How's Ticketmaster Plaza outside Barclays Center leased? State officials unsure of terms. But "temporary" plaza could be renegotiated, given arena value boost.

This is the second of three articles about the Aug. 8 Atlantic Yards Community Development Corporation (AY CDC) meeting. The first concerned the mystery topic discussed in Executive Session. The third concerned plans for Site 5 and community engagement about the project's future. 

Late in the meeting, AY CDC Director Gib Veconi brought up an issue related to the plans for Site 5, which involve moving the bulk from the unbuilt flagship tower once slated to loom over the arena (B1, aka "Miss Brooklyn") across Flatbush Avenue to create a giant, two-tower project at the parcel currently occupied by the big-box stores P.C. Richard and the now-closed Modell's.

Girls' basketball camp in July

In the 2021 Site 5 Interim Lease, as detailed in Exhibit K at right, Greenland got Empire State Development (ESD), the state authority that oversees/shepherds the project, to support a larger project than previously proposed, with the taller tower rising 910'.

Not only would the agreement, in its first clause, eliminate the B1 tower, it also would eliminate the Urban Room, the publicly accessible glass atrium attached to the tower and "make the current Urban Experience"--the plaza--permanent.

"If we we're now kind of obligated to accept this idea that the public plaza outside of Barclays Center has to be permanent," Veconi continued, "may I ask who owns?—ESD owns that, but is it actually at this moment being leased as part of the arena lease, the arena operators lease that space from you?"

(Note, on video, ESD staffers Joel Kolkmann and Arden Sokolow exchanging looks.")

 

"We believe so, we'd have to double-check," responded Kolkmann.

"It'd be nice to see an outline," observed AY CDC Chair Daniel Kummer, of the site boundaries and the public sidewalk.

Veconi moved that there be a presentation at the next AY CDC meeting. Though there was no pushback, the discussion went in a different direction, so it never came to a vote. Still, it's not unlikely there would be a presentation.

Transferring to public?

Director Ron Shiffman suggested looking at whether the plaza could be transferred to a public entity like the Parks Department or the Department of Transportation. ("Why not map it as parkland and charge a licensing fee?" I've argued.)

"If it's under a lease," Kummer cautioned, "that transfer would have to be subject to the lease."

Sure, but whatever lease exists today recognizes it at as a temporary phenomenon.

Kummer said they should get a more detailed understanding of the status of the space, "because it's obviously... more than just its air rights, it’s also its ground uses."

But the ground use is magically ceded to the arena company, while the air rights are owned by the master developer. That separation of interests was never contemplated or assessed

What's at stake

I'm not sure they got to the crux of the issue.

However much that parcel may be part of the premises leased to the arena operating company--the state owns the site to enable tax-exempt land and tax-exempt bonds--that situation is temporary.

As I've written, the plaza wasn’t expected to be permanent. It was implicitly predicated on the common ownership—no longer valid—of the arena operator and the project’s master developer, originally Forest City Ratner, and it would be replaced when B1 started.

Consider the Amended Memorandum of Environmental Commitments, part of the 2010 Development Agreement, the contract between ESD and the developer:

The urban plaza shall be completed and available for public use upon the date of the opening of the arena. Thereafter, [developer Forest City] shall operate and maintain the urban plaza in good and clean condition, until such time as the area occupied by the urban plaza is required for construction of Building 1 or the Urban Room.

That’s repeated in a 2014 update to the document, a Second Amended Memorandum of Environmental Commitments.

Since then, the arena operating company was taken over by Mikhail Prokhorov and then Joe Tsai.

No document addresses the divergence of interest.

A double bonus proposed

Consider this March 4, 2010 Declaration from ESD regarding the Arena Block:

(a) The Parcel B-1 Occupant shall notify the Arena Parcel Occupant at the time that it has determined that it is ready to proceed with (i) the construction of Building B-1 and or (ii) the modification of the public amenity comprising a plaza and other facilities in the portion of the Arena Parcel adjacent to Flatbush and Atlantic Avenues (the “Urban Experience”) into the permanent glass-enclosed urban room contemplated by the MGPP (the “Urban Room”) (such notice, a “Construction Notice”). 

...(i) No later than thirty (30) days after the receipt of a Construction Notice... the Arena Parcel Occupant shall designate a portion of the Arena Parcel and or the Arena Block (Non-Arena Parcel) Interim Lease Premises as the location for a temporary box office, other Arena facilities or portions of the Arena and/or entrance(s) for the Arena  

Instead, that intricate process will be avoided by simply eliminating B1, moving the B1 bulk across Flatbush Avenue, and leaving the plaza as is.

