The arena company benefits from the temporary plaza, likely more than with the unbuilt Urban Room. NY State seems ready to make it permanent, with no reciprocity.

This is the fourth of five articles about the Sept. 26 meeting of the advisory Atlantic Yards Community Development Corporation (AY CDC). The first concerned BSE Global's plans to use the closed Modell's store for a youth basketball program. The second concerned the expected entry of Related Companies and the obligations for affordable housing. The third concerned plans for a giant, two-tower project at Site 5. The fifth concerned plans for a Quality of Life meeting.

In my coverage of plans for Site 5, catercorner to the arena, I noted that the presentation to the AY CDC by Empire State Development (ESD), the state authority that oversees/shepherds the project, used loaded language to describe plans in a document called Exhibit K, part of the parcel's interim lease. 

The giant two-tower project at Site 5 would involving transferring bulk from the flagship tower (B1, aka "Miss Brooklyn") once planned to loom over the arena, across Flatbush Avenue to Site 5, longtime home of P.C. Richard and the new-closed Modell's.

That parcel was long slated for a substantial building in itself: 250' and 439,050 square feet. That's barely 27% the height of the Site 5 proposal, 910', and 35% of the bulk, at 1,242,000 square feet.

Eliminating the Urban Room, the required atrium attached to the B1 flagship tower, they would thus "preserve" the plaza, formerly known as the Urban Experience.

The term "preserve," I wrote, suggests that ESD would be conserving something civically valuable rather than also making "permanent"--the actual language in Exhibit K-- a space that's key to arena operations and revenues, and costs the arena operator nothing beyond maintenance.

Remember, the Amended Memorandum of Environmental Commitments, part of the 2010 Development Agreement, an updated in 2014, states:

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.

Why not some public gain?

I've argued that the space now known as Ticketmaster Plaza, on its fourth sponsor, is particularly valuable to the arena operating company owned by billionaire Joe Tsai, with a minority investment by the billionaire family of Julia Koch.

It's helped the arena and team reach a stratospheric valuation, housing promotional activities, advertising, and attendee queueing that never would have been accommodated by the original atrium, or Urban Room, planned at that triangle of land.

Ticketmaster Plaza, Dec. 13, 2023. Photo: Norman Oder

Remember, beyond the building's original oculus, a billboard for advertising, Tsai, who took over in 2019, added an LED wall over the arena doors, doubling the canvas for promotion.

So I think there are several rationales, and avenues, for New York State to claw back some value. In Would Joe Tsai's Slickest Move Be Poaching Ticketmaster Plaza?, I noted that the “temporary” plaza was implicitly predicated on the common ownership—no longer valid—of the arena operator and the project’s master developer, originally Forest City Ratner.

The plaza, barely discussed publicly before the project's approval, was "quietly ceded" to the arena operating company, part of BSE Global, at virtually no cost ($10/year, along with arena!), and was on the verge of being ceded permanently. But the plan to make the plaza permanent, I noted, offered the state leverage.

I've also argued that ESD had other leverage. It could threaten the arena naming rights, given that the bank Barclays, an admitted felon, should be considered a Prohibited Person, barred from state contracts. It also could use the re-approval of that neon art (or is it advertising?) installation over the transit entrance.

While some at the AY CDC meeting did acknowledge that the plaza clearly had value to the arena operators, they didn't go farther.

Notably, the cost to the arena operator did not come up. The nominal base rent for the arena site is $10 annually, plus a requirement to pay off construction and maintenance--a sum I had not clarified in my above-linked articles.

The discussion

The discussion (video here, also below) was led by Anna Pycior, Senior VP for Community Relations.

She noted that the AY CDC, in its August meeting, had requested for more information about the plaza.

"The blue portion of the map in the slide represents the public plaza," she said. "The arena is responsible in their lease to maintain and repair, they did a recent repaving."

That may be a little imprecise, since the whole arena looks blue too, but maybe it's a slightly lighter blue for the plaza and extensions of the arena property on Dean Street to the south and Sixth Avenue to the east.

"Under the lease agreement, they're required to keep the plaza open 7 am to 10 pm seven days a week," Pycior said. "They opted to keep it open 24/7." 

Girls basketball camp in July. Photo: Norman Oder

Pycior sounded appreciative, noting she had used the plaza before and after those hours. 

OK, but doesn't that contracted minimum seem unwise? After all, people commute to work before 7 am, using the transit hub, and return after 10 pm. Moreover, arena events end well after 10 pm, and it likely would be challenging to shut down the space.

"There were questions around use of the plaza," she said. "Events by Barclays, such as showcase games, the queuing, etc, are permitted under the lease." 

