On the evolution of NBA players investing in real estate

Watching ESPN’s “30 for 30” “Broke”, one hears some sobering statistics around professional basketball players ability to preserve their wealth. In 2009, it was noted by Sports Illustrated that 60 percent of former NBA players were broke within five years of retirement. In the past, aspiring professional basketball players, having needed to focus on their craft 24/7, have been victim to lacking financial literacy and knowing how to invest a hard-earned, million-dollar salary. Now, it is encouraging to see how NBA players are changing that narrative.

Two NBA players that arguably popularized real estate investing in the league also gave NBA fans one of the greatest playoff match-ups in league history.

It’s no secret that real estate represents one of the greatest forms of long-term investing, a hedge on inflation and an effective diversification strategy against traditional public equities investing. Two NBA players that arguably popularized real estate investing in the league also gave NBA fans one of the greatest playoff match-ups in league history.

In 1995, Hakeem “The Dream” Olajuwon and David “The Admiral” Robinson squared off in the Western Conference Finals. The Houston Rockets, on the cusp of another NBA Finals appearance, rode an out-of-this-world performance from 1994 MVP Olajuwon, who bamboozled 1995 MVP Robinson and the San Antonio Spurs with one dream shake after another. The Dream and the Admiral ultimately retired from the NBA in 2002 and 2003, respectively, but how they shepherded their post-NBA careers were MVP performances in their own right.

Olajuwon, building off a nascent real estate investment operation he had begun towards the latter part of his career, made one astute investment after another in the Houston market. In fact, in 2006, the New York Times reported that Hakeem made as much in real estate in 10 years as he did in his 17 seasons playing professional basketball. Impressively, Hakeem focused predominantly on land plays using solely cash and no leverage, the not-so-secret ingredient to juicing investment returns. As a devout Muslim, Olajuwon never sought outside financing, as it is against Islamic law to charge or pay interest.

Robinson equally carved a successful investing path with Admiral Capital Group, a real estate and private equity investment firm he formed in 2002 with a former Goldman Sachs real estate investment banker, Daniel Bassichis. In contrast to Hakeem, Robinson and Bassichis took a more institutional and income-focused approach to real estate. They’ve done everything to buying residential assets at below-market prices, providing debt and preferred equity financing for hotels and re-positioning office building in strong markets. The firm claims it has invested more than $300 million in over 50 deals with a total transaction value of over $1.5 billion.

Much like Robinson, Earvin “Magic” Johnson leveraged the expertise of a highly qualified investor in Canyon Capital Realty Advisors, forming the Canyon-Johnson Urban Fund (CJUF) in the early 2000s. CJUF raised nearly $2 billion in equity from institutions across three funds to make investments across the country, with a focus on investing in and re-positioning real estate in densely populated, ethnically diverse neighborhoods with strong market fundamentals for retail and housing.

Today, the real estate investing torch in the NBA continues to be passed. Luol Deng, who recently retired from the NBA in October 2019, wasn’t exactly an All-Star on the court in his 15-year career, though he certainly put up solid numbers. As a beneficiary to the famed salary cap hike in 2016, Deng was a fortunate to be in the right place at the right time. That year, the Lakers gave Deng $72 million over four years, adding significantly to Luol’s career earnings, which now stand at $151 million. With a highly liquid, investable capital base, Deng was able to form a $125 million real estate investing business called D3N9 that focuses on hotels, resorts, condominiums and apartment buildings. The NBA being a small circle, Deng even convinced former teammate Derrick Rose to invest in one of his projects.

While real estate doesn’t grab the headlines of other investment classes popular amongst other NBA players, such as venture capital (Kevin Durant’s Thirty Five Ventures and Andre Iguodala) and filmmaking (Lebron James’ Uninterrupted and Steph Curry’s Unanimous Media), it is a stable and well-returning investment strategy when directed towards quality assets in strong markets. As NBA ownership groups have begun to realize the importance of owning their arena and its neighboring real estate, players have equally grown to appreciate real estate as an investment class highly suitable for growing their wealth and setting them up for a successful career after retirement from the NBA.