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June 18, 2012
49ers PSL purchasers may be buying high
Mike Rosenberg of the San Jose Mercury News runs down the likelihood that seat licenses for the new San Francisco 49ers stadium will increase in value, and concludes that at the prices the team is setting, they don't look like a great speculative investment:
A review by this newspaper of other NFL teams shows that Pittsburgh Steelers fans, for example, have resold their seat licenses for up to 17 times what they paid originally by taking advantage of low initial prices and their teams' success on the field. But even buyers in big markets with die-hard fan bases like the Dallas Cowboys have lost more than $10,000 per seat after paying too much at the start and selling during losing streaks.
Those who buy high-priced seats in the Santa Clara stadium now, at the peak of Niners fever, may wind up like investors who last month bought stock in the super-hyped Facebook IPO, before shares famously plummeted.
"I think they're going to have a tough time making an easy buck buying when the market is high," said Greg Carl, managing partner with PSL Source, a North Carolina firm that brokers seat license sales. "I would not anticipate it shooting up out of the gate."
The problem here, such as it is, is that the 49ers have looked around at what other teams are charging for PSLs — and what fans of teams like the Steelers are getting on the resale market — and set prices accordingly high, which means anyone looking for a bargain isn't likely to get one. If the team does well, PSL values could rise; if it does poorly, as the Cowboys have, then buyers will be lucky to recoup their investment.
Keep in mind, though, that none of this necessarily means problems for the 49ers, or for Santa Clara taxpayers who are counting on those PSL sales to help pay off their share of stadium costs: Once the seat licenses are sold, the team and city have the cash, and it's then the problem of the people who've bought them whether values rise or not. And, of course, speculative value is only part of the reason for buying PSLs — you also get the right to buy tickets, which is why most people are going to be plunking down five-figure fees for these things. The only risk is if prospective PSL buyers read the Merc News and think, "Enh, if these things won't hold their value, I'll just skip getting tickets entirely." Given how they're selling so far, that doesn't seem too likely, but you never know how things will go once the initial rush of sales wears off.
The only information released about how psl sales are going is from the sales outfit doing the selling. No hard numbers have been released. It could be a lot of hype.
Given that it's a public agency that's on the hook for selling the psls (yes, there's a marketing group selling them, but ultimately Santa Clara's Stadium Authority is the agency selling the psls), one would think that the public would be entitled to know the details of how sales are going.
No real numbers have been released, so Santa Clara taxpayers don't know what's going on with the psl sales. And there's been no information about naming rights income.
Note that the loan paperwork was signed at the end of March, but there's been no news in the press or from the city stating that the loans have actually funded. The city's newsletter, which just came out last week, only trumpeted that the loans were signed by the end of March-no mention of the loans funding. People here are wondering if the lenders are trying to figure out exactly how the $950 million in loans would be refinanced and paid off. Wouldn't the lenders be entitled to exact information about psl sales and naming rights, given that those two sources are supposed to pay off a huge chunk of the construction loan debt?
And also note that the county auditor has disallowed $30 million in charges the Stadium Authority wanted to make to Santa Clara's RDA (RDA=redevelopment agency, which is now defunct.) The information about what the county auditor will and will not allow as legitimate charges to the former RDA is coming out of the RDA oversight committee meetings.
Note that had the RDA been dissolved before this whole stadium mess started, rather than in 2011, Santa Clara would have been less attractive as a target host city, because the siphoning off of property tax dollars in the RDA area for a stadium would not have been possible. (Looks like it's not possible now, based on the county auditor's decision. LOL)
Posted by SantaClaraTaxpayer on June 18, 2012 10:48 AM
Note that for most NFL teams the PSL doesn't give you the right to purchase specific seats, it's an obligation to do so. Preseason, regular season and playoffs, in perpetuity. Lose your job? Too bad...Pay up, sell the PSL at current "market" rates, or the team will take it back with zero compensation.
Posted by Mark on June 18, 2012 01:29 PM
Didn't the new PSLs for Santa Clara screw the existing holders for the current 49ers stadium out of their existing locations and push them away from the field?
It's quite possible that the high prices of the PSLs are a way to further push out the fans and get them some of that corporate moolah from the suckers?
@Cujo-Yep. There have been many complaints from long time fans quoted in the press about how they feel the 49ers have no fan loyalty. On the other hand, as a Santa Claran, we need the psl sales to make as much money as possible to pay down the $950 million in construction loans. It's only fair that fans who want to see the games live pay a pretty penny to help with the stadium construction debt.
