Skip to main content

"Doing it for the kids"? Sports biz reporter, after AY announcement, dissects the rhetoric

On 12/12/03, the same day that Forest City Ratner CEO Bruce Ratner appeared on WNYC radio's Brian Lehrer Show, so too did Matthew Futterman, sports business writer for the Star-Ledger of Newark, who made the necessary but obvious point that the developer's rhetoric about "doing this for the kids" or "for the community" shouldn't obscure the basic drive for profits.

Futterman first explained that New Jersey planned to spend $150 million to build a rail link to the Meadowlands--which is finally coming next year-- and hope that would entice New Jersey developer Charles Kushner, and his partner, then-Senator (and now-Governor) Jon Corzine, to buy the team and keep them in-state.

Futterman explained that multi-millionaire Corzine was serving more as a state supporter than a businessman: I'm not sure he's all that happy ...He’s used to making money, not losing it, and sports teams generally lose money.

BL: Well, part of the Brooklyn argument is that New Jersey has not supported the team, even when it’s been the Eastern Conference champions the last two years. They don’t sell out, like the hapless Knicks have through their lean years, in recent times, why is it a good business decision for any team owner to even stay in a situation like that?

MF: Every businessman who buys a sports team thinks that he’s made money elsewhere, thinks he’s going to make money on this… You’re completely right… they haven’t made any money. They’ve certainly been a financial failure, they’ve only won the last couple of years. And there’s any number of reasons why they haven’t done well financially...

Poor location

BL: What do you think the main reasons are, the location of the Meadowlands...?

MF: The location doesn’t help. It’s not that easy to get to. It’s not that fun to go to. There’s not very much going on… but the Nets were a terrible team for a really long time and a terrible way to spend whatever disposable income you had. Now they’re a pretty good team… but even with them being a good team, it’s still incredibly expensive to go see one of these basketball games, if you’re a regular person. With the entertainment options in this market, I just don’t know that it makes a ton of sense for people to spend their money on going to a December basketball game when maybe half the guys on the court actually feel like playing that particular night.

Still, if the team were to play in a transit-accessible arena such as in Newark or Brooklyn, it would be easier to fill seats.

Doing it "for the community"

BL: And what Brooklyn is going through now, in terms of debating the merits of this, Newark has gone through in the last few years.

MF: It was very funny. I mean, I like Bruce Ratner very much personally. He’s a very engaging person, he’s very enthusiastic, and I think he’s sincere, he has his heart in the right place, but it’s amazing how similar he sounds to the people who wanted to build the arena in Newark five years ago, in terms of, y’know, 'we’re doing this for the community, and we’re doing this for the kids, it’s important for them.'

Is it really important that you have a basketball team right there? And, y’know something, people are doing this to make money. He’s going to make a ton of money if he gets the arena and he gets to build this development, he’s going to make so much money that he can afford to pay nearly 300 million dollars for a basketball team that probably won’t make money. He’ll make money on the apartments and and he'll make money on the the office development and if he loses 15 to 20 million dollars a year on the basketball team, which is certainly what the basketball team has been losing in the past couple of years, it’ll be just fine.


Given the lucrative naming rights deal with Barclays Capital and the plethora of luxury suites, Forest City Ratner likely would make good money on the arena.

Profits in the new location?

BL: Why not think, with the central location [in Brooklyn]… he wouldn’t make money on the team, assuming they play well?

MF: Because it’s so expensive to run a basketball team. I mean, right now, the Nets’ payroll is up over 60 million dollars. Look, God bless him if the Nets are champions and they sell out every game. But even the teams that do really well on the court don’t necessarily make money on the court. The real money in sports, as it’s always been, has been in the increased value of the team each year. The game is to lose less money than the value of the team goes up… And then sell it. Meanwhile, you’ve had a nice tax write-off each year, to offset income that you have from your other businesses.

Hmm... does this mean the Nets might be for sale once they move?

