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A $12 million/year naming rights deal? Barclays paying $10M a year to the arena company, but investor memo cited $2M to the Nets

It's long been thought, at least since documents regarding the 2009 bond financing for the Brooklyn arena, that naming rights sponsor Barclays was paying $10 million a year, rather than the figures circulated in 2007: $20 million a year in unsupported hype, or $15 million a yearin better-sourced reporting.

September 2019 investor presentation
Well, that $10 million seems to be what they've paid the arena operating company.

But there's recent evidence, not previously reported, that the bank has been spending $12 million a year, with an additional $2 million  going to the Brooklyn Nets.

It's unclear whether that's been a consistent or fluctuating annual payment. 

Looking back: big hype

First, let's look back. When the naming rights agreement was announced in January 2007, it was widely reported--though never definitively sourced--that the 20-year deal was worth $400 million, or $20 million a year.

Actually, a better-sourced but mostly ignored article at the time, from the Wall Street Journal, stated, "Under the 20-year agreement, Barclays said it will pay about $300 million," or $15 million a year.

Before the arena actually got financed and built, original developer Forest City Ratner and Barclays twice renegotiated the deal. Though terms were not announced, given the recession and the switch to a smaller arena no longer designed by starchitect Frank Gehry, it was plausible that the deal was downgraded.

From CSL Market Analysis
The renogotiation: $10M to arena

And evidence confirmed it was.

As I wrote in December 2009, a Market Analysis by Convention Sports & Leisure (CSL), conducted at the behest of arena sponsor Brooklyn Arena LLC (controlled by Forest City Ratner), was included as part of bond documents prepared by Goldman Sachs.

It stated that the agreement would provide $10 million a year "to the facility" over a 20-year term, or $200 million.

But there was more to it, which I sometimes acknowledged, noting that "we know the revised deal is $10 million a year for the arena plus other unspecified payments to the Nets."

Indeed, as shown in the chart at right, "Certain fees under Naming Rights Agreement" were directed to New Jersey Basketball, then the corporate identity of the Nets.

No sum was ever attached to that general statement of "unspecified payments," so I--and others--have routinely referred to the naming rights deal as $200 million.

That, it seems, was unwise, given the wiggle room.

Then again, no further details surfaced. When a similar chart appeared in 2016 bond documents, upon the refinancing of the bonds, again the fees to the Nets were unspecified.

$12 million a year?

But a September 2019 presentation to arena bond investors, upon the finalization of the sale of the team and arena company from Mikhail Prokhorov to Joe Tsai, suggests that Barclays was paying $12 million a year: $10 million to the arena company and $2 million to the Brooklyn Nets.

September 2019 investor presentation

Uncertainties persist

What's unclear is whether Barclays has been paying $12 million a year all along, and/or whether the annual payments to the Nets relate to specific conditions or performance, and/or whether the sum has changed over time.

It's also unclear whether and how much those payments get suspended when the arena goes dark for a stretch, as since March 2020, because of the pandemic.

But it does seem clear that, as of now, "Certain fees" to the Nets are not insubstantial.

Note: in the original report, CSL acknowledged that "information provided to us by others was not audited or verified, and was assumed to be correct."

That said, CSL accurately reported the $10 million for the arena company. And it was not wrong to state that "Certain fees" would go to the Nets. It was just inadequately vague.

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