With BSE Global (Brooklyn Nets, ArenaCo, Liberty & more) valued at $6B, Joe & Clara Tsai set to reap $900 million in 15% sale to #sportswashing Koch clan

It's stunning: the Brooklyn Nets, Barclays Center operating company, and other assets in BSE Global are apparently valued at $6 billion--far more than previously estimated and nearly double the 2019 purchase price--upon the investment of a 15% non-controlling stake by the family of Julia Koch, widow of the late David Koch, a key right-wing political funder.

The apparent $900 million payday for owners Joe and Clara Tsai represents a huge profit after losing money on the team and arena company, and an astounding leap in valuation for a franchise once worth a fraction of this new investment. 

It also positions the Koch family, notably basketball fan David Koch, Jr., as future owners of BSE Global and the Nets, given the right of first refusal should the Tsais decide to sell. In February, when news of the potential Koch investment surfaced, the BSE Global valuation was reported at potentially $4.8 billion, and the Koch slice 10-15%.

The assets include the New York Liberty, the HSS Training Center, the Long Island Nets, the Nets Gaming Crew, as well as a part ownership in Glide, a winter skating rink at Brooklyn Bridge Park.

League approval coming

Sportico yesterday reported the transaction and valuation, citing an email sent to NBA owners, who must vote to approve it. They surely will do so, since the NBA has approved all sorts of owners with questionable business or political backgrounds, who accomplish #sportswashing as the headlines concern their team role rather than their record.

As one fan posted on NetsDaily, "Who harmed more people, [former Nets] Kyrie [Irving] posting a video on his IG [seemingly endorsing an anti-Semitic video] or the Koch’s investing millions into anti-climate change propaganda, anti abortion propaganda, racism denial, and anti DEI tactics??

As I wrote in March, I think the "tainted" funds from the new part-owner couldn't tarnish the spirit of the teams--as one local lawmaker suggested--given that the #sportswashing began long ago. Consider the owners: original developer Bruce Ratner (eminent domain, heavy-handed politics), Mikhail Prokhorov (Russian oligarch with "tricky" history getting rich in the post-Soviet world; Joe Tsai (Alibaba billionaire who defends China to the hilt).

Don't forget that Barclays, the arena naming rights sponsor, is an admitted felon (for fixing the foreign exchange spot market) and should have, as I argued, been ejected from the naming rights deal, given state strictures on dealing with such a felon. 

Remember, the arena's technically owned by a New York State entity, then leased to private parties to enable lower-cost, tax-exempt debt. So all the public charity would be dwarfed by actual tases.

How tainted is the money? I'd say somewhat. However, as NetsDaily put it, "Those who know the family say Julia Koch is not her husband politically and David Koch Jr. is not his father. But if you want to remain low-key, why buy an NBA team in New York City where your every move is put under the unforgiving microscope?"

Or, perhaps, why not put the money into repudiating some of the previous stances (as some foundations founded by robber barons have done).

It's for the fans, right?

For Koch and her three children, worth $65.2 billion (per Forbes), this is less than 1.4% of their net worth, and leaves ample room for other investments and philanthropy.

“I want to emphasize that both our families are committed to making the necessary investments in our franchises to build a sustainable winning culture,” Joe Tsai said in a letter to BSE employees cited by Sportico, “as well as in the people and physical infrastructure to bring the best of sports and entertainment to our fans and audiences.”

That means deeper pockets, perhaps, to recruit free agents and pay the NBA's "luxury tax," payments that are spread among team owners.

Also, I wouldn't be surprised if the Koch money helps fund some more gauzy--and not so transparent--community spending along the lines of the Tsais' Social Justice Fund, claimed to put $5 million a year over ten years into local initiatives.

Why invest?

Sportico's Scott Soshnick cited the enormous growth in NBA valuations, and the new growth in the WNBA's New York Liberty (now estimated at $130 million), but to my mind was overgenerous regarding the Barclays center, citing recent high grosses.

Remember, the issue is net income, and the arena has needed financial infusions by Tsai to cover required payments in lieu of taxes (PILOTs), including bond debt. That likely will end this fiscal year, but it still doesn't mean significant arena profits.

