Brad Humphreys, writing at the IJSF blog, posts about Cal-Berkeley and KU's decision to try and mortgage some stadium seats. Here is my previous post on this subject. Here's Brad:
Sounds like a great deal for Cal.The article is full of hilarious quotes, like “During the life of the seat right, the owner can treat it like a house, selling it at a higher price than he paid” (I hear that idea has worked out really well for a lot of homeowners in the past couple of years), and it is worth a read. This approach is being used at UC Berkeley, where they plan to sell about 3,000 seats in the refurbished Memorial Stadium as part of the Endowment Seating Program (ESP), at the University of Kansas, and perhaps by Tottenham of the English Premier League. Cal is selling the $175,000 and $220,000 seats with a 30 year financing package, and the cheap $40,000 seats with 40 year financing. The article claims that about 2,000 have already been sold. Tottenham may try to finance the construction of a new 60,000 seat stadium with this type of financing.
The article is short on details, so lets run the numbers: $175,000 financed over 30 years at a 5% fixed rate of interest comes to $933.96 a month, or $11,207.52 per year. Over that thirty years, the “owner” would pay $161,224 in interest. Some information I found at a Cal web site says that the seats can be purchased for a “30-year annual payment plan of $11,994 to $15,421″ which is close to my 30 year/5% fixed calculation. There appears to be some tax benefits, and, of course, the payments are fixed over 50 years, so there will be no future ticket price increases to worry about. I don’t see how Cal can get access to the capital up front, when they appear to be financing the “mortgage.” A couple of curious things from the “Facts about ESP” page:
- “Annual renewable program – no long-term encumbrance or contract. Sign a typical pledge agreement. Enjoy Cal games as long as you wish and then return the seats back to Cal to be resold.” Translation: Easy repo terms!
- “The ESP program provides for transferability if fully paid for – gift to children or grandchildren or sell to a third party” Note the “If fully paid for” clause. I wonder what happens if you can’t sell your seat for the $175,000 you paid for it? Sounds like you owe Cal the full amount if the price declines.