Alan Waxman is a Sports Superinvestor

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0:27MOB. NBA. NFL. Do you think in our lifetime, the three of us, there will ever be institutional capital that takes full control of one of those 92 teams? Within those three leagues, it will happen in our lifetime. But there needs to be substantial infrastructure and real estate adjacency to justify these valuations. Otherwise, these valuations are going to turn out to be probably too high.

0:57All right, Alex, we're back at Bloomberg Invest. massive conversation on stage, live taping of the deal with Alan Waxman, co-founder and CEO of Sixth Street Partners. They own across lots of sports, but I know there's one deal you're especially interested in. I am, and that's his acquisition of a minority stake of the New England Patriots. And I want to know how he cracked the code with Robert and Jonathan Kraft, who are in Mount Rushmore of my ownership groups. He's also done deals across soccer, basketball, and baseball. So I have a prediction. You guys are going to fix baseball. Okay, let's go.

1:31All right, let's do it. Please welcome to the stage Alan Waxman for a live taping of The Deal with Bloomberg's Jason Kelly and Alex Rodriguez. Alan Waxman, great to see you. I want to set the table a little bit and talk about 6th Street, your firm, because I think it's hard to understand, Alex, the context of what you're doing in sports without understanding the context of the firm and even some of what's going on in the world right now. So 30 seconds, give or take. What's the Sixth Street investing ethos? Complete flexibility. We invest across from day one, built the firm to invest across asset classes, geographies, sectors.

2:14Where's the best relative risk award? And we do that by having a team and a culture of people that are over themselves, No egos, no BS, no politics, no fiefdoms. We built our architecture to be an investor-first architecture. So we didn't build it to raise the biggest funds. We raised smaller strategy funds so that we raised those funds to the size of the opportunity. And then we have extensive capabilities. And that's how we built our firm from day one. That allows us to look across ecosystems and to find the best teams and the best opportunities. Wax, you were one of the early, early movers in sports.

2:47And you saw this early. You made that early acquisition, getting into the San Antonio Spurs right after COVID. But as a co-owner today, I have my Mount Rushmore of owners. And two that sit right on top of that list are Robert and Jonathan Kraft. I am fascinated by this deal. How did it start? Do you call Robert? Does Jonathan call you? Walk us through it. First of all, I spoke to Robert and Jonathan before this, and they speak so highly of Alex. So you've got some big fans there. My name didn't come up, just for the record, but go on. So, by the way, Jason's super talented. Thank you. I really appreciate that.

3:26I talked to a lot of people before this, and they said they're super talented, too. Look, this all starts, so we went through just context. The NFL didn't allow private equity or private capital, because we don't really think of ourselves as a private equity firm, but they didn't allow institutional investors. So the NFL ran this big process. Some might say it was a proctology exam. And you go through a process where they're trying to select, you know, two, three, four people that have sort of a golden key to invest in the NFL. But coming out of that process, the CFO, I don't think I've ever told this story publicly, but the CFO of the NFL, Joe Sinclair, is after we got approved, basically sent me an email.

4:06He said, hey, you know, and he was kind of the front lines of their due diligence on us and others. And he said, hey, have you ever met Robert or Jonathan Crouch? I think you culturally would get along with them. You should meet them. And they weren't looking to do minority equity investment. So he connected us. We got together. And I'm summarizing this, but literally instantaneously, it almost felt like family, where we had alignment on team values, team culture, and clarity of purpose, which obviously you see the results of what the New England Patriots had done. but what you don't see is all the little things, those micro things they did in terms of running the organization.

4:48And we just clicked right away. And that's, by the way, consistent. When you look at all the other sports teams we've invested in, they're all global champions. Real Madrid, Barcelona, San Francisco Giants, San Antonio Spurs, Boston Celtics. Like there's a theme here. But the one common denominator between all of them is alignment on culture, values, and clarity of purpose. I have a quick follow-up on that for you, Wax. So once you get through all the hugging and family and alignment, alignment and pricing, does that, do they say nine? Do you say six? Does it go back and forth? Or is that more, here's what we're looking for.

5:23You agree? The way that we do business and the way that I think the crafts do business, both Robert and Jonathan, is this is a long-term relationship. And the last thing we do in getting a partner is a back and forth. you kind of know what's fair and you're just trying to solve for fairness. And it was a very short conversation and we agreed on it and we got in business together. But you can just tell, by the way, it's not just sports. Any company we invest in, you can get a sense when you're in the meeting, you're watching the way they treat their employees, the way they treat junior people. You talk to different people in the company or the teams.