Rather, I suspect the Koch investment is a bet on the NBA, including future media rights and gambling revenues, as well as the rarity of an NBA asset in the country's media capital. (The New York Knicks would surely reap more). As Jay-Z once said, sports teams are like "paintings for billionaires," something few can buy.

Given David Jr.'s interest in the NBAS, observed NetsDaily, "So don’t be surprised if he lands a job or a series of them at BSE where he can learn the NBA trade."

Rising valuation

While Sportico valued the Nets and related businesses at $3.98 billion, the Tsais paid $3.3 billion for the team and arena company (and HSS)--or, by my calculation, closer to $3 billion after a rebate from Prokhorov.

That's an astonishing rise from the $300 million Ratner and investors paid in $2004. Then Prokhorov bought 80% of the team and 45% of the future arena company for $200 million in cash, plus debt and the willingness to cover losses

Ultimately, he spent—according to his deputy—less than $1.5 billion on the team and arena company, which implies a $1.5 billion profit on the sale to Tsai--though, according to a NetsDaily source, the profit was only $600 million.

No public gain

As I wrote, there have been multiple opportunities for public entities to get some piece of the astonishing upside, given that it was enabled by multiple forms of public assistance, including direct subsidies, tax breaks, below-cost land, tax-exempt financing, and eminent domain. Plus, of course, the ability to sell naming rights.

That seems even more stark today.

Also, as I wrote, it would be a tremendous irony to see Brooklyn’s “sports entertainment corporation” controlled, even in part, by Koch money.

After all, the libertarian philosophy behind the family fortune argued against all the direct and indirect public assistance that enabled the arena.

The press release

BSE Global Announce Julia Koch and Family as New Strategic Partners

19 Jun 2024

Julia Koch and her children David Jr., Mary Julia and John agree to purchase 15% of BSE Global

Joe Tsai, Clara Wu Tsai, and family will continue to retain full control of teams

BROOKLYN – Joe Tsai, Clara Wu Tsai and their family have agreed to sell a minority stake of BSE Global, the parent company of the Brooklyn Nets, New York Liberty and Barclays Center, to investors Julia Koch and her children. The transaction is not closed until final approval of the NBA Board of Governors. Terms of the transaction were not disclosed.

The investment comes after extensive and collaborative discussions between the two families. Joe Tsai will continue his position as the Chairman of BSE Global and Governor of the Brooklyn Nets and Clara Wu Tsai will remain Vice-Chair of BSE Global and Governor of New York Liberty. The business and basketball operations of BSE Global will continue to be managed by professional management led by group CEO Sam Zussman, Nets GM Sean Marks, and New York Liberty CEO Keia Clarke and GM Jonathan Kolb.

“We are pleased to welcome Julia Koch and her family to BSE Global,” said Tsai. “Mrs. Koch’s commitment to New York institutions is an invaluable addition to our franchise. The Nets have a special bond with the Brooklyn and broader New York communities, and we are looking forward to working with Mrs. Koch and her family as we increase investment in our franchise.”

“We welcome this new partnership with the Koch family,” said Wu Tsai. “We are excited to expand upon our shared commitment to New York City, especially the borough of Brooklyn, and continue to bring the very best sports and entertainment to this city.”

Julia Koch serves on the boards of Koch Industries, Memorial Sloan Kettering Cancer Center (MSK), The Metropolitan Museum of Art and Venetian Heritage. Mrs. Koch, along with her adult children, David Jr. and Mary Julia, and her high school-aged son, John, founded the Julia Koch Family Foundation in 2023 marking a new chapter while continuing the family’s lifelong commitment to philanthropy. Through the family network, their mission is to support transformative initiatives in healthcare, education and the arts, focusing on causes that impact the communities where the family lives, works, spends time and has pursued education. Mrs. Koch, David Jr, Mary Julia and John are based in New York City.

"Our family is honored to join the Tsai family in shaping, advancing and contributing to the shared vision for the future of The Nets, The Liberty and the broader Brooklyn community," said Koch.