Interviews Daren Hornig, Managing Partner, Hornig Capital Partners

0:00 Speaker 1 Good morning. This is Michael Stoler for the Stowly Real Estate Reporter on the Cats Around Table. So there’s one business that’s growing by leaps and bounds. It’s very active in Florida and it’s coming to New York and the region.

0:13 It’s pickleball. So I don’t really know that much. I’ve only played a couple of times. So I’ve brought together today the individual who’s really predominant in running pickleballs facilities with its partner. I have Darren Hornet, who is the head of real estate and managing partner at Hornet Capital Partners and also the head of real estate at Sports Timeball.

0:35 Thanks with me and care Thank you, Michael. So tell me a little bit. You’re in the real estate business. How do you get into the pickleball business?

0:43 Speaker 2 So I’m a real estate developer. I’ve developed a lot of property throughout the Northeast and came across an opportunity to purchase the Port Washington Tennis Academy, a seventeen court facility in Port Washington, New York that’s been a renowned facility.

0:59 We’re both McEnroe brothers, played Tracy Austin and Vitas Gerrelitis in purchasing that, and the goal around purchasing that at the time was during COVID was I saw there was a lot of extra time and recreational time that people had because they were working from home.

1:15 Speaker 1 How many courts did they have at that time?

1:17 Speaker 2 They had seventeen courts seventeen tennis courts. So my goal I was down in Florida during COVID also.

1:25 Speaker 1 Which is the largest pickleball state in the nation.

1:29 Speaker 2 Exactly predominantly outdoor courts. I started playing. I started playing a lot. I actually won my club championship two years in a row. Unfortunately I came in second place this year, and I fell in love with the sport. In part of my acquisition and due diligence, there were no indoor courts at the time in the New York area, so

1:49 we were able to convert four tennis courts to twelve indoor dedicated pickaball courts, and the pickaball business thankfully took off.

1:58 Speaker 1 Now, did you converted yourself or with sports time? No, with sport time. How do you meet sports time? And tell me a little bit about then.

2:07 Speaker 2 Sure, So, while I was in contract, I was talking to spot Time and other large racket sport operators and fitness operators and found a great relationship and fit with the principles of sport Time. Two gentlemen, Claude Oakin and Ben Slansky, we hit it off.

2:26 Speaker 1 We did a lease of which I’m.

2:27 Speaker 2 A partner, with the upside as that business grows, and we really had similar views and vision of where the sport of pickable was going. We had lunch one day and I said, I really think there’s an opportunity here.

2:41 Real estate is rather challenging right now with the interest rates and where lenders pulled.

2:45 Speaker 1 Back on lending.

2:46 Speaker 2 I said, I would like to go out and try to find some pickable locations, and literally at that lunch we shook hands and said, let’s just be partners. So my role is very consistent with the role of being a real estate developer. I do site acquisition. I find the locations, I make sure there’ zoned properly. We either

3:04 lease them or buy them. Then I take them through a development process, and once the courts and infrastructure are finished, I hand it over theoretically to sport Time and they operate to clubs with their infrastructure.

3:15 Speaker 1 Now there’s a location in Armund and two of the opening in New Jersey, correct.

3:21 Speaker 2 Right right now, we have four leases signed and we’re negotiating four more transactions. We’re opening up this fall in Westbury, New York at Stewart Avenue and Merricka Avenue, which will have thirty thousand feet and thirteen into a court.

3:35 Speaker 1 What was that facility before?

3:37 Speaker 2 It was originally a tennis facility, but in its lifetime it’s been a basketball facility where I actually coached my kids in basketball about fifteen years ago. And right now it’s a volleyball facility in badminton. So we’re taking that space over June fifteenth, take about three or four months to redevelop it and we’ll turn it into pick a Ball.

4:00 We’re also opening up in Englewood, New Jersey on Root four. That’s thirty thousand feet, twelve indoor courts and why was that a multi sport facility that is basketball and soccer ner right now? And then early next year we’re opening in Wayne, New Jersey. There’ll be eighteen indoor courts and fifty thousand feet and Armank will open the end of

4:20 next year. That’s twenty five thousand feet and eleven courts. Right on corporate drive across from the Equinox, Okay.

4:28 Speaker 1 With regard to pick a ball, people would be surprised that they had a pick a ball draft. Correct, Yes, two weeks about the pickle ball draft and then the pickle ball at the author Aish Stadium. I believe, yeah.

4:41 Speaker 2 I was actually there yesterday. It was the app. There’s a lot of pickaball leagues out there. The main league right now is Major League Pickable and what they do is they draft two men and two women to be on a team, and those teams play the other ten teams throughout the country, so they have roaming tournaments. There’s

5:03 two local teams, the New Jersey five and the Brooklyn Aces, and there’s a New York team.

5:09 Speaker 1 I forget, now, how do these teams make money from subscriptions? From ticket and sales?

5:14 Speaker 2 Ticket sales, I mean, very similar to how about the sports leagues from ticket sales and TV sponsorship is the holy grail. There’s a pick a Bowl channel now that the Tennis channel just launched a sister channel, so that’s starting to take off as well.