Unofficial image of proposed plans

That would be a huge bonus for both the developer, which doesn't have to build around a working arena, and for the arena company, which doesn't have to see its entrance and advertising signage compromised by construction.

That bonus is neither acknowledged nor reciprocated. As I've written, the huge boost in the value of the arena suggests a reassessment. 

Arena revenue from Urban Room

Yes, according to that Declaration, the arena company was supposed to benefit from Urban Room signage and use of part of it as a box office, plus gain naming rights:

(a) ESDC hereby grants to and establishes in favor of the Parcel B-1 Occupant a permanent, non-exclusive easement for the benefit of the Parcel B-1 Occupant and its Permitted Users for ingress to and egress from Building B-1 through the Urban Experience or, when constructed, the Urban Room (said Urban Experience or Urban Room, as applicable, the “Urban Zone"), subject to the following conditions:

(i) The Arena Parcel Occupant shall have the exclusive right to occupy any portion of the Urban Zone... as a box office or other related uses..., including without limitation, for a café, restaurant, retail and/or other service uses, the exclusive right to license the naming of the Urban Zone and any portions thereof, the exclusive right to install and ‘maintain signage in the Urban Zone and the right to retain all other economic interests derived from the Urban Zone not expressly granted to the Parcel B-1 Occupant in this Declaration.

Yes, that's a partial parallel to its more extensive use of the plaza. However, there were tradeoffs:

Except as explicitly stated otherwise in his Declaration, the Arena Parcel Occupant shall have the right to use and benefit from the Urban Zone as it sees fit, in is sole discretion, provided that such use does not affect the rights of the Parcel B-1 Occupant expressly granted in this Declaration in more than a de minimis fashion; provided that the Arena Parcel Occupant shall not configure or place obstructions in the Urban Zone in a manner that materially interferes with ingress and egress to Building B-1

It's fairly clear, however, that the open-air plaza, without sharing space with the tower, offers more benefits. 

There's a huge advantage to having the arena, rather than the tower, as a focal point.

Investing in upkeep, and revenue

Yes, the arena operator, currently Tsai's BSE Global, has invested in the parcel, for example in 2022 revamping the worn pavers and light fixtures, and belatedly installing outdoor--rather than the promised indoor--bike parking.

But the arena operator also has increased opportunity to sell sponsorships and advertising for what's now known, thanks to its fourth sponsor, as Ticketmaster Plaza.

Not only does the oculus serve digital ads and promotional purposes, but so does the additional "LED wall" Tsai installed in 2021.

Yes, it's a key crossroads and periodic gathering space, especially since 2020 protests when the plaza was, in the words of an organizer, "totally appropriated." It's also routinely truncated for promotional events and arena operations.

Modifying the lease

So, whatever's in the lease, it must be modified to make the plaza permanent. If so, New York State can consider changing the terms.

After all, times have changed, and the plaza has proved lucrative, helping fuel the increased valuation of the arena, which the New York Post said--for the purposes of Tsai's sale of a minority stake to the Koch family--was $1.5 billion, some 60% more than construction costs and well above any previous valuation.

The state has leverage. As I've written, in 2015, the New York Islanders moved to Brooklyn, with a purportedly “ironclad” 25-year lease (though they left four years later). That could’ve triggered a payment. 

After all, if a second professional team arrived at Barclays, according to the February 2005 Memorandum of Understanding (MOU) signed by the city, state, and original developer Forest City, “additional rent and other terms” would be negotiated.

But that document was nonbinding, and ESD ignored that pledge. Nor did any elected officials raise the issue when Tsai bought the WNBA’s New York Liberty and moved them to Brooklyn.

While the Liberty started slowly, they made the WNBA finals last year, saw their attendance grow, and were valued in Tsai's recent transaction with the Koch family, according to the New York Post, at $200 million, well above Sportico’s recent estimate of $130 million. Clara Wu Tsai aims for a $1 billion valuation.

Other inflection points

There are at least two other points of leverage.

One involves leveraging the discretionary (but automatic?) extension of the neon conceptual art installation, Belong/Brooklyn, which also, as I've argued, serves as advertising.

There's another, more significant piece of leverage--not that they'll use it.

I'll write about that shortly.

The point, though, is it's all political.