Earvin “Magic” Johnson did it all on the basketball court: college champion, NBA champion, Olympic champion, one of the greatest players in the history of the sport. But now it is Johnson’s spectacular performance in the business world that inspires professional athletes. His success in establishing businesses in inner cities — and the relentless energy and charisma he uses in recruiting like-minded investors — has persuaded other athletes to embrace the Magic formula.
Los Angeles Lakers center Shaquille O’Neal, Dallas Cowboys wide receiver Keyshawn Johnson, Toronto Raptors guard Jalen Rose, and Terrell Brandon, who last month retired from the National Basketball Association after 11 seasons, are among the most visible of the next-generation investors influenced by Johnson.
Each has invested six- or seven-figure sums in housing projects, restaurants and shopping centers in poor, urban areas — investments that require far more emotion, time and energy than simply purchasing stocks and bonds and watching the returns accumulate.
“It’s absolutely imperative to Earvin that more players become more involved in their communities and expand their options after their playing careers,” said Ken Lombard, president of Johnson Development Corp. and Johnson’s key business partner. “We’ve shown there is a path that can be followed that is rewarding to both yourself and your community, and it’s been an ongoing dialogue with guys who want to position themselves for this same kind of transition.”
It is a transition Johnson made in astonishing fashion.
Johnson led the Lakers to five NBA championships, redefined the point guard position and ushered in an up-tempo, appealing brand of basketball that most fans wish still existed — and he accomplished it all with an endearing smile that made him a corporate favorite for endorsements.
He retired as a player — for the second time — in 1996 and now is an executive vice president and part owner of the Lakers. He also is perhaps the country’s most successful businessman specializing in inner-city development projects.
Johnson’s massive portfolio, with an estimated value of more than $700million, covers an ever-expanding spectrum that includes commercial real estate, a chain of movie theaters that bears his name, TGI Friday’s and Starbucks franchises, fitness centers and mortgage brokerages.
Locally, Johnson’s investments include eight Starbucks coffee shops, three Washington Mutual home-loan centers and a movie theater slated to open at Landover’s Boulevard at Capital Centre. All are located in primarily black or underdeveloped urban areas.
The motivation is consistent among those inspired by Johnson: Provide an economic spark to the often-downtrodden neighborhoods in which they grew up or similar areas. But rather than simple charity, Johnson’s hefty net worth is showing that good community action and profitable business can go hand in hand.
“Magic has told me for a long time, ’Start owning stuff,’” O’Neal said. “I’ve been watching what he’s been doing. Magic has led the way for athletes after basketball. One thing I don’t do is call it ’giving back.’ I call it doing what I was taught.”
Backing words with action
At first blush, Keyshawn Johnson appears to be a stereotypical, me-first modern athlete.
He plays the National Football League’s quintessential prima-donna position, is regarded as something of a loudmouth and has a history of petulant behavior. But he also is one of sports’ most active investors working in inner cities. The native of South Central Los Angeles invested in the Chesterfield Square Mall, the first shopping complex to open in that part of the city since the Rodney King riots in 1992.
Keyshawn Johnson, through his company, Keyshawn Capital Development LLC, is a partner in Marlton Square, a $123million mixed-use development in the Crenshaw area of Los Angeles that will include single-family homes, housing for senior citizens and a large shopping center.
“This has always been a core investment strategy for Keyshawn,” said Jerome Stanley, his agent. “Ever since the beginning [of his pro football career], he has wanted to reinvest in his community. It’s not the only type of project he does, but it is very, very important to him.”
The connection to Magic Johnson is central to Keyshawn Johnson’s work. The two men talk regularly. Magic Johnson owns a Starbucks shop at Chesterfield Square. Marlton Square will connect to a Magic Johnson Theatre complex via a pedestrian walkway.
“They talk whenever they can. There is definitely a common purpose here,” Mr. Stanley said.
Keyshawn Johnson does not have a background in finance, law or accounting, and he requires the accounting and legal help of Mr. Stanley and others in his efforts. But like Magic Johnson, Keyshawn Johnson contributes more than money to his deals. He brings star power, confidence and swagger — a potent combination that lures retail tenants, lenders and other needed parties who otherwise might be leery of committing to an inner-city development project.