5:28 Speaker 1 Right. I noticed that FS one and CBS Sports Network are having some Pickle Bowl over there. Let’s talk about pickle ball. In New York City specific locations, you have the One Pen, Yes, one Penn. Lifetime just opened a very nice facility at One Pen. It’s seven indoor courts and.

5:48 Speaker 2 They actually did a very good job there. Great location and they’re filled almost all the time.

5:54 Speaker 1 And what about people there’s pickle board at Central Park. Correct, it’s Walnuts, ring.

6:00 Speaker 2 Woman, Drink City, pick a Ball open the facility there. I believe it’s fourteen outdoor courts. So that’s a nice facility as well. But it’s seasonal because it’s outdoors.

6:10 Speaker 1 So what are the best locations to hoping? Is it a former costco, which I think one of the locations.

6:17 Speaker 2 It’s challenging. You know, the nuance of pickaball is you need high ceilings because people like to lob the ball. Personally, I don’t like lobbying or being lobbed against. But you need generally twenty foot ceilings are higher, and you need column spacing that are at least thirty feet, reason being the court is twenty by forty four feet. However, you

6:40 play a lot of the game outside the lines and a lot of the angles, so you don’t want to be running into a column. So finding space particularly in New York City is very challenging because, as you know, developers haven’t built buildings with twenty foot ceilings not necessary generally, and the column spacing is generally twenty to twenty five

6:58 feet eCos of the economics.

7:01 Speaker 1 So do you see in the luxury condominiums perhaps pickleball courts.

7:06 Speaker 2 I think there will be some. I think, you know, people will put in one or two as an amende. Amendities are always evolving in New York City. What people think are the demand for the moment, So I think Pickaball will be there. And you know general Pickaball Court sixty by thirty is only eighteen hundred feet, So if

7:24 you had to make an area eighteen hundred feet column free, it’s not that much money in the scheme of things, and would definitely be an attraction.

7:31 Speaker 1 Now, in the real estate acquisition business, you look for certain characteristics. What are the main characteristics that you’re looking for in the pickle boil.

7:41 Speaker 2 So space first and foremost right, we could be in the best location in a poor space and sport time, Pickaball will not open a facility that is subpar. So I probably looked in the last year and a half at about one hundred and fifty different spaces. Personally walk those spaces, and I’ve only identified ten that I like.

8:04 And even though one hundred and fifty would have some of the characteristics that worked. It was a place in the city on the west side that had twenty six foot columns. Now, even though a court could fit in there, we would not lease that because we didn’t think the playing environment was up to our standards.

8:19 Speaker 1 Right, that’s like the Lifetime on the Sky, Lifetime on forty second Street, Well.

8:24 Speaker 2 That one, I believe is in old tennis courts, so that one will fit. Well, this was a different location. It was a former bowling alley. And then it’s just general population. I mean, the demographics are very, very broad and pickable from eight year olds to eighty year olds of playing both male and female, all races.

8:43 Speaker 1 What about the injury reports.

8:46 Speaker 2 You know, the injury reports are over blown. It’s a lot of media hyping something that’s new, and people are getting hurt like any other sport. But if you look at the statistics, and I follow a lot of statistics and do my research, will have golf injuries then pickable.

9:02 Speaker 1 Okay. With regard to the injuries, A number of years ago you were involved with Saint Barnabas. Talked to me about that project with Saint Barnabas in l and M sure.

9:12 Speaker 2 So that was a great project and a great feel good project. We had the opportunity through relationships with Saint Barnabas Hospital. I had actually assisted them in acquiring land across the street from them that was designated to be a parking lot. When Mayor Bloomberg came in and he rezoned the area, they put in residential. So I approached

9:34 Saint Barnabas and said, you know, guys, it’s a little silly to build a parking lot here, parking deck structure, why don’t we look at building residential. So long story, very short because it was a long story getting to this point. We ended up building three different buildings about four hundred and fifty thousand feet four hundred and fifty units,

9:54 and we created a fifty thousand square foot ambulatory care facility in the base of the building at Saint Barnabas now owns and operates. But in addition to that, we put a rooftop farm on the roof that teaches people in the community how to build, how to build how to build and grow vegetables. We also put a teaching

10:14 kitchen inside the Saint Barnabas to teach local residents how to cook meals for the family instead of just buying from shops. And we also put in Bronx Works, which helps formerly homeless people get back on their feet and operate and get jobs and get into the community.

10:33 Speaker 1 When last question, how difficult is it to get financing today for both real estate and pickable.

10:41 Speaker 2 To say it’s hard is an understatement. When you look at financing right now, it’s really the survival of the fittest and the best product types multifamily can get financing. The challenge with that is in New York City, if you build to a seven and a seven and a half cap rate, you usually make a lot of money. Okay,

11:02 right now, interest rates are higher than that.

11:04 Speaker 1 Has the availability and money for pickaball it’s limited.

11:09 Speaker 2 But what we just finished up a friends and family round. So we’re raising all equity and it’s a combination of my equity, sports time equity, and some friends and family that have given us the equity. So we’re just growing from equity all on balance sheet and growing it.

11:24 Speaker 1 So I’d like to say I have the King of pickleball over here today, and I think it’s going to grow and continue. I like to thank Darren Hornett here and I’ll see you next week. Thanks a lot, Michael