.
Speaker 2 (11:31):
So, David, can you give us some more of an
idea of what specific opportunities look like as we head
into twenty twenty five. I think about the college space
because Velocity focuses on middle market companies, so we're not
talking NFL teams, right, that's no longer middle market. But
if you're talking about businesses or opportunities within college athletics,
(11:52):
obviously that space is growing by leaps and bounds. You
have Bill Belichick, who led the Patriots to multiple Super
Bowl victories, now join using the United Excuse me, the
University of North Carolina's football team. College athletics is becoming
more and more professionalized. It's no longer going to just
be middle market anymore.
Speaker 4 (12:09):
Well, I think the Belichick announcement is interesting, but it's
a lot more than just hiring a football coach to
build the football program.
Speaker 2 (12:20):
You and c is what do you see then, starting
with Bill Belichick joining UNC and how what kind of
opportunities does that open your eyes up to?
Speaker 4 (12:28):
Well, I think it's a perfect example of like you said,
college athletics this you can use it. We're professional sports,
but they're entertainment and media businesses. It just so happens
that the talent is also going to get a college
education at the same time, Bill Belichick is away for
North Carolina to build a global brand which will attract athletes,
(12:53):
which drives the revenue. Generation of the intellectual property rights
of university and North Carolina. So when people want to
come to North Carolina, now it's I get access to
one of the most successful NFL coaches of all time
his network of contacts around the world. So if I'm
coming to play, they have a fantastic women's soccer team,
(13:16):
I'm going to get access to Bill Belichick. Maybe you
can't build my brand even And that is where college
sports is going. You just saw the example of what
happened at University of Michigan, where all the resources was
Tom Brady and Dave Portney were put into attracting talent
for the university. It's the same exact reason why this
(13:36):
happened at North Carolina because it's a way for them
to present an opportunity to talent that other universities can't match.
Speaker 1 (13:47):
I want to go to I know we're running out
of time, but I want to go to something that
Bob said if you can explain more of it, you
said Velocity needs operating partners while the school needs capital partners.
Can you explain that more.
Speaker 5 (14:02):
Well.
Speaker 6 (14:03):
Our purpose in life is to provide a perpetual stream
of earnings to fund public education in state of Texas.
We're one hundred and eighty year old enterprise that was
founded at the beginning of the dawn of the state
of Texas, so as pivoted from a republic, and the
(14:25):
founding fathers of Texas had the foresight to say, education
is going to be critical for the state's success, and
we're going to set aside a lot of the large
s that we've acquired in the form of millions of
acres of land that presumably, you know, you could get
revenue from timber or cotton or cattle grazing. Little did
they know a great majority of that was sitting on
(14:46):
top of the Permian basin and has been a perpetual
source of cash inflows. We are able, therefore to you know,
invest with a very long term view of you know,
creating franchise value over time. I think one of the
(15:08):
problems in the industry of institutional investing for pensions and
endowments has been the fund format that you know, has
a ten year contractual life, and you have these great
entrepreneurs that are building platforms that are creating enterprise value,
but a bar around year seven or eight, you know,
they're kind of forced to go sell the firm to
(15:28):
monetize it, to you know, get everybody liquid and that happens,
you know, regularly for firms you know that might have
forty to fifty year plus lives, but you know every
seven or eight years are having to go through a
liquidation event. That's a distraction, that's a huge cost erodes
a lot of enterprise value, and being able to invest
(15:49):
with a much more open ended view is an advantage
for both, you know, the capital provider and the investment partners.
Speaker 4 (16:01):
And Bob, I want to expand on that. You know,
one of the areas about this partnership is that because
of this capital and the connectivity with Texas Permanent School
Fund the State of Texas, we can actually drive value
for our portfolio companies that I've never been able to
see in this industry in in my past. So I'll
(16:21):
give two examples. The Amian related to what you asked
about the portfolio. So, we are the controlling shareholder in
a location based entertainment business called camp which licenses intellectual property.
