New: The Sports Mortgage

10 10 2009

You can now buy your own sports stadium seat the same way you can buy your own home. 

The “sports mortgage” is the latest attempt to increase funding for arenas as current sources of income diminish said Kevin Clark in his WSJ article, “At Long Last, the Sports Mortgage”

 “Public financing has been a failure for stadiums in the last half dozen years,” said Cal associate athletic director David Rosselli in the article linked above.  “I think this is going to be the future of how capital projects are done in sports”. 

Stadium seats go for as much as $220,000 at Cal (http://tinyurl.com/yk5sqq6)

Stadium seats go for as much as $220,000 at Cal (http://tinyurl.com/yk5sqq6)

Under the program, fans pay for their favorite seats over a given period, such as 50 years.  When this term is up and the seat is completely paid off, they become full owner until they choose to sell.   

Despite early hesitation from financial observers, many fans seem to find the option quite attractive: sports mortgages shield fans from season-to-season spikes in ticket prices and can also become a potential source of income in the long-run.

The University of Kansas and the University of California, Berkeley have already implemented the idea – and it is working, said Clark.  For five years Cal tried to raise the $300 million needed to renovate their Memorial Stadium, but came up with only $125 million.

The school then switched to the sports mortgage model, under which they only need to sell 3,000 seats.  Two-thirds of these seats have already been sold at prices such as $175,00 and $220,000 a piece over a 50-year term. 

Lou Weisbach, chief executive of the Stadium Capital Financing Group, came up with the idea in 2004.  He said in the article that professional teams are increasingly throwing around the idea as their official forms of revenue are depleting.

Since this seems to encompass the majority of professional teams as of now, it looks like the sports mortgage could be here to stay.  And good thing too; the sports mortgage model will not only raise money for struggling teams now, but over time as well.  It will keep fans in the seats for years to come, and this will surely boost future concession and ticket sales – a plus for both teams and fans alike.

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