Despite the arena hoopla, are they making their nut? Forest City's behind on contractually obligated revenues, and stated $4 million for Calvin Klein sponsorship claim looks doubtful
However--and this question was relevant even before the Nets didn't get lucky in the NBA lottery--it doesn't remove the question mark over whether the Barclays Center will bring in the revenue predicted from ticket sales and sponsorships.
After all, in late March parent company Forest City Enterprises reported that some "64 percent of forecasted contractually obligated revenues for the [Barclays Center] arena are currently under contract."
While that's a not insignificant rise from the 56 percent reported in December 2011, the developer has admitted that the 100% mark will not be met by the arena opening.
The next quarterly report arrives late this afternoon and it should factor in the announcement that Calvin Klein signed on as a Founding Partner, in a deal reported at $4 million a year.
So we'll see how much closer they are to the 100%.
However, as described below, it's doubtful that the Founding Partner deals are worth $4 million a year.
Yormark's optimism, but reasons for skepticism
Nets/Barclays Center CEO Brett Yormark has been typically optimistic. "Our balance sheet changes dramatically with the move from New Jersey to Brooklyn, he said in a 5/1/12 ESPN interview, noting that 75% of suites had been sold.
Indeed, there are many more revenue streams. "We've never really been embraced by a community," Yormark said. "Brooklyn has 2.6 million people. There's close to 6 million people within a ten-mile radius of the Barclays Center."
He said it was not necessary to convert Knicks fans: "Our goal is to own Brooklyn. If we can own Brooklyn, we'll be very, very viable in the marketplace."
While Yormark certainly has reason for optimism, he also has a track record, shall we say, of incomplete candor regarding the arena timetable.
Also, Yormark and the Nets have long claimed that the Barclays naming rights agreement is still worth $400 million, despite documentation that the number was cut to $200 million plus unspecified additional sums.
That means either Yormark was blowing smoke or the deals were renegotiated in the wake of the recession--or maybe even both.
The $100 million claim came in a 5/12/08 Sports Business Journal article, headlined Nets add 6 founding partners for Barclays:
The Nets have more than 100 million reasons to stay on course and move to Brooklyn.(Emphasis added)
While the organization’s Barclays Center project is mired in legal delays and reports surfaced recently that New Jersey officials were making a run to have the team move to the Prudential Center in Newark, Nets Sports & Entertainment President and CEO Brett Yormark said last week that he expects to break ground in the fourth quarter of this year and open the building in time for the 2010-11 season.
And as evidence, Yormark said the team has signed six new founding partners that join previously announced Jones Soda, representing more than $100 million in sponsorship commitments in the new building. The founding-partner deals are all five to 10 years in length and range from $1.5 million to $5 million a year, Yormark said.
Most are existing Nets sponsors: Anheuser-Busch, Cushman & Wakefield, MGM Grand/Foxwoods, ADT, Emblem Health and Izod, which has naming rights to the Nets’ current home court at the Meadowlands.
Reasons for doubt
A year-and-a-half later, however, there was little evidence of $100 million.
The 12/16/09 Official Statement issued by Goldman, Sachs for potential buyers of arena bonds identified only about $55 million worth of Founding Partner/Sponsorship deals: $11 million-plus a year over an average of five years, as noted in the graphic below:
Note that that's the "Arena Portion," which indicates potential room for sums to flow to the Nets, as well. But no additional sum was announced.
$4 million a year?
However, despite the recent report in the New York Post that Founding Partner "deals cost north of $4 million annually, said industry sources," the evidence from the bond document indicates otherwise. The screenshot below indicates both Founding Partners and Founding Sponsors.
Among the list below, current Founding Partners include Cushman & Wakefield, EmblemHealth, Foxwoods Resort Casino, and MetroPCS.
Now there are some new Founding Partners and Legacy Partners, as indicated in the PDF below--for example, Jones Soda ended its deal and Coke entered, and a whole bunch of smaller deals have been signed.
What's the current number? Unclear.
But "industry sources" should be taken with a grain of salt.