Invest like the Patriots

As a Boston based company and avid Boston sports fans we would not be “doing our job” if we didn’t discuss the New England Patriots winning their 5^th Super Bowl since 2001 earlier this month. While naysayers (and Jets fans) might point to Spygate or Deflategate to try to diminish the Patriots accomplishments, the longevity of the Patriots success is nothing but impressive. Since 2001, the Patriots have made the playoffs in all but two seasons, played in eleven Conference Championship games, and seven Super Bowls winning five of them.   This is arguably the most successful 17-year span by any NFL franchise.

In 1994 the NFL implemented a salary cap to prevent financially superior franchises from continually out-bidding other franchises on highly sought after players to even the playing field and decrease the likelihood of one, or a few, franchises consistently outperforming the rest. So how have the Patriots been able to sustain this unprecedented run of success in a league determined to maintain an even playing field?

Tom Brady.

Well, he’s one reason. But it really starts from the top of the organization. When it comes to professional sports, athletes are assets, and the Patriots organization has proved time after time that they refuse to overpay for assets. They have also proved that they are willing to trade or release assets, sometimes even “star” assets, in their prime, or when they are most valuable. Rather than competing in bidding wars over top-tier players with other franchises usually resulting in overpayment, or resigning players who have peaked in their NFL-career cycle, they re-invest in assets that show value, assets that will outperform their contract price.

Not only have the Patriots been successful acquiring emerging players and trading or releasing players at their peak right before value of the player dramatically decreases, but they have also found success acquiring “troubled” players for penny’s on the dollar and getting them to perform. Randy Moss is a perfect example of this. Moss was a highly talented player who was devalued due to some off field issues and lack of effort on a losing team, but the Patriots were able to bring him in and he proceeded to set the record for most touch down catches in a single season.

While this seems like a concept other NFL franchises could easily replicate, the Patriots continue to execute at a higher level. How so? Well, like in multi-family real estate investing, it all comes down to analysis, developing and sticking to criteria developed off analysis, and management of assets. Since the beginning of the Bill Belichick regime, the Patriots have monitored how the game is played on the field and adopted players and a playing style that gives them the best chance of success. In the early 2000’s they won three Super Bowl Championships playing hard-nosed defense and controlling the ball on offense. When the league changed certain play-of-game rules to promote a faster, less physical product, the Patriots set records with a spread offense and vertical passing game, and implemented a defense based on speed rather than physicality. And in recent years, they were the first to heavily utilize the two tight-end set to create mismatches against defenses.

Understanding how the game is evolving has allowed the Patriots to develop a certain criteria around the type of players they look for. Rather than over paying for high end talent, they stick to their criteria and through proper coaching, or management, they put their players in the best position to succeed.

While football and real estate have very little in common, the way the Patriots have run their organization and football operations over the past 17 years is very similar to how we invest in real estate. Understanding the investment environment allows us to develop criteria around what assets will succeed in this market. Sticking to the criteria and seeing the value in assets other investors overlook rather than overpaying for highly sought after assets. Managing the assets at a high level, and then trading the asset at maximum value.  Whether it be football, real estate, or anything in between, market knowledge, asset analysis, and asset management are keys to success.