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The Barclays sale and the Prokhorov pullback: end of BSE Global's (over?)ambitious experiment as venue operator with "progression ladder"?

So, if the reported plan for Mikhail Prokhorov to sell the Barclays Center and Nassau Coliseum operating companies to Joe Tsai goes through, what would it mean?

Well, it's clear, as I explain below, that Prokhorov's BSE Global is retreating from an ambitious strategy to be an operator of variously sized venues--a strategy that has not gone too well.

A good deal, or not?

It's not clear whether the venue deal with Taiwanese-Canadian billionaire Tsai, who's already bought 49% of the Brooklyn Nets and is poised to buy the rest of the team, would be a good one for Prokhorov.

Maybe Prokhorov had no choice: the National Basketball Association prefers that team owners also own/operate arenas.

Maybe it doesn't matter, from a bottom line standpoint: Prokhorov will have made a nice profit on the Nets, and rehabilitated his image from "playboy oligarch" to "sports team owner."

From BSE Global web site
And maybe it was a good time to get out, as the Barclays Center has generated far more glitz than profits, and the Nassau Coliseum has both lagged behind predictions and is likely to be seriously threatened if a new arena at Belmont park is built.

And/or maybe it was a good time for Prokhorov cash out, to redeploy money in perhaps less volatile investment vehicles.

Reversal of (venue) fortune

However, it clearly signals a major, if not complete, reversal of an ambitious strategy to be a venue operator in multiple locations, as BSE Global CEO Brett Yormark told Billboard 4/3/17:
Yormark hopes Webster Hall and other AEG/Bowery Presents facilities become feeder venues for rising artists who aspire to play big arena shows at Nassau Coliseum and Barclays Center.
"We're trying to diversify our venue portfolio so we can connect with artists early and often," he says. "We have a progression approach that allows us to get to know them and let them understand the experience they'll have when they play one of our venues."
Well, Webster Hall reemerged this February. The improvements cost far more than the once-projected $10 million, Jay Marciano, the chairman of AEG Presents, told the Times, with a laugh: “I won’t give a specific number, but it was a multiple of that... Nothing gets done cheaply in New York City.”

Consider: BSE Global's plan to renovate and reopen the Paramount Theater, at the Long Island University campus in Brooklyn, was, as of 2015, supposed to take 24 months of work yet open a bit later, in 2018.

In June 2018, they finally started work, but with a projected mid-2019 reopening. Currently, the estimated re-opening remains "mid-2019." I wouldn't bet on it, though.

What about London?

In May 2018, BSE Global announced a new London chapter to its advisory board:
The London chapter will align experts in the sports and entertainment industry to bring marquee events to BSE venues as well as support BSE’s vision for global expansion and make BSE venues aspirational destinations for artists and fans around the world.
“I am excited to grow our global reach with the creation of the BSE Advisory Board’s London Chapter,” said BSE CEO Brett Yormark, who co-founded the Advisory Board.
As I reported 10/1/18, there were a couple of revealing moments in a 9/20/18 podcast interview on Bloomberg with Yormark.

"Our goal, starting with ownership, is to do business everywhere," Yormark said at about 18:49. "We've got a nice footprint here in New York metropolitan area, when you think of our venue business. Our goal is to expand beyond that. I think London is our next horizon, something we've been looking at for quite some time... an entertainment venue... small to mid-size."

Nothing has opened in London.

"Our vision on the entertainment side is in many respects to create a progression ladder up to the Barclays Center, and to a lesser degree NYCB Live," Yormark continued. "In order to do that, we've had to diversify our portfolio. About two years ago, we acquired Webster Hall, with our partners AEG. We also have the Downtown Paramount in Brooklyn."

"And the goal is: how do you connect with artists early and often in their careers. Let them start at Webster, then go to Paramount, and make their way right up to Barclays," he said. "So, to the extend we can replicate that that progression ladder, in great markets around the world that are nurturing great talent, we'd like to do that. We think the UK's a natural next step for us."

That progression ladder is being dismantled.

What about the real estate project in Nassau?

The BSE Global sale also raises questions, as noted by Long Island Business News, about a real estate partnership:
The sale to Tsai would also have implications for RXR Realty, which has proposed a $1.5 billion mixed-use redevelopment of 66 acres surrounding the Coliseum. RXR had partnered with BSE on the project, which still needs approvals from the Town of Hempstead.

Comments

  1. This doesn't make sense. Specifically economic reasons stated for Prokhorov disinvestment don't add up. The Nets and New York real estate prices keep rising significantly year to year. The wealthy, specially a man with 10B cushing is always willing to absorb small operating losses for the big picture. With Barclay's Center Islanders $50M albatross contract finally out of their books, they stood to finally make profits projected. The Nets are now a team on the rise with a winning culture and contending future. This looks like the exact wrong time to sell out. From your knowledge is there any evidence of political pressures on Prokhorov?

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    Replies
    1. Not sure about political pressure, though Henry Abbott, in his True Hoop coverage, suggests that much overseas investment by Russians is subject to such pressure.
      It may simply be that he can't keep the arena if he sells to Tsai, who's paying a huge amount for the team.
      I suspect that the arena may do better without the Islanders, but they weren't doing that well financially before the Islanders. In other words, high revenues but not high profits.

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