The New York Post is reporting that the arena-management giant AEG (still owned by Philip Anschutz, contrary to what he suggested two years ago) may be looking to buy the Brooklyn Nets‘ arena, according to those ever-popular “sources.” Also, that he doesn’t want to pay what arena majority owner/Nets minority owner Bruce Ratner of Forest City Ratner wants to get for the building:
AEG is said to be willing to spend up to $500 million on the 19,000-seat concert and sports arena, or slightly more than 12 times Barclays’ roughly $40 million in expected 2014 operating profits, sources said.
However, Forest City, which last month forecast that profit number would soar 63 percent to $65 million in 2016, is said to be seeking a lot more than $500 million.
Those projections sound awfully optimistic, given that the Barclays Center only took in $30 million in its first year of operations, barely enough to pay off its $29 million a year in construction debt. AEG would undoubtedly love to have its own concert facility in New York City — though given that right now the company gets to play the Brooklyn arena and Madison Square Garden off against each other when bidding for events, it can’t be too unhappy with the status quo, either. Though maybe with the Islanders due to arrive next fall, they might be worried about not having enough open dates at both arenas to keep the bidding wars going, maybe?
And speaking of the Islanders, buried way at the bottom of the Post article is this:
AEG believes Yormark is paying too much to keep the arena booked, sources said. It was Yormark who guaranteed $50 million a year to the New York Islanders once they move to Barclays next season.
“AEG sees the Islanders deal as too risky,” the source said.
After roughly five years, Barclays can get out of the Islanders contract, sources said.
This is the first I can recall hearing about a $50 million revenue guarantee for the Islanders — the highest number I’d seen previously was $10 million in annual payments from the arena to the team, while the arena kept most hockey revenues — and definitely the first I’ve heard about the Islanders having a five-year out clause. (And the first Islander fans have heard of it, too, apparently.) That would make the decision to move the Islanders to Brooklyn make a bit more sense — if there’s an out clause, both Ratner and Isles owner Charles Wang get to effectively conduct a trial run in Brooklyn. And if it turns out no one wants to go see hockey in a basketball arena 20 miles from their traditional home base, the Islanders can conceivably move back to a renovated Nassau Coliseum, currently set to be downsized to 13,000 seats (but at least 13,000 seats placed properly for hockey) by … Bruce Ratner.
All of this is a hell of a lot of speculation based solely on a report based on unnamed sources in a newspaper that doesn’t have a great track record with its “exclusives.” Take it all with a grain of salt for now, though if you want to jump to conclusions of the “almost brand-new arena can’t even sell for more than half what it cost to build” variety, don’t let me stop you.
In the past Forbes mentioned that the Isles were getting $50 million/year from Barclays Center. That’s for everything, though. Isles get $0 from concessions, boxes, ticket sales, etc. Just a flat $50 million/year.
I wonder if AEG’s move is in retaliation for MSG taking over the Forum.
I’m guessing here: $50M arena revenues, $30M for local tv and guessing $30M from other sources. Total $110M. Not bad but can this team turn a profit? Especially as other revenues increase.
Just asking.
Isles’ TV contract is actually more like $24m currently:
http://www.forbes.com/pictures/mlh45eemg/6-new-york-islanders/
Not sure where $30m “other” would come from, if they don’t get ad revenues, parking, anything else like that.
Also, found this (again from the Post) on the $50m guarantee, which puts it curiously in the subjunctive tense:
http://newyork.cbslocal.com/2014/03/31/report-revenue-guarantees-at-barclays-stand-to-benefit-islanders-big/
The Forbes report Ben mentions just links to the above CBS story, which cites the Post. So we’re going entirely by the Post’s unnamed sources on this one right now…
Neil
The NHL does have a national tv deal, albeit one that pales in comparison to the NFL, NBA and MLB. But still, you’re looking at roughly $9 million a year there plus you have merchandise sales, local radio deals and revenue sharing. Not sure if it would amount to $30 million but it gets them closer.
Still, it’s the fans who get screwed. I couldn’t care less about the Islanders but I know there are people who do. They seemed to be pretty excited when they found out that the team would be staying on Long Island. Now, AEG could very well be pulling the rug out from under them. If Quebec City still doesn’t have a team in 5 years, I could see AEG completely selling out and letting them move there.
