New book “The Brooklyn Wars” to rake muck of Nets arena deal

I know I already ask my readers here to become Supporters of this site (which reminds me, I need to set my next members-only chat date soon), but I do want to alert you to another project I’ve just launched that may be of interest: “The Brooklyn Wars,” a book drawing on my decade-plus of reporting on the massive changes that my home borough has undergone.

I’ve launched a Kickstarter site where you can preorder the book and win fabulous rewards. (One FoS reader has already availed himself of the “Go to a Nets game with Neil and have him complain about the terrible sightlines the whole time” level.) And yes, there will be sports subsidy content: One of the four main sections will focus on the machinations behind the construction of the Brooklyn Nets arena and what it’s meant for its Prospect Heights neighborhood and Brooklyn as a whole since.

Please check it out if you’re interested — and given the way nearly every city seems to have its own burgeoning mini-Brooklyn, or at least is trying to create one by force of will, it’s a story that should have relevance far beyond the confines of one borough. Besides which, everybody is fascinated by Brooklyn, right?

Nets arena cheap seats should come with oxygen bottles

I attended my first Brooklyn Nets game last night, and my overall impression didn’t change much from my earlier visits to the Barclays Center for concerts: The design lends itself to major foot traffic jams both getting in and getting out, the acoustics are lousy, and the food is overpriced even by sports concessions standards. ($7 for a small container of popcorn, $6.75 for a square slice of pizza, beers starting at $8.50.) Mostly, though, since we had bought cheap tickets for the last rows of the upper deck, the overall impression was: Man, these seats are ridiculously high.

How high, exactly, is a question I’ve been trying to figure out since getting home from the game. The roof at Barclays Center peaks 137 feet above street level, and the floor is about 20 feet below. The New York Mets‘ Citi Field, by contrast, is 116 feet tall, with a field that’s pretty much at grade. Now, the last row of seats at Barclays isn’t quite up to the peak of the roof, but it’s pretty close — meaning that, at least by this rough guesstimate, the worst seat at the Nets’ 18,000-seat arena is just about as bad as the worst seat at the Mets’ 40,000-seat stadium.

If anyone out there has more precise figures, please share them, as this is a very rough back-of-the-envelope estimate. Still, it’s a reminder of just how bad a double layer of luxury suites can be for the views of everyone sitting above them, not to mention an indication that something went badly wrong in the design when Bruce Ratner was value engineering it. And, of course, it’s only going to get worse for hockey.


Brooklyn Nets project wants to raise more cash by selling more green cards

Atlantic Yards Report had a long story yesterday (it doesn’t have any other kind) about how the Brooklyn Nets‘ arena developers are looking to do another round of EB-5 financing, the mechanism that allows foreign investors — mostly Chinese, in this case — to jump the line for green cards if they’ll extend interest-free loans to U.S. development projects in blighted neighborhoods. It’s well worth a read if you’re interested, especially for the bit about how the Chinese government will actually be benefitting from this as a co-investor, but I just wanted to call out this quote it pulls from an article last year by Dartmouth business professor John Vogel:

One of the oddities about the EB-5 program is that the U.S. government is giving out the green cards, but the entrepreneur who puts together the investment gets the money. This scheme seems inefficient and open to corruption. If our government really believes that it is a good idea to sell green cards, maybe we should drop the pretense that this is a job creation program. It might be more efficient to have the money go directly to the U.S. Treasury and reduce the deficit by billions of dollars a year.

This is actually an excellent way of looking at it: Green cards are a public asset, one that the government mostly chooses to give away in order of application, but which here are being handed out in exchange for investment cash. In other words, the government is selling green cards, but it’s not getting the money — that’s going to private developers.

Now, you can say that it’s encouraging private development in places that need it (though it’s tough to imagine anyplace that needs a hand in promoting development less than Brooklyn), but still, is that the most efficient way to get housing built? Vogel suggests using the money to reduce the deficit, but it could equally be used for government construction projects, or jobs programs, or just handing out cash to poor people. It’d be nice to see a cost-benefit analysis of this, but somehow I doubt the lobbyists who helped institute EB-5 in the first place are going to be pushing for funding of that.


New arena has Nets’ value soaring, Nets’ profits in the toilet

The new Forbes NBA franchise value figures are out, and the Brooklyn Nets jumped almost 50% in value for the second straight year, thanks to their new arena in the borough of artisanal mayonnaise. Which must mean they’re making money hand over fist, right?

The Nets are on track to lose at least $50 million this season even with an extended playoff run, thanks to a $101 million payroll and luxury tax bill of at least $80 million.

Um, okay, then. There are three possible takeaways from this. One, which is Atlantic Yards Report’s view, is that it doesn’t matter how much money you lose on a pro sports team, since you’ll make it up when it’s time to sell. Two would be that Forbes’ team valuation figures are on crack. (It’s worth noting that the magazine’s annual profit and loss figures have been pretty much on target when compared to data later publicly released, but their team valuations haven’t matched up that well with sale prices.) Or three, people who buy sports teams will pay crazy money to sit in the owner’s box, even if it’s to own a team that has no hope of ever turning a profit. I wouldn’t have picked owner stupidity at one time, but recent evidence has me less certain.