5:59Are they all saying the same things? Are they saying seven different things? And you can tell by just meeting everyone what that culture is, what the values are, and obviously do they have clarity of purpose. And so let's talk about investing in the NFL because you rightly pointed out this was a long process. The NFL was really the last of the major North American leagues and almost any league in the world to really embrace institutional capital. But what was it about this particular deal financially? And as you figured out how to underwrite this and did the diligence. What was it about this franchise and this sport that made it a compelling investment?

6:39As a minority shareholder, no rights. I mean, this is, you're in it, but they're running it. Look, the first thing is like, what's the durability of the league? What's the leadership of the league? They're A plus. Like all you have to do is spend time with Roger. Roger Goodell. Yeah, and the people blown, the owner, it's a world-class organization. Then you get into sort of the market, the Boston sports market, we're also the Boston Celtics. It's a great sports market. It's a great fan base. And look, I think with all these - You are in New York, just as a reminder. New York's a great - Red Sox are next.

7:15By the way, we're partners with the New York Yankees and they're a great fan base too. It's not exclusive. Everyone's got their own cultures. But look, I think at the end of the day, for us, the league itself, the durability of the league, the international expansion opportunities, the fact that just all these brands historically, if you go back 20 years ago, these brands were local brands. You have to get the local right. But once you have the local right, the global opportunity for all these brands, like take Wemby, like we're investing in the Santos Spurs. I went last year when they were playing in Paris, it was literally like an NBA finals game.

7:52So you just turned on an entire country and that's happening all over the place. In the NFL, those opportunities, the international opportunities are the same. So look, for us, it was pretty easy. But again, this wasn't a competitive process. It was a handshake. It was a set of relationships. And that's how almost all of our deals have happened in the sports ecosystem.

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8:47How do you think private equity, private capital has performed so far? Has it been about what you thought it would be in terms of the uptake from the teams, the uptake from the funds? Like, Where is it now? Where does it go next? I think it's happened about kind of what we'd expect. Because it's been fairly minimal. Yeah, I think about what we would expect. I think the challenge is, and this is why I think there's an important delineation between private equity and private capital. Yeah. Because a lot of private equity capital, the liability or the fund structures, you have to sell the asset in five to seven years.

9:26That is a terrible idea for investing in a sports team, whether it's a control or minority. So our vehicle, we have very patient capital, which is why I think that really matters. A lot of these guys owning these teams, they don't have to sell. They don't have to do anything. And some of them just want good partners. So it's kind of happened what I expect. I would expect over time, if valuations continue to increase, it's just going to continue to grow. So, but, and this is really, I think, the next wave of sports, is there needs to be substantial infrastructure and real estate adjacency investment to justify these valuations.

10:05Otherwise, these valuations are going to turn out to be, in a lot of cases, not all cases, probably too high. I got one more on the NFL, just because it's such a juggernaut. Do you want to go first? No. I love when you guys flow. Yeah. I love when you guys flow like this. We're like a married couple. Okay. Anyways, Wax, when you think about the NFL as such a juggernaut, and when you look at just P &L and you dig down into just the thesis of an investment, right? Is it, when you look at an NFL team, is it the market? Is it scarcity, appreciation, cash flow? What are the things that excites you in Sixth Street about deploying capital in football?

10:40I think it's all those things. It's scarcity. Obviously, different markets matter. Ownership, culture, values, clarity of purpose, that matters. But again, you know, it doesn't take a long time. If you look at every youth in the world, everyone's picking up their phone all the time. AI is just going to continue to consume people's time. And I think the other thing is that the sort of exporting of sports, particularly global brands and other markets, is going to continue to increase. And I think, again, I think that's an opportunity for the NFL. It's interesting to think about your... Can I ask you guys a question?

11:17Sure. What do you guys think? Jason will take any questions. Flip that question around. How would you guys, you guys talked to a lot of smart people. How would you guys answer that? Underwriting the NFL? Yeah. I mean, I'll answer because you prodded me into it. It's really hard to do. I mean, I think the point you made about the international opportunity, I think is one that was underappreciated for a long time with the NFL. And I think even the NFL didn't quite fully appreciate what the market was. and I think as it's invested more and more, I did a piece about Shad Khan of the Jaguars and Fulham FC a few years ago and understanding through his eyes, he was obviously a pioneer with the London-based games.

12:03I think that international piece, I mean, I know you've spent a lot of time with Roger Goodell and others. I mean, that seems to be the real growth market in terms of both fans and really the technology as such And I think you, and we'll talk about this, I think, in the NBA section too. If you can truly globalize American football, I mean, good Lord. Here's what I can tell you with fact. There's excess demand for sports teams internationally in sports in cities that want to bring NFL games to their markets. Yeah. So not to dodge your question. So it's kind of the things that I talked about that I really like about the NFL.