BL: Is that the case around the NBA?

MF: That’s the case in sports everywhere… There’s very few teams that actually make money. Look, he may make a lot of money. He’s got a—he could have a great location. It’s going to rely on the Knicks’ formula, which is to have all these big companies that are housed in New York to spend a lot of money on tickets and on luxury boxes. That’s where all the money is, it’s in the corporate seats. Because… you can’t afford to go to basketball game regularly. It’s a 200 dollar night out for me and my wife.

AY sans arena?

BL: So it sounds like… that some people in the community don’t mind some of the other pieces of the development project, although I’m sure many do object to high office towers… but don’t want the Nets. And you’re saying he could make more money if he just built the other stuff without the Nets.

MF: The problem is that the arena is the draw for the office towers, it makes it a good place to be, it makes–the arena makes it happening. That’s what these arenas have become in a lot of cities. Right in the immediate area of the neighborhood, there’s a hotel, there’s an office building, in this case there’s probably not going to be much of a parking lot. There’s this other ancillary development. It doesn’t spread out more than a couple of blocks from the arena. So this idea that an arena’s going to remake a whole city has been proven false at this point. But right in the immediate area… they call them the real estate play--there’s a couple of real estate plays that always do very well.

Well, there would be quite a few parking lots. And the arena would be not just a draw for the "real estate play" but also a lever for government subsidies and the exercise of eminent domain.

Creating jobs and revenue

BL: Do you have an opinion, as a sports business reporter, as to whether stadium and arena developments generally create jobs for the community?

MF: There are certain jobs that get created; there are certain people who have to hand out hot dogs and take tickets…. But I think the larger public policy question is whether that’s really a good idea to allow developers to keep the money that their developments generate in taxes… I’m not sure what the answer to that is… But, y’know, if a sports team owner gets it, then who’s to say that Bear Stearns isn’t going to go up to—I just use Bear Stearns colloquially as any other businessperson... who’s to say they’re not the next people to go to the state and say, 'we want to build this building, but we want to keep all the taxes it generates.' He didn’t mention income taxes. There’s a 66 million-dollar payroll... What’s the city income tax, plus the city income tax on all the visiting basketball players. It starts to be a pretty big number that they get to keep.

Actually, that tax increment financing (TIF) has not been deployed. But the question remains as to why certain businesses get subsidies and others don't.

It's about the Benjamins

BL: Who gets to decide which bidder gets the team?

MF: Ray Chambers and Lewis Katz, who are the principal owners.

BL: Want to make a prediction?

MF: Right now, I’m going to go with the guy who’s put the most money on the table, that’s Bruce Ratner, I mean, it’s an auction.

BL: So they [Chambers and Katz] don’t care about New Jersey?

MF: Probably about as much as Walter O’Malley cared about Brooklyn.

Or, to quote Ratner's interview in the 6/26/05 New York Times Magazine: We were the highest bidder for the team. Like so many things in life, it was just a matter of money.

Comments

Popular posts from this blog

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…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…

Former ESDC CEO Lago returns to NYC to head City Planning Commission

Carl Weisbrod, Mayor Bill de Blasio's City Planning Commission Chairman and Director of the Department of City Planning, is resigning,

And he's being replaced by Marisa Lago, currently a federal official, but who Atlantic Yards-ologists remember as the short-term Empire State Development Corporation CEO who, in an impolitic but candid 2009 statement, acknowledged that the project would take "decades."

Still, Lago not long after that played the good soldier at a May 2009 Senate oversight hearing, justifying changes in the project but claiming the public benefits remained the same.

By returning to City Planning, Lago will join former ESDC General Counsel Anita Laremont, who after retiring from the state (and taking a pension) got the job with the city.

Back at planning

Lago, a lawyer, in 1983 began work as an aide to City Planning Chairman Herb Sturz, and later served as the General Counsel to the president of the NYC Economic Development Corporation, Weisbrod himself.