Barclays Center barely breaking even despite #1 arena ranking

Hey, remember how the Brooklyn Nets’ Barclays Center was rated the top-grossing arena in the U.S. for the first half of 2013, and I concluded that it could be “an exception to the rule that arenas don’t usually make money” after paying off construction costs? Turns out I may have been slightly hasty:

In its first full year in operation, the arena brought in about $30 million in operating profit, the company reported on Monday, far less than the more than $76 million projected when the arena began construction in 2010.

That’s from the Wall Street Journal’s Eliot Brown, who took to Twitter to add:

So even the top-grossing arena in the country barely broke even in its first full year. Apparently John Christison was right when he said it’s tough to make money on these things. (Which isn’t really a surprise, him being a longtime arena manager and all.)

Norman Oder of Atlantic Yards Report takes a closer buy lorazepam usa look at why the Barclays Center had that $46 million shortfall in operating profit, and finds that it’s virtually all added expenses:

Brown’s article doesn’t link to the actual SEC filing, so we’re at a dead end for the moment on how the Barclays Center managed to blow through an extra $50 million in spending in its first year. More on this later, I hope.

[UPDATE: Brown informs me that the SEC and bond filings aren’t exactly comparable because they don’t use the same accounting measures, so it’s probably not an extra $50 million in spending. His conclusion that the Barclays Center is barely breaking even stands, though. One possible explanation: Even though the arena is doing gangbusters business, it’s likely doing so by offering “generous deals to woo big names, either by offering low rent or by guaranteeing a performer a high portion of ticket sales,” as Brown reported in October.]

Brooklyn arena developer sues NYC to get lower tax bill on its parking lots

Forest City Ratner, the developer of the Brooklyn Nets arena and the as-yet-mostly-unbuilt surrounding Atlantic Yards housing tower project, is suing the city for lower property tax payments on one of its parking lots. Because that’s just what developers do:

The Finance Department put the block’s market value at $11.2 million for its current fiscal year, which began July 1. But FCR says in a lawsuit filed in Brooklyn Supreme Court that it’s only worth about $1.6 million…

“As you can imagine, real estate and development companies like Forest City have a fiduciary responsibility to review and question assessments in a timely manner,” FCR spokesman Joe DePlasco told DNAinfo New York.

“This is a standard operating procedure for these types of companies.”

FCR, you may recall, last year sued the city over its Barclays Center tax bill, then later said it was a mistake, after realizing that Barclays Center doesn’t pay taxes. Nor does the parking lot block, technically, but it does pay PILOTs (payments in lieu of taxes), which, unlike the PILOTs for the actual arena site, the city gets to keep, rather than kicking them back to pay off Ratner’s arena costs.

Under the deal to build on the Atlantic Yards, FCR leases the block for a nominal fee from the state’s Empire State Development Corporation.

Since the state owns the Atlantic Yards, the land is exempt from property taxes. However, FCR must make payments in lieu of taxes, or PILOTs, to the city to develop the block.

The PILOT amount for the block is the equivalent of what FCR would pay the city in property taxes, according to the ESDC. The Finance Department determined that for this fiscal year the property tax for the block would be nearly $700,000, according to city records.

If the court agrees to lower the city’s appraisal, FCR would in turn pay a smaller PILOT amount, according to the ESDC.

This is apparently the kind of lawsuit that land owners file all the time, so no hard feelings or anything between FCR and the city. Unlike the lawsuit by employees of Ludwig’s Drug Store charging racist treatment when they attended games in the store’s luxury suite, which looks to have hard feelings aplenty — understandable when you’ve been charged $1,000 for a pizza.

NYC development agency: Nets arena earning us more than half what it’s costing us, woohoo!

The Brooklyn Nets‘ Barclays Center brought in $14 million in new tax revenues to New York City last year, according to … well, according to the New York Daily News, which reported it in an exclusive this morning, but they got the info from … the New York City Economic Development Corporation, which got it from … “data provided by Barclays Center developer Forest City Ratner.”

Okay, then.

The $14 million figure claims to be a measure of spending by non-New York City residents both inside and outside the arena, as well as income taxes paid by Nets employees; the Daily News article doesn’t say whether this is only of non-city residents who came to the city just to go to Barclays, since as you may have heard, some people visit New York City for other reasons and might take in a basketball game while in town. Nor does it say how Forest City Ratner compiled the data — I’m guessing with fan surveys, since they claim to be tracking spending outside the arena as well, but no details have been provided. I’ve asked NYCEDC for more specifics; if I hear back, I’ll post an update here.

Anyway, if the $14 million in new tax revenues is true, how good is that for New York City? Assuming it lasts for another 30 years and doesn’t tail off as the new-arena smell wears off, that’d be worth about $200 million in present value to the city. City taxpayers, meanwhile, are putting up about $350 million toward the arena ($170 million in cash, $180 million in tax breaks), according to the New York City Independent Budget Office, meaning — okay, that’s a pretty crappy return even if you take the Nets’ claims at face value.

