Valuing Suites in Giants-Jets Stadium

Allan Kreda has a stunning datapoint today: luxury suites in the new Giants-Jets stadium in New Jersey are selling for $1 million each. Per season. Now, I know nothing about football, so I'm maybe not the best person to opine on this. But on its face, that's a crazy amount of money: more than $60,000 per regular-season game, although presumably there's a good chance that one team or the other will make the playoffs in any given year.

What explains these eye-popping sums? My best guess is that it comes back to the age-old question of what to get the man who has everything. Let's say you're a prime broker, and you want to entertain your hedge-fund clients. You can spend a lot of money on anything from fine food and wine to strip clubs, but ultimately your clients could and probably do spend their own money on exactly the same things themselves. You're just giving them more of what they've already got.

Watching a football match from a luxury suite, however, is not something that a hedge-fund manager can simply buy for cash. The suites are being sold on 10-year contracts three years in advance, and as I understand it they almost never change hands once they've been sold. So the hotshot hedgie of 2017 has really no opportunity to sit in one of these suites unless he's invited to by its owner – by the time the games are being played, the suite will have become a valuable asset which money can't buy. Perfect, for the prime broker which wants to differentiate itself from the crowd.

And then there's the Embedded Superbowl Option. If the Superbowl takes place during the life of the contract, the owner of the suite can basically name his price. Given what prime brokers do for a living, valuing an option like that should be child's play, no?