It's really for young children and families, and we're opening
our second location in the state of Texas in Houston
in about a month. Well, the Texas Permanent School Fund
(16:45):
Corporation sole purpose is to provide funding for the K
through twelve school system in the state.
Speaker 2 (16:51):
Of Texas Synergy.
Speaker 4 (16:54):
I have done this for a long time, and when
I worked at Apollo, we had some unique competitive advantages.
I put this at the top of the list. Second example,
talking about the disruption in college athletics Elevate, which is
an investment that both ourselves and Texas Permanent School Fund
have a large stake in. And if you recall when
(17:16):
I was at Harris Splitzer Sports, I was part of
the group that founded Elevate eight years ago. And so
the college space is one of our biggest initiatives. We
have a very big secondary ticketing platform, one of the
biggest in the college football space. So we work with
the rights holder UNC for example, and help them monetize
(17:37):
their tickets primarily football or basketball in the secondary marketplace. Well,
given what's happening in college sports, ticket is a piece
of inventory, It's an asset they're trying to sell to
bring talent in to grow their metia ites. Well, imagine
if you could walk into university and say this has
(17:57):
been great to do this year over year, We'll give
you X amount of dollars for the right to monetize
your tickets over the next decade. There's very few organizations
that could compete with what we are willing to offer
to universities because of Texas Permanent school funds capital.
Speaker 3 (18:19):
You know, you know, Michael bar I got to just
say it's amazing that Bob Borden didn't come to New
York State features Retirement System because then, David, I mean,
then we'd be getting some like Yankee fans, Jet fans instead.
It's gonna Ben, it's gonna all go to Texas. It's
gonna be to go Daryl K. Royal, you know, Memorial Stadium.
I mean, it's gonna be right in their backyard. And
we lost it. We lost it up here.
Speaker 1 (18:37):
Well, see now, Bob, this is when you can like
set the trend man and help come on up. You
know right now, Dabie and Scarlet and I we're gonna like,
you know, invest in like marble racing and that's about it.
But see, you guys are really setting the trend here.
Speaker 6 (18:54):
We have a couple of ke people on our staff
from the New York Retirement System and my president and
Deputy Chief Investment Officer, Stu Bohart, was former president of
Morgan Stanley asset Management and partner at Fortress. So we're
we're bringing, we're recruiting.
Speaker 7 (19:10):
From New York, I can tell you that. But you know, yeah,
and you know, we have a we have an ace
in the hole with uh no income taxes in our state.
Speaker 6 (19:22):
He Uh. The David didn't mention that this activity on
monetizing tickets is already something that Elevate has been doing
with the University of Texas and Texas A and M.
Speaker 5 (19:34):
So you can connect the dots there.
Speaker 6 (19:36):
Uh, and you know, to say the NFL is maybe
too big of a ticket, there's still a lot surrounding that,
you know, where Elevate was responsible for the naming rights
for the change from FedExField to Northwest for the Commanders now.
So that's just an example of there's an entire opportunity
set in and around those franchises for boarding services that
(20:03):
you know, has incredible growth opportunity and if you can
scale it, you know, I think the success becomes success.
And let's be frank. You know, college football is now
professional football. It's and it's different than any other It's
not a feeder league or farm team like you think
in baseball. You know, arguably college football's popularity and eyeballs
(20:30):
and you know, just loyalty is on par and perhaps
even higher the NFL. So it's just phenomenal. You know,
once in a generation opportunity to you know, figure out
ways to roll out, you know, a holistic entertainment and
promotional solution for college sports. And you know, folks like
(20:52):
Bill Belichick realized that for sure. So this is a beginning.
We're on the front end of I think a new frontier.
And you know, college athletics and you know, Velocity and
Elevate and others are well placed to take advantage of that.
And we haven't talked about and I know we have
time constraints here, but you know in the motorsports world
(21:15):
that things like putting perrella motorsports are involved in, and
Elevates involved in the promotion of Formula one in Texas
and Moto GP in Texas. And we have this first
class facility, the Circuit of the Americas, which has hosted
Formula one in the US, you know for now fifteen
seventeen years, I think, and was responsible for bringing Formula
(21:35):
one back to Texas.
