Bruce Ratner, the developer who spent ten years buying the New Jersey Nets and then fighting a bitter court battle to tear down houses in Brooklyn to make way for a new arena and brought in a Russian billionaire partner to help pay the bills, is celebrating his ultimate victory the only way he knows how: by putting the arena up for sale.
Developer Forest City Ratner is marketing its majority interest in the Brooklyn arena that is home to the NBA’s Brooklyn Nets, seeking a buyer for some or all of its 55% stake in the building, according to people familiar with the matter.
An arena spokesman declined to offer details, but said in an email that “Our goal is to identify a strategic partner as we continue to capitalize on the great performance of Barclays Center.”
“Great performance” sounds nice when shopping the place around to buyers, but the fact of the matter is that the Barclays Center hasn’t done great in terms of its bottom line: It just about barely broke even in its first full year of operations, 2013, despite record-setting ticket sales. (The Wall Street Journal’s Eliot Brown, who earlier reported that the arena turned a tiny profit, now says that the arena reported a small loss in 2013.) And while arena revenues were up in the first half of 2014, they’re still well below projections, and not likely to improve significantly as the Nets honeymoon wears off and a trade war for concerts heats up with the newly renovated Madison Square Garden. (Yes, the Islanders arrive in 2015, but as we’ve seen elsewhere, sports teams often cost as much in lost concert revenue as they pay in rent.)
The reason for all this red ink? The $29 million a year in debt that Ratner saddled himself with, while turning over majority ownership of the arena’s biggest money-maker, the Nets, to Mikhail Prokhorov in exchange for more cash to feed the arena’s $1 billion construction budget maw. Even the most successful arenas don’t churn out that kind of profit margin year after year, which is no doubt one reason why Ratner is looking to cash out, though it’ll be extremely interesting to see what price he gets for a building saddled with $500 million in debt, not to mention Brook Lopez’s tender feet.
There’s much more, as you’d expect, at Atlantic Yards Report, including the observation that Ratner is really only selling operating rights to the arena, since it technically belongs to the state of New York in a complicated tax-dodge arrangement.
The big question remains, however: Why on earth did Ratner care so much about this project that he moved heaven and earth (and Daniel Goldstein), plus assumed half a billion dollars in debt, to make it happen? The man has never shown any interest in basketball, and ditched control of the team as soon as possible after the project was approved. There was the theory that the arena was a loss leader for getting hold of valuable Brooklyn land to develop with housing, but Ratner’s planned housing towers are doing even worse than the arena, though he’s still shopping around in China for investors. That leaves … wanting to drum up foot traffic for his mall across the street? Wanting to make even more of a name for himself in Brooklyn real estate, even if it’s not an especially positive one? Presumably he had something in mind all along — or maybe it’s just Hanlon’s Razor.