12:46is the market is very important. The scarcity. Now think about if you're in real estate and there's only 32 beachfront properties and you own one of them. So I would think about that. The combination of appreciation and cashflow, it's very rare in sports. And to have that like a moat that you can actually underwrite it and it's like A paper as A paper can get because obviously the national TV deal is going to get probably richer here. And then I would say I would over-index in leadership. And I think Roger Goodell is best in class as good as they get as far as commissioner. And then when you have a guy like Robert Kraft and Jonathan that makes it.

13:18Because at the end of the day, forget what the numbers say, you still have to be in partners with families, like a marriage. And that's how I would look at it. A hundred percent. And I'd say across the NFL, there's some great owners across the NFL. All right, you want to talk some hoops? Sure. All right. The NBA is interesting, and you have such a fascinating lens here, Wax, because you went into the Spurs six years ago, five and change. And then you go into the Celtics, you know, a number of years later. the valuation differential alone is massive. How did the opportunity evolve? How did it change as you've sort of seen the NBA five, six years ago and the NBA today from a business perspective?

13:57From an institutional investor standpoint? Well, first of all, we were one of the first, I think we were the first or the second institutional investor in the NBA where the San Antonio Spurs, we just literally, they changed rules and we cold called the San Antonio Spurs. So it was - You literally just picked up Tony, like R.C. Buford, like, Like, you know, like, what's up, bro? To be fair, it was my colleague, Austin Bowers, picked up the phone, and that's what we do. Like, we just picked up the phone. I grew up in Austin, so we had a view, an Austin-San Antonio view, but that was different. All these people are like, ooh, cold calling.

14:27Okay, I'm going to do that. Go ahead. Don't be afraid. Just be really a real person and just ask good questions. You'll be fine. Sorry, that was unsolicited. Whoever was talking in the audience. So, look, I think back then, I mean, And that was in the middle of COVID. So very different environment. I mean, revenue had gone to a zero for a lot of these teams are significantly reduced. So very different environment. I would say it's maturing. There's more people that are obviously getting into it. So I'd say that the competitive landscape is different. So that's different. But on the other hand - Competitive landscape from an investor perspective.

15:03There's just more cap, which is a good thing. There's the gentrification of the asset class. We were always interested in investing in sports. It's themes are only as good if it's investable. Maybe in public markets, you can express a theme, but in private markets, you could have the best theme in the world. But if it's not investable, then it's a waste of time. And COVID made it investable. So that really opened it up and started to gentrify. Today, it's very different. First of all, we're at the beginning of a new media deal. So there's massive re-rating. So that's different, but there's also a lot more capital.

15:33But again, the international opportunity in the NBA, it's massive. You look at the demographics, you look at the number of NBA players that are from different countries. And again, it takes one player on one team from one country to open up that country. And open up that country in terms of possible engagement of new fans. Was that similar to you? Is that what you guys saw in 21? We came in around the same time, right after COVID, which was a very scary time. I remember my mom saying, what are you doing? You have the Disney bubble, these stadiums are, you're going to go crazy. that you shouldn't do this.

16:09I said, Mom, I think I'm okay. She made me think a little bit. But what's exciting about the NBA as we saw it, as you look at where we are today in 2026, the last eight MVPs have been non-Americans. And then when you think about the global footprint that Wax is talking about and the opportunity, I think we're really in the early innings of where we're going to go as the NBA. So it's very exciting.

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17:07It's interesting as we think back over the, let's just make it about us for a second. As we think back over the course of this show's history, one of our earliest guests was Brandi Chastain, you know, one of your co-owners in Bay FC. And what was so interesting for us who followed this so closely as a business, your investment in Bay FC, an expansion team at the time, was radical and new because you were the first institutional fund that was allowed to become a control owner of a major U.S. sports team. Tell us a little bit about that deal from your, we sort of heard the Brandy perspective, you know, sort of coming in as a player.

17:45But this is new territory at that time for a fund. Never have we made an investment where people thought we were crazy. But from our standpoint, it's one of the most asymmetric investments we've ever made. So just for context, the original, the last expansion fee before we bought BFC, was I think three or$4 million. And we paid$53 million and two or three years later. So people thought we were crazy. But what got us on the NWSL initially is my, at the time, nine-year-old daughter. She was on her iPad and she was watching an NWSL game. And I was like, huh, that's kind of interesting. So look, through a number of people around the ecosystem, like you should take a look at this.