Speaker 4 (21:37):
Bob's not telling you that he in his spare time
is likes to race. I think that might be for
the for the next discussion.
Speaker 6 (21:45):
Yeah, it's bubbling up.
Speaker 1 (21:49):
You got a fellow motorhead over here. Man, really, what
is your favorite? Man? If you you know and you
get in the car.
Speaker 6 (21:57):
Oh boy, well, my favorite form of sports.
Speaker 1 (22:02):
My favorite car? O, favorite car? Favorite car.
Speaker 6 (22:04):
Okay, I've had over one hundred my children. We can
answer this question. You asked my third grade er, what's
your dad's favorite car? The next one?
Speaker 1 (22:15):
We run a full service show, folks man, no half
step in here, David, Bob Man, what a pleasure to
talk to you, guys. Thank you for joining us on
the Bloomberg Business of Sports.
Speaker 4 (22:27):
Thank you for having us. We look forward to coming back.
Speaker 6 (22:30):
The pleasure is ours.
Speaker 1 (22:31):
Our thanks to both Velocity Capital Management founding partner David
Abrams and Texas Permanent School Fund CEO and CIO Bob
Borden for joining us, and thank you for joining us
for my colleague Scarlett Pooh and Damian Sasaur. I'm Michael Barr.
You're listening to the Bloomberg Business of Sports from Bloomberg
(22:52):
Radio around the world.
Thanks for joining us on the Bloomberg Business of Sports,
where we explore the big money issues in the world
of sports. I'm Michael Barr, along with my colleagues Scarlett
Fou and Damien.
Speaker 2 (00:10):
Sassou and NFL league owners approve the sale of two
teams selling ten percent stakes to private equity firms.
Speaker 3 (00:16):
That's right, Scarlett. The Buffalo Bill sold a ten percent
stake to Arctos Partners and the Miami Dolphins sold the
ten percent steak to Ares Management.
Speaker 1 (00:23):
And we're expecting a lot more similar moves down the
road as more private equity firms look to get a
foothold in sports. Here now to take us through the
growth of private equity in sports is Velocity Capital Management
founding partner David Abrams.
Speaker 2 (00:39):
We're also joined by Texas Permanent School Fund CEO and
CIO Bob Borden, who recently invested into Velocity's flagship opportunity fund.
Speaker 1 (00:48):
David, Bob, Welcome to the Bloomberg Business of Sports.
Speaker 4 (00:51):
Thank you for having us.
Speaker 1 (00:53):
I'm going to start with David if I may, the
Velocity Capital Management founding partner. This must be great news
because we're going to see more and more of this
of the capital of the small equities coming in and
(01:13):
eventually maybe we can afford some of these big old two, three,
four billion dollar teams.
Speaker 4 (01:21):
Well, we are both humbled and grateful for our partnership
with Bob and the Texas Permanent School Fund Corporation. Bob
will talk a little bit about our history and some
of the things we've done together, but we really believe
that this is the first time that we've seen where
an institutional allocator has said, we don't want to just
(01:43):
invest in a specific fund and be in private equity
or credit, but we want to build a platform to
take advantage of the disruption and commercialization we're seeing across
the broader entertainment, sports, and media ecosystem. With the partnership
we have, we think that we can be you know,
(02:04):
of a you know, an operationally intensive partner for the
middle market, which where we believe there's you know, the
most attractive risk adjusted opportunities.
Speaker 2 (02:15):
So, Bob, let me bring you into the conversation. What
have you seen take place in this sector that convinced
you that you want to bring the Texas PSF into
this part of the business. Was it a specific deal,
was it a specific sport well, you know, when I look.
Speaker 5 (02:31):
At it, over a long period of time, you know
this this.
Speaker 6 (02:34):
Really evolved from you know, franchises that were owned by
dynasty families for decades on ends, and really the revenue
sources were primarily around you know, cable television contracts.
Speaker 5 (02:47):
And now we have a brave new world of all
kinds of.