“Keyshawn’s a smart guy, and he’s working very hard to set himself for a long [business] career,” Mr. Lombard said. “He’s realized that one guy can’t beat a whole team. And he’s done what you have to do: surround yourself with your own team of professionals, and that team may not include your buddies.”
Other athletes have similar stories.
Brandon returned to his native Portland, Ore., where he has invested in commercial real estate, apparel retail stores and a barbershop. His investment plans include apartment housing, perhaps a recording studio and, like Magic Johnson, a Starbucks.
O’Neal five years ago invested in a real estate development near the Newark, N.J., projects in which he lived as a youth. In 2002, the NBA superstar became a general partner in American Housing Preservation Corp., a Maine-based company that purchased nearly $100million worth of low-income housing in Colorado. The seller, Urban Inc., insisted as a condition of sale that the property not be turned into market-rate apartments and condominiums.
“I’ve had a lot of opportunities to do stuff [in Los Angeles],” O’Neal said. “But I’m not going to live here when I’m done playing. So I’ve decided to do some of those things where I’m going to live: Texas, Jersey, Denver, Florida.”
Unique business, concerns
The Initiative for a Competitive Inner City, a Boston-based group that advocates investment in such urban areas, estimates that inner-city areas hold $85billion of retail spending power. Inner-city stores often outperform suburban outlets on a revenues-per-square-foot basis. When inner-city stores are staffed by nearby residents, shopper loyalty has proven particularly strong.
With many suburban areas near a saturation level of stores and housing, inner-city projects are a way for retailers and developers to keep expanding.
“When you combine financial backing, celebrity status and the knowledge to work through the development process, people do pay attention,” said Rep. Maxine Waters, a California Democrat who has watched much of the two Johnsons’ work occur in her Los Angeles district. “They’ve shown that dollars will indeed be spent [by consumers].”
But such efforts are not for the faint of heart. Banks often are reluctant to provide financing for development in these areas, and political and regulatory red tape abounds. And in the case of retail and restaurant franchises, inner-city investment often requires venturing away from market-tested, preset menus to include more ethnic offerings.
Magic Johnson, for example, tried to develop the same Crenshaw property now being developed by Keyshawn Johnson in the Marlton Square project. The property, formerly known as Santa Barbara Plaza, steadily declined over the past 25 years, and occasional public-sector attempts to revitalize it stumbled at the start.
Magic Johnson attempted an ambitious redevelopment that combined name-brand retail stores, including large Wal-Mart and Home Depot stores, and housing. But after failing to procure financing, political support or tenants to anchor the project, he withdrew from the effort.
There is also a headlong rush among many athletes, particularly younger ones, to emulate Magic Johnson. It’s something many financial advisers who work with pro athletes seek to slow.
“These athletes all have instincts to help in some way. It’s very natural: Many of them come from humble backgrounds,” said Femi Shote, an adviser with Asset Harvest Group in McLean. “But direct investment in a business, any business, is very tough. It’s much harder than stocks and bonds. Two-thirds of all business startups are going to fail, so it takes a lot of time and maturity to direct one’s energy in the right places.
“These types of [inner-city] projects require special skills, a lot of patience and maturity. Magic Johnson has done tremendous things, and a lot of people look up to him. But what he’s done is not easy to duplicate. Even some of his ideas didn’t work.”
Magic Johnson is now making himself available to athletes, particularly NBA players, on a regular basis for counseling on post-athletic business careers that involve inner-city investments. And at the invitation of the NBA Players Association, he spoke last summer to a large group of young players.
“It’s very difficult to do this kind of work while you’re still playing,” Mr. Lombard said. “We’re seeing it, and it is possible to do your homework and start to position yourself while still an active player. But what we’re trying to get across is that with what they’ve achieved already, there are real options for these guys and, usually, a lot of life left.
“They need to think these options through. And when they do, the results can be very powerful.”
• Staff writer John N. Mitchell contributed to this report.
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