Note that during the stadium campaign, when the 49ers owners wanted faithful fans to help push for yes votes, there was no mention made of psls. The anti-stadium subsidy group Santa Clara Plays Fair wrote about this issue and sounded a warning to fans about hefty psl prices that were coming fans way, but the fans wouldn't listen. So now if they want tickets to 49ers games in the new stadium, they have to buy a license to buy the right to purchase season tickets which are far more expensive than tickets have been in Candlestick.
Posted by SantaClaraTaxpayer on June 19, 2012 12:28 AM
I understand not publicizing PSL sales unless they are doing better than expected.
What's the likelihood of the Raiders moving to Santa Clara? I believe the 49ers have the final say on that. It's crazy that wasn't negotiated from the beginning.
Posted by Slinger61 on June 19, 2012 01:49 AM
Slinger,
I think you mean "not releasing [verifiable] information about PSL sales unless they are going better than expected".
Right now, there is publicity, like "don't miss out on this once in a lifetime deal!"
There Mercury did post secondary PSL markets for Dallas and NY. In NY only lower priced PSLs had a modest increase, but consider this fact in the wake of a dramatic SB win four months ago.
Dallas shows prices drops of over 75% in some instances.
Of course, if a stadium doesn't sell out, then PSLs in some instances are a worthless expenditure (like happened in Oakland).
The 49er faithful were (at least the ones publicly complaining) a naive lot IMO. However, I'm sure many of them would have been happy with a far cheaper SC stadium alternative if they were able to handle Candlestick.
Posted by santa clara jay on June 19, 2012 10:02 AM
@Cujo - The 'Raiders' were sort of hidden in the 49ers stadium Term Sheet and ballot language by stating 'one or two teams.' Even our former mayor expressed surprise in the press at the idea of the Raiders coming here after the stadium ballot measure passed.
The 'two teams' was negotiated - Santa Clara's pro-stadium city council gave away the store on that one. The 49ers alone (the Yorks) get to decide whether or not to sublease to the Raiders. Santa Clarans have no say and our city council doesn't get a vote. Again, the anti-stadium subsidy group, Santa Clara Plays Fair, put out the word that the Raiders could come too if the ballot measure passed, but $5 million in campaign spending from the 49ers owners for a town of less than 50,000 voters effectively drowned out the voices of reason. (They paid $350 per yes vote.)
Note that there has been no mention of the Raiders fans needing to buy personal seat licenses. Unlike the Jets/Giants, in which each team's fans had to purchase psls, apparently Raiders fans wouldn't have to buy seat licenses at the Santa Clara stadium. Also note that psls didn't work for the Raiders for the Coliseum renovation (in part because they had a time limit on them.) There's no reason to believe that psl sales would work for the Raiders this time around. Which leads to an interesting situation - if the Raiders do come to Santa Clara, and their fans don't have to buy psls, how will 49ers fans who bought psls feel? Taken advantage of?
Posted by SantaClaraTaxpayer on June 19, 2012 01:18 PM
When I first heard of PSLs I laughed and thought that nobody in their right mind would pay a massive surcharge up front without getting *something* other than a bad reason to keep buying tickets. Of course there's all sorts of nuts with individual fortunes and large companies that will pay. I just couldn't work out the math.
I grew up a few miles from Connie Mack stadium in Philly and walked to games. The Red Sox and the Cubs make do in older stadiums than Connie Mack. Yet some team that plays 8 or 9 real games a year wants *how much* from the taxpayers & ticket holders and you have to buy licenses too?
After seeing some of the deals (Cincy, Indy et al.) I even started believing the Cowflops stadium a bargain.
Is there a balanced study of how a city that lost a team fared over 10 to 20 years against the city that overpaid with cuts, perks and giveaways. Something like Baltimore vs. Indy where Baltimore never got a team again.
What the hell, if the guys pushing for stadiums can make pie-in-the-sky projections I'd really love to see something far more objective for the "losing" city. LA would be a great example but it's probably too big to show anything you could make a convincing case. Even a "what if Green Bay moved to San Antonio and got an Indy-style deal" would be interesting.
Posted by Cujo on June 19, 2012 06:54 PM
I doubt the effect here of losing a team would amount to much. There are an awful lot of alternative things to do in the Bay Area. I think there's a good possibility that NFL football will be less popular in 10-20 years here then it is now, due to changing demographics principally.