Speaker 6 (02:51):
Delivery of the experience, not only through media and streaming,
but through surrounding entertainment and functions broader around the entire
sports event. And it's really a disruption of an ancient
model that is creating a world of opportunity. And it's
(03:16):
it's still in its nascent stages of you know what,
what are ultimately going to be the best mechanisms to
monetize the entire experience. And David's assembled a top flight team.
And David and I have experienced going back to the
(03:36):
Great Financial Crisis, that has given me great confidence in his.
Speaker 5 (03:39):
Ability to execute. And you know, I think that it's it's.
Speaker 6 (03:45):
A good time to to really assemble teams and back
them with capital while there is this consolidation opportunity in
this sector.
Speaker 3 (03:56):
Well, Bob our audience, we know David all too well.
We know him from Harris Blitzer an apollo. I mean,
forget about David. We want to hear more about you,
and we need to bring you in properly. You're the
CEO and CIO of the fifty two billion dollar Beast,
the Texas Permanent Fund, and you're investing in a sports
focused private equity fund. And I'm going to pitch yourself, well, Bob,
I really am here, Collar Capital saying eighty one percent
(04:18):
they surveyed one point nine trillion in assets under management
pension funds like yourself. Eighty one percent reported the risks
of sports funds are too great, too great to invest
in these trophy assets as you put them. Talk to
us about what makes Velocity different in your mind?
Speaker 6 (04:33):
Yeah, well, yeah, the risks of doing it with the
wrong team are certainly high. And I that's not a pun.
I mean the you know, the wrong management group. You know,
this is somewhat analogous to the early days of you know,
internet search engines, you know, and there was a lot
of viable ideas and competitors, but you know, once the
(04:57):
industry really coalesced, you know, you had two or three
obvious leaders. It's also a very bifurcated industry, you know
where at the very you know top, you have these
you know, multi billion dollars you said earlier, two or
three billion. I think the check sizes now are going
to be five to ten billion for certainly for NFL franchises.
(05:19):
And that's hard to play in because you know they're
big checks and very liquid. But all of the infrastructure
in and around major sporting events has got a great
opportunity for consolidation and scale, and you know, Velocities put
together a really good team. My experience with David dates
(05:42):
back to the financial crisis and really exploiting the opportunities
and non performing loans in Europe, and I saw the
way that he and his team were able to execute.
And knowing that in that interim time, you know, he
was a key figure running the Harris Splitzer enterprise, I
(06:07):
think it is really positioned him well to capitalize on
this opportunity set. And in my mind, you know, the
risk is involved in you know, backing the wrong team
or some some firm that's trying to do this just
as an adjunct to other things they do, or in
(06:28):
a more you know, really venture fashion and you know
this this kind of mid market area. I think is
where the risk adjusted returns are very attractive, and you know,
we're investing in teams that have deep experience and you know,
have some traction, and really what we're doing is unlocking
(06:50):
their skills by trying to solve the capital puzzle for
them so they can focus on value creation more than
capital raising.
Speaker 3 (06:59):
Well, Bob, I think he hit nail on the head here.
You're not buying a sports franchise, per Se. You're buying
into Velocity in their holdings like Perrella, Motorsports, Elevate. David
tell us a little bit about what's going on with
X games, some of the you know, portfolio holdings, how
the fund is structured, and you know what whise ahead.
Speaker 4 (07:14):
Well, I think Elevate is a perfect example of this
partnership and why we're so excited. There was some news
out the other day about both Velocity and Texas Permanent
School Fund and Levy putting significant capital on the balance sheet.
But I think one of the big differentiators of this
partnership is how Texas Permanent School Fund is not just
(07:39):
a typical asset allocator. And the reason they'll bring that
up is we have the ability to provide holistic solutions
to various intellectual property rights holders. And if I think
about Elevate, you know, one of the big initiatives for
us as a company is what the disruption is going
to lead to and colle athletics, and so there's lots
(08:03):
of different ways to figure out how to work with
the university, whether it's the NIL space, whether it's helping
build the stadium, whether it's helping monetize their ticketing inventory.
