Don’t miss Bill Virgin’s latest column in the Seattle P-I today. The subject is the Sonics’ sale, but check out the reference to Seattle real estate that he managed to slip in there:
Owning a sports franchise is like buying a Monet painting. The immediate payoff is psychological, not financial; in fact, ownership is likely to be a financial drain. A work of art doesn’t pay interest; it does generate expenses for security, insurance and preservation. The financial payoff comes when it’s sold — if a buyer can be found who is willing to pay more than the original purchase price and accumulated losses.
In other words, the Greater Fool Theory — which is what the Seattle real estate market is based on these days. People are paying outrageous prices for homes, even properties they know they’ll have to pour money into for renovation or upkeep, with the expectation that when it’s time to sell, they’ll be able to recoup their purchase price and those remodeling and maintenance expenses by finding a Greater Fool who will pay enough.
As long as an owner has confidence the pool of Greater Fools has not been drained, the issue becomes whether there’s enough psychological benefit from owning a team, a house, or a Monet to put up with the losses — and the wallet is thick enough to endure them. The former Sonics ownership group decided the trade-off wasn’t worth it, especially when a live one showed up on the doorstep, checkbook in hand.
I think Bill may well be the first person in the “mainstream media” in Seattle to actually openly admit that. Kudos, Bill.
(Bill Virgin, Seattle P-I, 07.20.2006)