New financial documents confirm brutal year for Barclays Center, but uptick in Q2 ticket sales may be promising
Documents recently filed by the Brooklyn Events Center (aka ArenaCo), which operates the Barclays Center, confirm that the pandemic has continued to diminish revenue, leaving the cash on hand well short of being able to pay off bonds for arena construction.
But they also leave a hint that the return of Brooklyn Nets basketball--with higher ticket prices and a full house--may ultimately prove lucrative, along with the emergence of the WNBA's New York Liberty to help fill the schedule.
In the first two of the three most recent fiscal years, expenses exceeded revenue, and in the most recent, net revenue barely topped $2 million. That's well below the required $25.5 million in bond payments, part of the $37 million in PILOTs, or payments in lieu of taxes.
Some perspective
Each of the fiscal years, however, deserves an asterisk, and the re-emergence of tours for musical and other acts, assuming the Delta variant of coronavirus doesn't close things down, could mean a robust future for Barclays and other venues.
In the past two fiscal years, of course, the coronavirus pandemic closed the arena in March 2020, only to reopen in December, first without fans.
It reopened to Brooklyn Nets fans in February 2021 with a small crowd, at 10% capacity in March 2021 and started filling up for the playoffs in May 2021, with the first game at 14,391. The final game, in June, drew 16,287, 92% of the 17,732 capacity.
In the first of the fiscal years, FY 2019, the arena--as I wrote last October--was burdened by an onerous lease with the New York Islanders and contractual provisions that steered more revenue to the Nets. That also generated a separate reserve account to ensure those bond payments would be made.
Cash receipts
Now the Islanders are gone, and the Nets, with three superstars and a stratospheric payroll, have the juice to charge more for tickets--and expect a longer playoff run, compounding ticket sales.
There are hints of that in fourth quarter of the 2019 and 2021 fiscal years, as indicated below.
In 2019, the arena earned only $29.3 million in ticket sales in Q4, which included only four playoff games: two for hockey and two for basketball. In 2021, the arena earned $12.3 million in Q4, without hockey, mainly relying on Nets games, including seven home playoff games.
It's also worth noting that suite and sponsor installments have not recovered as much as ticket sales, which likely reflects the reported role of make-goods, or adjustments/credits given in place of a refund.
As I wrote last October, the arena company won't go bust. Billionaire Joe Tsai (who owns the team and ArenaCo), according to a February 2020 investor presentation, has signed an Operating Support Agreement with the NBA, that “guarantees Team and Arena obligations,” presumably re-assuring bond investors.
Overoptimistic predictions
As I wrote in March 2017, the 2016 refinancing of the arena bonds contained a chart, below, that predicted robust net revenue, approaching $49 million in FY 2019, and exceeding $50 million in the next two fiscal years.
That would leave a significant cushion to pay the PILOTs, and deliver a decent profit. That hasn't happened yet. But the presence of the arena certainly lifted the value of the Nets, so even if the arena doesn't make money (as of now) or make much money (in the future), the two should be seen as allied.
(The "Net Cash Flow" combined profit--net revenue minus profit--and reimbursement for O&M, or operations and maintenance. Such funds could thus support arena operations that previously would have come from the operator's pocket.)
Comments
Post a Comment