Skip to main content

Forbes: value of Nets leaps 48%, to $530 million, upon Brooklyn move (were all those subsidies needed?)

From Forbes on the Nets
The annual Forbes list of NBA team valuations came out last week, and while the Knicks and Lakers got notice for being worth more than $1 billion, the 48% rise in value of the Brooklyn Nets, bringing the team value to $530 million even before assessing the full impact of the new arena and location, is astonishing.

Forbes reported:
The increase is due to higher revenue from television, new and renovated arenas, and the NBA’s new collective-bargaining agreement, which reduced player costs from 57% of revenues to roughly 50%. The labor deal also increased the amount of money high-revenue teams provide low-revenue teams.
Also, player costs went down because of the lockout, though the latter didn't affect some locked-in revenues.

Nets value leaps

The Nets were big winners:
The move from New Jersey to the $1 billion Barclays Center has transformed the team from one of the league’s financial laggards to one of its elite, with luxurious floor level suites that rent for $550,000 a year.
(Actually, the arena cost $845 million, as Forbes states elsewhere.)

Shouldn't this news make New York City and State officials rethink their pattern of agreeing to renegotiate deals for the Vanderbilt Yard and other subsidies/project benefits?

According to the Forbes page on the Nets:
The Nets posted the NBA’s second-biggest operating loss in their final season playing in Newark’s Prudential Center, but it is a new era for the Nets after their move to Brooklyn and the opening of the Barclays Center. Jay-Z, a small investor in the Nets, opened the arena to rave reviews with a series of eight concerts in the fall. The team is adding the NHL's Islanders as a tenant starting in 2015, which will help offset the arena's operating expenses. Russian billionaire Mikhail Prokhorov owns 80% of the Nets and a 45% stake in the arena, while real estate developer Bruce Ratner owns a controlling interest in the Barclays Center and will operate the arena. Ratner also owns 20% of the basketball team.
Note that the Nets are worth $292 million alone--near what each of Prokhorov and Ratner put in, albeit before paying for losses--based on NBA revenue sharing.

Now the revenue sharing figure may adjust down because of the Brooklyn move, but surely the team's value attributable to city and market size, to arena, and to brand--all far, far lower than the comparable figures for the Knicks--will grow.

In other words, Ratner and Prokhorov--buying into a new arena, and new market--made a very smart deal, however long it took. (They don't own the arena, just the operating company. Remember, the arena is "publicly owned," for purposes of issuing tax-exempt bonds.)

And since Ratner and parent company Forest City Enterprises have considered selling the team, now might be a good time to take some profits--or, they could wait and see the value grow even further.

(Here's one blogger who contends that, in the past, Forbes has actually undervalued teams, which sell for even more than estimated value.)

The value of TV

In The Celtics Score: How Boston's Value Doubled To $730 Million In Just 10 Years, Forbes explains how the Boston Celtics have done very, very well.
From Forbes on the Nets
In an era of ballooning television contracts fueling leaps in sports franchise values across every league, it’s easy to see why someone would–allegedly, mind you–offer up a ridiculous number for a team based in Boston, perhaps the most rabid sports market in the Western Hemisphere and home to a legacy that includes 17 NBA world championships. After ten years and hundreds of millions in added value under [Wyc] Grousbeck, the Celtics are primed to be flipped. You can’t blame someone for asking.

“It speaks to how valuable teams are becoming because of media rights,” he says. “Sports deliver the most valuable demographic to advertisers.”
This passage, in an article on The NBA's Billionaire Owners, doesn't quite make sense:
Wealthy owners certainly carry more value in smaller markets. Money for things like arena fix-ups, which [Paul] Allen largely financed for Portland’s Rose Garden, and brand new buildings to escape New Jersey in, which the Brooklyn Nets got thanks to [Mikhail] Prokhorov’s partial buyout of Bruce Ratner, can get done despite relatively limited cash flows.
Yes, Prokhorov bought most of the Nets and a 45% share of the arena operating company, but the arena relies even more on naming rights/sponsorships and other cash flow to pay back the $511 million in tax-exempt bonds.

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.