Conde Nast’s Megan Barnett reports on how the lion’s share of the new Yankee Stadium is apparently going to be financed. The idea is that the seats in the new Yankees Stadium will be sold in advance to investors who will own them in perpetuity. Morgan Stanley and its partner, a start-up entity called Stadium Capital Financing Group, are hoping that their structure becomes the accepted way of privately-financing sports stadiums. They have even applied for a patent regarding the concept, which seems like a stretch. Here’s how it would work:
Fans would buy seats for a designated period of time and finance them much like a mortgage. Pricing mechanisms can vary, but the most appealing option for buyers might be a 30-year loan with an annual payment equal to the current price of a season ticket. In exchange, the seat becomes real property, equivalent to, say, a condominium. The team (or university or other owner) receives the principal amount of the loan up front, to put toward construction costs.
This arrangement is different from seat licensing, which gives the holder the right to buy a season ticket for a specific seat. . . . Under [the] system, people own seats, not shares of a team.
Say, for instance, the current price of a season baseball ticket is $3,240. A 30-year loan at 6 percent interest with an annual payment of $3,240 results in a principal amount of $45,000. Even if the price of the seat doubles in the next 20 years, the seat owner still pays $3,240. Investors will have the option of making annual payments over 30 years, paying the entire amount up front, or something in between. Owners can also sell their seats at any time for market value, but rest assuredóthe team will get a cut of any profits.
At least one expert on financing stadiums, though, does not believe the financing technique will be all that earth shattering:
Roger Noll, a Stanford University economics professor who has written extensively about stadium financing, says that such an approach might make a dent in required public funding but will never replace it. Noll points out that most teams can’t afford to sacrifice future revenues in order to pay for their ball fields. “At the end of the day, stadiums are not good investments,” he says. “This isn’t going to be a revolution.”
H’mm, think this might work to defray the cost of this proposed boondoggle?
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Check out this excellent Jason Friedman/Houston Press article on new Rockets general manager, Daryl Morey. As noted in this previous post, I liked Les Alexander’s decision in hiring Morey, who is a stathead. That quality has been sadly lacking in the Rockets’ management suite over the past decade as the team declined from its mid-1990’s dominance. Now, if Morey can just find the Rockets an above-average point guard.
