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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?

COMMENTS

I suppose "I can't define blight, but I know it when I see it" doesn't pass constitutional muster?

Posted by David Dyte on December 4, 2009 10:24 AM

And if THE RAT thinks he might be able to make up those extra basis points by raising ticket prices, as a long time Nets' season ticket holder, I can unequivocably say: "Fuggedaboutit'.

Posted by Alan Leader on December 5, 2009 02:25 PM

I am 100% sure that Rat 'n' Prokhy will charge the same price for tickets regardless of what the basis points are: whatever the market will bear.

Whether you consider this a good thing or a bad thing for Nets fans is up to you.

Posted by Neil on December 5, 2009 05:00 PM

It will be built enough already neil. The islanders and nets will be partners. Two of my favorite teams will be in brooklyn.

Posted by Dan on December 5, 2009 05:58 PM

Hey...anything that gets those spoiled brat millionaire bastards less money cannot possibly be bad. And of course, that's just the ballplayers; Rat Guy and his Russian mafia buddy will surely get less too. Boo hoo.

Posted by Marty on December 6, 2009 02:19 PM

Dan, the plans for the new arena indicate that the floor space will not be large enough to put a NHL-sized rink. If not KC. the Islanders will be stuck in Nassau.

Posted by LeftWingCracker on December 7, 2009 03:56 PM

It's interesting that Ratner has to make all these concessions in ownership in order to build the arena. It just confirms what I thought all along - he was never interested in owning an NBA franchise, and was always about getting a sweet deal to develop and own prime real estate in downtown Brooklyn. It seems like he will get his way. As someone who used to live on the corner of Pacific and Vanderbilt (right across the street from the Atlantic Yards) I can say this will be terrible for the borough. It will squash Flatbush and downtown while driving out local tenants and businesses. Everything that made Brooklyn so great will soon be gone. The Manhattanization of Brooklyn has begun.

Posted by Ian on December 7, 2009 11:51 PM

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