Again, it makes sense to me. No metro area should have 3 teams in the same sport while a hockey rabid place like QC has an empty arena but it’s not about me, it’s about the fans who should at least have some idea of where the team will be long term as opposed to some trial run.
And this is what kills me about AEG. This isn’t the first time that they’ve complained about an anchor tenant hogging up dates. They’ve said the same about their KC Sprint Center as well yet for whatever reason, they seem to need not 1, not 2 but THREE major league tenants at Staples Center. I’m guessing that if you can guarantee them nearly 130 dates a year it makes up for whatever non sporting events you lose due to all the booked dates.
Well, AEG is mostly in the business of putting on concerts, right? So I can see why they’d be annoyed at the prospect of a sports team, especially one that doesn’t pay much in rent, getting in the way of all those music shows and circuses and what have you.
I’ve never actually seen what the Lakers, Kings, and Clippers pay in rent. My guess is that the finances of sports vs. concerts were very different when Staples was built from how they are now, but that’s not based on any actual research.
Neil
AEG is the Kings so I understand why they are there.
The Lakers situation is a bit more complex. They basically add up their revenue then hand over 10% of it to AEG as rent at the end of the year or something along those lines. I’ve never had a problem with that 2 team setup.
OTOH, I’ve never understood the need for the Clippers nor why the Clippers wouldn’t make more of an effort to branch away from the shadow of the Lakers. They paid $1.5 million a year on their last lease but not sure what they do on this one. I actually sort of understand AEG’s angle as they keep so much generated revenue from Clipper games but still, they could keep a good chunk of that from concerts and other events as well. Either way, the Clippers get hosed.
But yes, the finances are different nowadays. When Staples was built, suites were the big thing in sports and no arena decorated it’s bowl with more suites than Staples as they are the only arena in the world with 3 levels of suites all on top of each other. The demand for suites was high in those days but has apparently gone down when you look at how new arenas are being laid out.
Also, I get email alerts all the time from AEG promoting suite deals and what not. Not only are they no longer selling out all their suites, they now have to resort to 50% off deals just to get people to show up now. Throw in the fact that the upper bowl is the worst in the league due to being on top of all those suites and you have a lousy setup for not only the Clippers but fans who want a decent seat with a decent view. You either pay an exorbitant amount to sit in the lower bowl or have a horrible view in the upper bowl. No “middle class” seats to speak of.
I would hope that Ballmer eventually moves into or builds his own arena. It’s more than just a “mine, all mine!!” deal. With a lot of his potential being lost to AEG and him talking about being an owner for life and then passing the team to his kids, it would make sense in the long run to build his own crib.
“You either pay an exorbitant amount to sit in the lower bowl or have a horrible view in the upper bowl. No ‘middle class’ seats to speak of.”
Barclays Center has only two layers of suites, but the exact same problem.
If the reason why Ratner is looking to sell is because he wants to convert his real estate holdings into a REIT for tax purposes why is the lease agreement to redevelop/renovate the Nassau Coliseum not included in the sale negotiations?
It would obviously increase the sale price to his benefit.
As AEG has shown with the Sprint Center and now with the arena in Las Vegas they are willing to spend money to construct new arena(s) even without a major league sports anchor tenant (and in Kansas City the arena is allegedly profitable).
AEG could agree to modify the renovation plans to include more luxury boxes and wider concourses so the Islanders can be moved back to Long Island.
I believe Forest City’s lease with Nassau County begins on 08/01/15.
AEG actually paid for less than 20% of the Sprint Center cost, while getting first dibs on all the arena revenues:
https://www.fieldofschemes.com/2009/10/02/2342/aegs-sweetheart-sprint-center-lease-the-breakdown/
They have shown that they’re good at running buildings that other people pay for, though.
“I wonder if AEG’s move is in retaliation for MSG taking over the Forum”
You never know Ben it’s possible but the thought, the idea and the notion of that is very interesting and intriguing.
With AEG building a NHL/NBA sized arena in Las Veas and the NHL publicly announcing its interest in placing a NHL team in the desert city. Could this be a set up for the Islanders to move to LV in the coming years?
Not unless the 42nd-largest TV market in the nation is somehow suddenly going to offer a Brooklyn-sized cable deal.