Estimating Market Rent for Major League Stadiums

By Kinnard, William N., Jr.; Geckler, Mary Beth | Real Estate Issues, Summer 1999 | Go to article overview

Estimating Market Rent for Major League Stadiums


Kinnard, William N., Jr., Geckler, Mary Beth, Real Estate Issues


NTRODUCTION: BACKGROUND TO THE RESEARCH

In April 1997, an article titled "Team Performance, Attendance, and Risk for Major League Baseball Stadiums,"' was published as part of the Real Estate Issues series on counseling opportunities in the major league sports industry. That presentation noted the growing importance of venue revenues2 to both the owner of the stadium (typically a municipality, county, or public authority) and the owners of the team franchise. The emphasis in the article was on Major League Baseball stadiums, although many venues were dual-sports facilities housing National Football League (NFL) teams as well.

The reported findings demonstrated the importance of gameday ticket revenues to both the stadium owner and the franchise. In recent years, however, gross ticket revenues have represented a declining percentage of total venue revenues. Not surprisingly, on-field performance by Major League Baseball (MLB) teams was a major determinant of attendance, which determines revenues from ticket sales as well as concessions and parking. Moreover, the dollar volume from sales of short-term licenses on luxury boxes/suites and club seats tends to fluctuate directly and nearly proportionately with on-field team success (particularly in the preceding year).

Within the framework of subsequent assignments to value leasehold/possessory interests of major league teams in both MLB and the NFL, we have been required in each instance to estimate market rent. Moreover, we served as consultants in the 1989-1990 property tax appeal of SkyDome in Toronto, as well as its 1995 sale. In both those cases, the identification of market rent payable by the tenant MLB franchise was a major issue.

This manuscript presents the results of analyzing the body of lease and rental data for MLB, NFL and dual-sport stadiums. The indicated market rent model derived from that analysis is also shown.

FEASIBILITY ANALYSIS AND VALUATION OF LESSEE INTERESTS

Table 1 lists the new MLB and NFL stadiums built in the 1990s, major renovations of existing stadiums, and new construction under way or planned as of 1998. Virtually every existing or planned MLB and NFL venue is on that list. At least one feasibility study was conducted for each project, whether completed, in process, or proposed. Feasibility studies are necessary to obtain project financing, much of which takes the form of debt plus "equity" participations represented by the sale of such intangibles as naming rights, exclusive product sales rights, or advertising rights in the new or renovated stadium. Indeed, sale of these intangibles has provided a major proportion of the up-front money that constitutes "equity" in recent major league stadium construction projects.

In any feasibility study, anticipated revenues are necessarily forecast (often optimistically). One of the major elements of revenue, but far from the only source, is the rent to be paid by the tenant franchise for the use of the stadium. Because the lessor is typically a public body, that rent is required to be "market rent," which is defined by the Appraisal Institute as, "the rental income that a property would most probably command on the open market, as indicated by current rentals being paid and asked for comparable space, as of the date of the appraisal."3

Over 30 MLB and NFL leases were studied as part of the research on which this article is based, to identify what (if any) market pattern of rentals exists. Information on other leases came from the publication, Inside the Ownership of Professional Sports Teams: 1999.4 Both NFL and MLB leases specify and distinguish carefully between "rent" paid by the lessee franchise and revenue-sharing by the stadium owner (nearly always a public body) with the lessee franchise owner. These leases are signed well in advance of construction, and provide an important basis for acquiring both equity participations and debt financing. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Estimating Market Rent for Major League Stadiums
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.