Skip to main content

Suite-intensive arena promises millions in revenue

The city would earn only about $1 million a year in new tax revenues from the Brooklyn arena, according to 2005 analysis by the Independent Budget Office. (And that’s been criticized by analyst Neil deMause for too much optimism; depending how much of the city's seemingly doubled Atlantic Yards contribution were attributed to the arena, the cost-benefit analysis could look even worse for the city.)

But developer Forest City Ratner and other Nets owners stand to earn millions more from lucrative new suites, helping pay for the country’s most expensive arena ($637.2 million) by constructing nearly six times as many suites as the current Continental Airlines Arena, built in 1981.

Suites on the block

And those suites are on sale. Yesterday’s Sports Business Journal (subscription required, but there’s a summary on Nets Daily) reports that the Nets are selling suites to team sponsors and investors, with the sale open to the public around Labor Day. (Would the legal challenges be over by then?)

The suite business offers big profits, and has been the impetus for numerous sports franchises to seek sleek new facilities.

Suite-heavy arena

How would the arena compare? While no one from the Nets would comment to the publication, an audit conducted by KPMG on behalf of the Empire State Development Corporation offers this analysis:
[Forest City Ratner] assumes that approximately 162 of 170 suites will be sold annually through a combination of first ring suites, second ring suites, courtside suites, and loge boxes. The suite price includes the price of tickets to NBA games and approximately 25 percent of other events held at the arena. In addition, it is assumed that three of the four party suites, each with sixty suites, will be sold for all NBA games on an annual basis.
Given the competitiveness of the market, both the total number of suites and the average price per suite assumed by FCRC appear to be on the high end relative to other similar arenas. NBA arenas average approximately ninety suites. Facilities in Chicago, Detroit, Los Angeles, Dallas, Toronto, and Philadelphia are the only ones that offer more than 125 suites. Other than the Palace at Auburn Hills in Detroit, all of these facilities host both NBA and NHL teams.


The report notes that, while there are now about 1100 suites in the New York/New Jersey market, new or renovated facilities would add to that number, “which will further increase the competitiveness of corporate support.” That’s an argument for starting before those new baseball stadiums are built.

Revenue estimates

How much would the suites cost and how much would the owners earn? The developer assumes a range of $58,000 to $580,000, while KPMG notes that the market ranges from $65,000 to $450,000--and adjusts the Nets' top suite price to about $464,000.

How much would the developer earn? That’s tough to calculate, because we don’t know how many suites would be sold at different price points. At an average of 30% of the top price, the average suite would cost $139,200. At 40%, the cost would be $185,600. At 50%, it would be $232,000.

If 162 suites were sold as assumed, the annual revenue for each scenario would be $22.5 million, $30.1 million, or $37.6 million. In other words, it would more than complement the approximately $20 million annually that the developer would get from the Barclays Capital naming rights deal, estimated at $400 million over 20 years.

And Forest City Ratner might get a great jump on paying back much--maybe all--of the arena construction costs. As I noted, the state will offer Forest City tax-free bonds to construct the arena. At a 5% interest rate, $637.2 million would mean payments of about $41 million a year over 30 years, or less than the combined Barclays and suite revenue. (That's if my interest rate and suite revenue assumptions are in the ballpark, so the issue deserves further scrutiny.)

The Sports Business Journal article offers a brief mention of the KPMG report, citing a New York Post mention, but not the detail above.

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …

"There is no alternative": DM Glen on de Blasio's affordable housing strategy

As I've written, Mayor Bill de Blasio sure knows how to steer and spin coverage of his affordable housing initiatives.

Indeed, his latest announcement, claiming significant progress, came with a pre-press release op-ed in the New York Daily News and then a friendly photo-op press conference with an understandably grateful--and very lucky--winner of an affordable housing lottery.

To me, though, the most significant quote came from Deputy Mayor Alicia Glen, who, as the Wall Street Journal reported:
said public housing had been “starved” of federal support for years now, leaving the city with fewer ways of creating affordable housing. “Are we relying too heavily on the private sector?” she said. “There is no alternative.” Though Glen was using what she surely sees as a common-sense phrase, it recalls the slogan of a politician with whom I doubt de Blasio identifies: former British Prime Minister Margaret Thatcher, a Conservative who believed in free markets.

It suggests the limits to …