Elevate can do a lot of different things, but Texas
Permanent School Fund can provide capital that's private equity oriented, credit,
real estate, and do let Bob talk talk about the
(08:26):
last point, which is the name Permanent is there for
a reason because it's permanent capital where you can hold
an asset for thirty years. There's very few examples of
other investment firms who had access to that capital, and
that allows us to solve problems for rights holders. Bob
(08:48):
will let you talk about why we're so excited about
that aspect of the partnership.
Speaker 6 (08:55):
Well, you know I was mentioned earlier, what you know
our peers do of the largest educational endowment in the
country and actually knocking on sixty billion today.
Speaker 5 (09:07):
The lessons that.
Speaker 6 (09:10):
I learned over the years when you've got you know,
good partners and investment firms, and I think that you know,
we're where my peers have you know, left a lot
of meat on the bone. Is putting everything in boxes,
you know, hiring talented firms to manage one, you know,
very narrowly defined aspect of the fund, and you know,
(09:32):
kind of report back on that. And I found that,
you know, there's incredible talent at some of these firms,
and they're doing a lot of interesting things, not just
the little slice that you may have hired them for.
And necessity being the mother of invention. In the mid
two thousands, I was tapped to run the South Carolina
Investment Commission. It was thirty five billion dollars and I
(09:54):
was hired and given an attorney and an admin and said,
build a cutting edge endowment style pension solution. And I
realized that we were going to have to really leverage
partners a lot more than have traditionally been done, and
by providing more free form capital that can be put
to use, and not only in funds, but in co investments,
(10:17):
direct investments, both in debt, inequity and real assets, seating platforms,
ET cetera. A much more fungible form of capital that
makes you a true partner with that group is a
key to success there. It's a way to access a
(10:37):
lot of opportunities and using those lessons along with the
experience that I had with David, you know, I see
this space as ripe for development.
Speaker 5 (10:50):
Consolidation is almost you know, a late stage word.
Speaker 6 (10:53):
You know, this is still very nascent in some of
the technologies and other services in around entertainment, just not
only the hospitality, but you know, the branding and naming
rights and a lot of these things. And those who
who figure it out and can do it at you know, reasonable.
Speaker 5 (11:13):
Scale, you know well, will.
Speaker 6 (11:16):
Come out ahead. And so what we want to be
able to do is have this fungible capital to back
a variety of opportunities that come out of the greater
Velocity platform, of which I expect and are already seeing
evidence that they're going to be numerous.
Speaker 2 (11:31):
So, David, can you give us some more of an
idea of what specific opportunities look like as we head
into twenty twenty five. I think about the college space
because Velocity focuses on middle market companies, so we're not
talking NFL teams, right, that's no longer middle market. But
if you're talking about businesses or opportunities within college athletics,
(11:52):
obviously that space is growing by leaps and bounds. You
have Bill Belichick, who led the Patriots to multiple Super
Bowl victories, now join using the United Excuse me, the
University of North Carolina's football team. College athletics is becoming
more and more professionalized. It's no longer going to just
be middle market anymore.
Speaker 4 (12:09):
Well, I think the Belichick announcement is interesting, but it's
a lot more than just hiring a football coach to
build the football program.
Speaker 2 (12:20):
You and c is what do you see then, starting
with Bill Belichick joining UNC and how what kind of
opportunities does that open your eyes up to?
Speaker 4 (12:28):
Well, I think it's a perfect example of like you said,
college athletics this you can use it. We're professional sports,
but they're entertainment and media businesses. It just so happens
that the talent is also going to get a college
education at the same time, Bill Belichick is away for
North Carolina to build a global brand which will attract athletes,
(12:53):
which drives the revenue. Generation of the intellectual property rights
of university and North Carolina. So when people want to
come to North Carolina, now it's I get access to
one of the most successful NFL coaches of all time
his network of contacts around the world. So if I'm
coming to play, they have a fantastic women's soccer team,
(13:16):
I'm going to get access to Bill Belichick. Maybe you
can't build my brand even And that is where college
sports is going. You just saw the example of what
happened at University of Michigan, where all the resources was
Tom Brady and Dave Portney were put into attracting talent
for the university. It's the same exact reason why this
(13:36):
happened at North Carolina because it's a way for them
to present an opportunity to talent that other universities can't match.