18:32So, and I'm summarizing, There's a lot my wife was involved, so she was proud of me because she thought this was a great investment opportunity. She's much smarter than I am, by the way, applied mathematics major. But we started studying it, and we looked at the market. And at the time, like, a lot of the sponsorship revenue was in sort of the impact bucket. It wasn't in the CMO bucket. So the chief marketing officer versus the impact bucket. And that was just a major, major opportunity for us because we knew people were watching. And it's actually the only time in my entire investment career where I actually printed our investment thesis.

19:11I put it out there publicly. It's the first time and only time we've ever done that because I thought it was so asymmetric. You can find it on LinkedIn. I mean, it was a very popular LinkedIn. And I'm not a big social media. I don't even have social media. But we put it out there because we thought just for people to understand, and sure enough, you know, now everyone's talking about it and we're still at the early stages. But again, it's not going to be linear to growth, but it's been a good investment for us. Well, and to be clear, I mean, if you think about where the valuations have gone, where the expansion fees have gone, you know, literally a year ago, we were sitting on the equivalent of the stage.

19:49I think we were actually downstairs with Melody Hobson. She paid substantially more for the Denver expansion franchise, I think four times more than you did to build in Denver. And obviously Willow Bay, who's been a guest in the show as well, you know, she bought Angel City at a valuation of$250. So clearly it's going up. It goes to anything. Ultimately, investing is about supply and demand. Like it could be the best theme in the world, but if there's excess supply of capital, by the way, this might rhyme with private credit, excess supply of capital and low demand, that's not gonna work out well.

20:29The thing, going back to what you said, Alex, is these are scarce assets. So there's valuable pieces of real estate. And as you start to sell expansion teams, there's less and less valuable real estate. And what I can tell you, and I'm going on the record here, is that what Melody and Willow, who are both two incredibly talented people, they're going to look very smart in about three or four years and what they paid, and you'll be having the same conversation to them, Melody and Willow, and you're going to be saying people paid four times more. Right. That's my prediction. I'm going on the record on that.

21:03Oh, I like when you go on the record. Yeah. Now we got it. I guess we're live TV, so I guess we're already on the record, so there you go. I'm following up a little bit on what Jason said, which I'm fascinated by this. Like Jason said, You're the first private institution, called it private equity, institution of money, that's a control partner. I think we're the only one. The only one. In the U.S. My question is on the big three, MLB, NBA, NFL. Do you think in our lifetime, the three of us, there will ever be institutional capital that takes full control of one of those 92 teams? I got to be careful here, but I'm going to say within those three leagues, it will happen in our lifetime for the simple reason that evaluations continue to go up, which in order for that to happen, there needs to be hundreds of billions of dollars of infrastructure and real estate investment to make that happen.

21:52Just the size of these valuations is gonna get to a point where there's only gonna be a finite number of individuals. So again, there's no certainties, but probabilistically, if you sort of play that through, I think the leagues will look at it. Will it happen in our lifetime? I think anything can happen in our lifetime. So I'm going to say, especially we're going to live a long time, hopefully, knock on wood or something. But no, we're, I think it'll happen in our lifetime. But yeah, just if any of the commissioners of those three leagues are looking for, I don't think it'll be probably one, probably a long time from now.

22:26That's what I would say. You'll be mostly surfing and not investing. I'm hoping I'm just surfing and not investing. Yeah, exactly. Costa Rica. There you go. All right, you each have 30 seconds to tell me how we're going to fix baseball. Go, Alex. Oh, boy. We're here at 30 seconds. It's a lot of pressure. So I would say I'm a contrarian. So I think the best time that I've seen in the last 15 years to invest in baseball is today because the amount of uncertainty. Uncertainty around the CBA, are they going to strike or not? I love that for an investor. The bet you're going to make is going to get better, not worse, because right now it's pretty tight.

22:58And then the other one is that Rob Manford is going to integrate all the regional rights into one and try to copy what Roger Goodell has done with the NFL. because the World Series showed us that if you have the right product, you have the right teams, you have the right stars, the right strategy in good baseball, we had 53 million people watch the World Series game seven when you include the U.S. market, Japan, and Canada. And it was one of the best I've ever seen. 30 seconds. I'll throw it out there. I'm probably going to get some slack for this, but I'm going to throw out a straw man on just real quick, okay?

23:28So first of all, you got to get the minimum standards up, minimum salary across the league. I think you got to do that. And this is going to be a little controversial but I think that each team, I think you should have a salary cap, but each team should have one or two designated players that can pay whatever they want. So if you want to pay someone a billion dollars, they're worth a billion, show you a time, worth a billion dollars you can pay them. So you get one, two, three, something that doesn't upset the competitive balance, but allows teams for these superstars to make what they earn. And you put all that together and then you get people like on the TV deal and meteorites aligning interests.