"ESD does, in the arena lease, we have the right to make comments and suggestions that they in good faith, will respond to," she said. "But under the lease, they are managing, maintaining, cleaning, repairing and using for those events, the plaza."

 

Drilling down

During the discussion, AY CDC Director Ron Shiffman asked who has the naming rights for the plaza. The arena, he was told. 

"So they can generate income," he said.

How long is the lease, to Brooklyn Sports & Entertainment? "It goes through 2047, give or take a few months, depending on NBA season," Pycior said.

That didn't quite cover it, because the plaza is officially temporary.

Is ESD the lessor?

No, responded her colleague Joel Kolkmann, Senior VP, Real Estate. Rather, it's the BALDC, the Brooklyn Arena Local Development Corporation, which is essentially an alter ego of the ESD, though it's officially the creation of the Job Development Authority, annother ESD alter ego.  

Note Kolkmann's somewhat hesitant--understandably so--reference to the BALDC, which barely exists.

What if...?

"What provisions in the lease were there to account for the possibility of building B1, because that has, up until the marvelous Site 5 development lease was signed, was part of the project," asked AY CDC Director Gib Veconi, with a mildly sardonic touch toward a lease that was not disclosed to the advisory board or the public.

"The Declaration for the arena site goes into a lot of detail about what would happen when B1 is built, and how that would work in terms of the arena versus that construction," responded ESD attorney Matthew Acocella.

Drilling down

I'm not sure exactly what document he was referring to, but the 2009 arena bond prospectus presumed a scenario for building the flagship tower, and converting the plaza into an atrium. The B1 Occupant would have to notify the Arena Parcel Occupant of its plans, while the Arena Parcel Occupant would construct temporary arena facilities, with reimbursement by the tower builder.

The Arena Parcel Occupant would construct a permanent box office, entrance, and other permanent arena facilities in the Urban Room, with reimbursement by the B1 Occupant. The latter would have an easement for ingress and egress for its users in the Urban Room, unless temporarily restricted by the Arena Parcel Occupant, which would have to provide alternate access,

The Arena Parcel Occupant would be able to use the Urban Room for a box office and retail, as well as gain naming rights, signage, and "all economic interests derived from the Urban Zone," while not adversely affecting the rights of the B1 Occupant. The MTA also would have an easement for use by subway passengers.

Both easements, notably the first, would cut into the Urban Room's value.

Back to the discussion

"Okay, but at some point, if they build a building there, it can't be part of their lease any longer," Veconi said. 

Indeed, when the document was prepared, the arena company was an affiliate of the same company slated to build B1, Forest City Ratner.

"They would still have the ability to use and maintain and improve and program the enclosed space under the construction," Acocella said, regarding the Urban Room. This is true, but it would've been smaller than the plaza, and truncated by the B1 access.

"So what was supposed to be the Urban Room would have continued under their control," Veconi said. 

"So effectively, the economic value to them of relocating B1," he said, "is not to lose access to that space for the intervening years where the B1 building would have been developed."

I think it's more than not losing access to the plaza during construction, because the Urban Room would not have been a straight substitute. Rather, the Urban Room would have less space for arena use, since it also would enclose the entrance to an office building.

Veconi suggested there was probably a license agreement "that explains what would happen when that construction takes place. There's presumably some economic value to them, in having that not happen,"

"I can't speak to the economic value," Acocella replied. "The declaration does speak of what would happen when they're ready to proceed with construction of B1."

Who pays?

"Is there any relief in the lease expense for Brooklyn Sports and Entertainment during that time, if that happened," asked Veconi, "or do they still pay the same?"

"No, nothing changes," Acocella said. That would've been the right time to explain that the arena lease expense, in terms of payment to the state, is essentially nil: $10/year, as shown in the screenshot below, from the arena's annual fiscal report.

The benefit

That, Veconi said, "is good to understand. I mean, it does seem like not moving ahead with B1 does represent some type of a benefit to the lessee in this case, and we should have some kind of recourse to try to--"

At that point, he was interrupted, and the dialogue became obscured. 

"Are you talking about the years that would have been under construction, that they don't lose?" asked Arden Sokolow, ESD Executive VP, Real Estate Development and Planning.

"Among other benefits," observed AY CDC Chair Daniel Kummer.

"And the advantage of having the space, open to the air," chimed in Shiffman.

"As Ron pointed out," Veconi said, "they are able to sell the naming rights as well. Perhaps they could for the Urban Room as well."

ESD's Acocella assented.

(I'd argue that the plaza, a larger and non-shared space, offers more value.)

Veconi said thanks. "I think that helps to sort of clarify what the situation there is," he said.

It did, though not completely in my view. Let's see if it gets ventilated further.