Speaker 1 (13:47):
I want to go to I know we're running out
of time, but I want to go to something that
Bob said if you can explain more of it, you
said Velocity needs operating partners while the school needs capital partners.
Can you explain that more.
Speaker 5 (14:02):
Well.
Speaker 6 (14:03):
Our purpose in life is to provide a perpetual stream
of earnings to fund public education in state of Texas.
We're one hundred and eighty year old enterprise that was
founded at the beginning of the dawn of the state
of Texas, so as pivoted from a republic, and the
(14:25):
founding fathers of Texas had the foresight to say, education
is going to be critical for the state's success, and
we're going to set aside a lot of the large
s that we've acquired in the form of millions of
acres of land that presumably, you know, you could get
revenue from timber or cotton or cattle grazing. Little did
they know a great majority of that was sitting on
(14:46):
top of the Permian basin and has been a perpetual
source of cash inflows. We are able, therefore to you know,
invest with a very long term view of you know,
creating franchise value over time. I think one of the
(15:08):
problems in the industry of institutional investing for pensions and
endowments has been the fund format that you know, has
a ten year contractual life, and you have these great
entrepreneurs that are building platforms that are creating enterprise value,
but a bar around year seven or eight, you know,
they're kind of forced to go sell the firm to
(15:28):
monetize it, to you know, get everybody liquid and that happens,
you know, regularly for firms you know that might have
forty to fifty year plus lives, but you know every
seven or eight years are having to go through a
liquidation event. That's a distraction, that's a huge cost erodes
a lot of enterprise value, and being able to invest
(15:49):
with a much more open ended view is an advantage
for both, you know, the capital provider and the investment partners.
Speaker 4 (16:01):
And Bob, I want to expand on that. You know,
one of the areas about this partnership is that because
of this capital and the connectivity with Texas Permanent School
Fund the State of Texas, we can actually drive value
for our portfolio companies that I've never been able to
see in this industry in in my past. So I'll
(16:21):
give two examples. The Amian related to what you asked
about the portfolio. So, we are the controlling shareholder in
a location based entertainment business called camp which licenses intellectual property.
It's really for young children and families, and we're opening
our second location in the state of Texas in Houston
in about a month. Well, the Texas Permanent School Fund
(16:45):
Corporation sole purpose is to provide funding for the K
through twelve school system in the state.
Speaker 2 (16:51):
Of Texas Synergy.
Speaker 4 (16:54):
I have done this for a long time, and when
I worked at Apollo, we had some unique competitive advantages.
I put this at the top of the list. Second example,
talking about the disruption in college athletics Elevate, which is
an investment that both ourselves and Texas Permanent School Fund
have a large stake in. And if you recall when
(17:16):
I was at Harris Splitzer Sports, I was part of
the group that founded Elevate eight years ago. And so
the college space is one of our biggest initiatives. We
have a very big secondary ticketing platform, one of the
biggest in the college football space. So we work with
the rights holder UNC for example, and help them monetize
(17:37):
their tickets primarily football or basketball in the secondary marketplace. Well,
given what's happening in college sports, ticket is a piece
of inventory, It's an asset they're trying to sell to
bring talent in to grow their metia ites. Well, imagine
if you could walk into university and say this has
(17:57):
been great to do this year over year, We'll give
you X amount of dollars for the right to monetize
your tickets over the next decade. There's very few organizations
that could compete with what we are willing to offer
to universities because of Texas Permanent school funds capital.
Speaker 3 (18:19):
You know, you know, Michael bar I got to just
say it's amazing that Bob Borden didn't come to New
York State features Retirement System because then, David, I mean,
then we'd be getting some like Yankee fans, Jet fans instead.