The IBO, incidentally, previously estimated that the city would earn about $130 million in new revenues to pay off its $350 million arena cost, a number that could end up just about right in line with the Nets’ claims, if out-of-town arena attendance dips some in coming decades. So props to the IBO for their projection, and way fewer props to the Daily News for citing the IBO’s report without ever mentioning the $350 million cost figure. It’s almost like they fired all their editors or something.

Brooklyn arena raking in the dough, for itself, anyway

All hail the Brooklyn Nets’ Barclays Center, which was named the top-grossing venue in the U.S. for the first half of 2013:

The Brooklyn arena was named the top-grossing venue in America for the first half of 2013, according to Billboard, with $46.9 million in gross ticket sales revenue. According to Pollstar, the venue – which has hosted 51 concerts since it opened in September and will bring in Beyonce and Justin Bieber next week – was the third-biggest ticket-seller in the world, behind The O2 in London and Manchester Arena in Manchester, England.

Now, that’s top-grossing, and doesn’t say much about how much the Nets will, um, net after paying off their share of the arena costs. And there’s no guarantee that the Barclays Center will still be on top in years when Madison Square Garden doesn’t shut down in May for renovations, let alone a few years down the road when Barclays is no longer the shiniest kid on the block. And, of course, we still don’t know what if anything all this money changing hands via Ticketmaster means for business in the surrounding Brooklyn neighborhoods.

Still, it’s an indication that the Nets bond offering wasn’t totally crazy, and that there is an exception to the rule that arenas don’t usually make money: Build one in the middle of the nation’s largest city, where you can charge top ticket prices, and which was previously served by only one other comparable arena whose calendar was booked to bursting. And make sure that Mick Jagger and Paul McCartney live forever.

Brooklyn arena helps local businesses, also doesn’t help local businesses

The Wall Street Journal has chimed in with the latest “What has the Brooklyn Nets‘ Barclays Center meant for local businesses?” story, and its answer, unsurprisingly, is “it depends who you ask.”

“I can tell you both personally and professionally I have seen a great impact on the local businesses,” says Carlo Scissura, president of the Brooklyn Chamber of Commerce. “You go into any restaurant or bar before or after a game or concert and they’re packed.”

Still, area businesses say that doesn’t always translate into an increase in sales. “Even if there’s no activity going on at Barclays, I tend to maintain my same numbers,” says Andre Jordan, one of the owners of Die Koelner Bierhalle, a German beer hall that opened in August on St. Marks Place. Mr. Jordan says that the bar’s core clientele is residents in surrounding neighborhoods like Park Slope and Boerum Hill.

The basic problem here is the but-for factor: When you build a sports arena in an already-booming neighborhood — and Brooklyn’s Prospect Heights was about as booming as you could get, complete with an artisanal mayonnaise store — it’s hard to tell whether all the foot traffic came for the arena, or was there anyway. Or whether the arena traffic displaced the usual traffic, as Jordan told the WSJ: “My customers who would normally have come in will look and say, ‘It’s too busy in there, let’s find some other place.'”

There’s obviously some impact when you have 18,000 people streaming in and out of a neighborhood most nights, but it’s complicated, especially since everyone is going to want to eat at the same time (nobody’s going to head for the beer hall during a Nets game). There are ways of doing a more fine-tuned analysis here, which I hope to do at some point; you’ll be the first to know when it happens.

[UPDATE: Atlantic Yards Report notes that the same fan survey that prompted the WSJ article also revealed that only 8% of Nets ticket buyers came from New Jersey, as opposed to more than 15% in pre-Brooklyn-move projections. Which has been good for easing traffic fears, since Brooklynites are more likely to take public transit or walk to the games, but less good for economic impact on New York City, since luring fans from New Jersey was key to the project’s economic benefit claims.]

Latest state-of-the-art stadium enhancement: Smell-o-vision

The most remarkable part of this DNAinfo article on how the Brooklyn Nets are pumping a “signature scent” into the Barclays Center isn’t that the Brooklyn Nets are pumping a signature scent into the Barclays Center, nor even that the Brooklyn Nets have a signature scent. No, it’s that sports teams have apparently been spritzing perfume at you for a while now without your knowledge:

That cocoa-drenched cloud you inhale when you walk into the Times Square Hershey’s store isn’t candy — it’s ScentAir.

In recent years the company’s olfactory empire has expanded to include sports venues such as the Dallas Cowboys’ and Atlanta Hawks’ stadiums. At the St. Louis Rams’ stadium the air is redolent with a “cotton candy” fragrance that’s meant to “create a positive first impression for fans,” a team spokesman told

It’s only fitting that the Nets are resorting to this, given that they were among the first franchises to pipe in fake crowd noise to make it sound like fans were actually cheering. Nobody’s allergic to loud sounds (okay, maybe Roger Miller), though, unlike smells — you have to wonder if the first sports-fan lawsuit against smell-spritzing can be far off.