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December 04, 2009
Nets naming-rights deal cut in half
Remember that record-breaking $20 million a year naming-rights deal that Barclays Bank signed for the New Jersey Nets' new Brooklyn arena almost three years ago? Turns out the real number is only a little over $10 million. The New York Observer's Eliot Brown, who pored over the 772-page arena financing document released last week by Goldman Sachs, reports:
According to documents related to the arena's financing that were released Thursday, Barclays will pay $10 million a year to the arena's owner for the 20-year deal. Looking solely at this, it would seem to make it a half-off discount, but there are a number of other untold fees paid directly to the Nets as part of the naming rights, according to the documents. Forest City Ratner declined to provide those numbers, and a spokesman for Barclays declined to comment. ...
Whatever the fees paid directly to the team, it's hard to think that they're twice $10 million a year. After all, a consultant's study attached to the documents refers repeatedly to the transaction as a $200 million naming rights deal, and uses that number as a basis of comparison for other naming rights deals.
If there was indeed a revision, it came either at the end of 2008 or earlier this year. The original 2007 contract expired at the end of 2008, but was extended after Barclays and Mr. Ratner's firm, Forest City Ratner, renegotiated. At that time, new terms were not released, though Barclays released a statement saying it was "unwavering in its commitment" to the project. The financial documents released now say the deal was again amended in August 2009.
This only makes the Brooklyn arena deal look worse for developer and Nets owner Bruce Ratner, who's already had to agree to sell off a large share of the team and arena to raise capital, and is looking at possibly $60 million a year in bond payments, plus up-front cash costs.
The Goldman Sachs documents (downloadable here after an annoying registration requirement also reveal that using the arena for hockey is still on the table, notwithstanding that the latest arena design would be too small for the NHL: "The New York Islanders could potentially become a tenant of the proposed arena as well... If built as planned, the arena would need to be retrofitted to accommodate the ice-making abilities the NHL requires for its franchises." In other words, more money to add to the arena's already $1.1 billion price tag.
Meanwhile, Ratner got more bad news yesterday, albeit in an oblique form: A New York state court yesterday ruled that the state can't use eminent domain to take property for an expansion of Columbia University, stating the declaration that the land was blighted was unconstitutional because the state had "failed to adopt, retain or promulgate any regulation or written standard for the finding of blight." While it's unlikely this will be enough to overturn last month's eminent domain approval for Atlantic Yards, it certainly casts some uncertainty on the project right when Ratner and friends are trying to obtain bond insurance, set interest rates, and sell bonds, all processes that shudder at uncertainty. You know that's what Matthew Brinkerhoff, lawyer for the Atlantic Yards opponents, was thinking when he declared yesterday, "If I was involved in the bond sale, I would be looking at this decision and it would concern me, in a way that is very unexpected." Was that the sound of a few extra basis points I just heard?