It's gonna Ben, it's gonna all go to Texas. It's
gonna be to go Daryl K. Royal, you know, Memorial Stadium.
I mean, it's gonna be right in their backyard. And
we lost it. We lost it up here.
Speaker 1 (18:37):
Well, see now, Bob, this is when you can like
set the trend man and help come on up. You
know right now, Dabie and Scarlet and I we're gonna like,
you know, invest in like marble racing and that's about it.
But see, you guys are really setting the trend here.
Speaker 6 (18:54):
We have a couple of ke people on our staff
from the New York Retirement System and my president and
Deputy Chief Investment Officer, Stu Bohart, was former president of
Morgan Stanley asset Management and partner at Fortress. So we're
we're bringing, we're recruiting.
Speaker 7 (19:10):
From New York, I can tell you that. But you know, yeah,
and you know, we have a we have an ace
in the hole with uh no income taxes in our state.
Speaker 6 (19:22):
He Uh. The David didn't mention that this activity on
monetizing tickets is already something that Elevate has been doing
with the University of Texas and Texas A and M.
Speaker 5 (19:34):
So you can connect the dots there.
Speaker 6 (19:36):
Uh, and you know, to say the NFL is maybe
too big of a ticket, there's still a lot surrounding that,
you know, where Elevate was responsible for the naming rights
for the change from FedExField to Northwest for the Commanders now.
So that's just an example of there's an entire opportunity
set in and around those franchises for boarding services that
(20:03):
you know, has incredible growth opportunity and if you can
scale it, you know, I think the success becomes success.
And let's be frank. You know, college football is now
professional football. It's and it's different than any other It's
not a feeder league or farm team like you think
in baseball. You know, arguably college football's popularity and eyeballs
(20:30):
and you know, just loyalty is on par and perhaps
even higher the NFL. So it's just phenomenal. You know,
once in a generation opportunity to you know, figure out
ways to roll out, you know, a holistic entertainment and
promotional solution for college sports. And you know, folks like
(20:52):
Bill Belichick realized that for sure. So this is a beginning.
We're on the front end of I think a new frontier.
And you know, college athletics and you know, Velocity and
Elevate and others are well placed to take advantage of that.
And we haven't talked about and I know we have
time constraints here, but you know in the motorsports world
(21:15):
that things like putting perrella motorsports are involved in, and
Elevates involved in the promotion of Formula one in Texas
and Moto GP in Texas. And we have this first
class facility, the Circuit of the Americas, which has hosted
Formula one in the US, you know for now fifteen
seventeen years, I think, and was responsible for bringing Formula
(21:35):
one back to Texas.
Speaker 4 (21:37):
Bob's not telling you that he in his spare time
is likes to race. I think that might be for
the for the next discussion.
Speaker 6 (21:45):
Yeah, it's bubbling up.
Speaker 1 (21:49):
You got a fellow motorhead over here. Man, really, what
is your favorite? Man? If you you know and you
get in the car.
Speaker 6 (21:57):
Oh boy, well, my favorite form of sports.
Speaker 1 (22:02):
My favorite car? O, favorite car? Favorite car.
Speaker 6 (22:04):
Okay, I've had over one hundred my children. We can
answer this question. You asked my third grade er, what's
your dad's favorite car? The next one?
Speaker 1 (22:15):
We run a full service show, folks man, no half
step in here, David, Bob Man, what a pleasure to
talk to you, guys. Thank you for joining us on
the Bloomberg Business of Sports.
Speaker 4 (22:27):
Thank you for having us. We look forward to coming back.
Speaker 6 (22:30):
The pleasure is ours.
Speaker 1 (22:31):
Our thanks to both Velocity Capital Management founding partner David
Abrams and Texas Permanent School Fund CEO and CIO Bob
Borden for joining us, and thank you for joining us
for my colleague Scarlett Pooh and Damian Sasaur. I'm Michael Barr.
You're listening to the Bloomberg Business of Sports from Bloomberg
(22:52):
Radio around the world.
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