Barclays Center net revenues again won't cover construction debt. However, ticket sales jump 50% over previous year. More tours + Ticketmaster effect?

According to the latest financial disclosures to bondholders from the Barclays Center operating company, the arena company still isn't earning enough profit to cover construction bonds--but a significant uptick in ticket sales may point to a better future.

The arena company made an $12.5 million profit, according to unaudited (and thus unofficial) statements, in the first six months of calendar year 2023, according to financial documents recently disclosed to bondholders. See screenshot above right.

That's well less than the $18 million reported during the first half of calendar year 2022. Then again, the Brooklyn Nets no longer had superstars. The fiscal year ends June 30.

That first-half result, coupled with nearly $4 million in profit (see below left) in the first half of the 2023 fiscal year, won't be enough to cover the arena's construction debt in FY 2023, which ended June 30. (In the similar period a year earlier, the arena barely broke even.) 

So the combined net revenue, less than $17 million, should mean that owner Joe Tsai will again have to dip into his pocketbook to cover the payments,.

For the fiscal year, the arena company owes some $38.65 million for required PILOTs, or payments in lieu of taxes, of which $27 million goes toward debt service on arena construction bonds.

Most of the rest goes back to the arena company to be used on operations and maintenance (O&M)--but it still must be paid. Billionaire Tsai has committed to backstopping any losses. 

Note that these statistics do not address the bottom line for the Brooklyn Nets, which Tsai also owns. 

It's amazing to me that, while the value of the arena company and Nets keeps soaring--a tribute to the long-term value plus perhaps also the tax benefits of losses--the arena company still isn't profitable. Keep in mind that the arena company doesn't pay property taxes; instead, they're essentially diverted to pay off cheaper tax-exempt construction bonds, given the site is nominally owned by a public entity.

FY 2023 cash receipts: ticket sales up, sponsor give-backs?

While the arena company has not yet issued its annual report, it did release an unaudited statement of cash receipts, indicating $140.6 million in FY 2023, a 50% jump from $93.6 million in FY 2022.

Notably, while suite and sponsor installments were somewhat stagnant at $26.8 million (versus $26.2 million in the previous year), ticket sales were way up, to $113.8 million (versus $67.4 million in the previous year).

The increase in ticket sales likely reflects revenues that are not counted in the current fiscal year, since the overall $140.6 million in cash receipts far exceeds the $98.6 million reported in annual revenues.

Also worth noting: the changeover from SeatGeek to Ticketmaster, along with a recovery in the concert schedule, may reflect increased ticket sales.

I last year speculated that the relatively low revenues from suite and sponsor installments reflected some credit, deferral of payments, or other financial givebacks to compensate them for lost opportunities during the pandemic. (Such "make goods" were announced in 2020.) Either way, those figures are well below pre-pandemic numbers.

Update: "strongly positioned" to grow

NetsDaily followed up, getting a statement from the arena operator that did not deny the reality but asserted, not without grounding, that things are looking up:

In a statement to NetsDaily, BSE Global, the parent company of the Nets and Barclays, expressed optimism that the arena — and the organization — is “stongly positioned” to grow.

“BSE Global and Barclays Center is strongly positioned for continued growth and to further deepen our unique position as a world class sports and entertainment organization in the heart of New York City. We’re excited about our future, and we have the right people and leadership in place to continue delivering unforgettable experiences in Brooklyn.”

FY 2022 cash receipts

FY 2021 cash receipts

The arena was mostly dark, with annual revenues $29.5 million, in FY 2021, which ended in June 2021. As noted, ticket sales picked up only in the fourth quarter.

FY 2020 cash receipts

The New York Islanders played part of their season at the Barclays Center, and there was a busy schedule of other events--at least until the pandemic shut down the arena in the fourth quarter of the fiscal year, which is the second quarter of the calendar year. 

The arena made a profit, but not enough to cover bond payments.

FY 2019 cash receipts

The New York Islanders played part of their season at the Barclays Center, and there was a busy schedule of other events, leading to $204.6 million in revenues. Still, the arena didn't make a profit that year.