Forest City Enterprises, Bruce Ratner's parent group, confirmed Thursday that it has retained an investment adviser to sell the 20 percent of the Nets Mikhail Prokhorov doesn't own, hopefully by year's end. Forest City, a Cleveland-based firm, and Ratner are the lead partners in Nets Sports and Entertainment, a group of around 100 investors (including Jason Kidd) that own 55 percent of Barclays Center and the 20 percent of the Nets.
According to investors in the team, Prokhorov has the right to match whatever offer Nets Sports and Entertainment receives for the team. Any new investors would have to be vetted by the NBA before a sale could be finalized.
As reported by Norman Oder, critic and chronicler of the overall Atlantic Yard project, FCE's chief financial officer, told conference call held with investment analysts that the time has come to sell the asset, which is outside the company's core business.
Forest City, given its " focus is on accelerating vertical development," has recently retained advisors to help market its minority share in the Brooklyn Nets. Forest City is the managing member of Nets Sports and Entertainment, which owns 20% of the team, otherwise owned by affiliates of Mikhail Prokhorov's Onexim Group.
What's the balance they're carrying the Nets on, the executives were asked.
"We’re carrying the Nets at zero, we’ve written it down," responded Chief Financial Officer Bob O'Brien.
Oder also reported that O'Brien told the analysts, "The efforts really just started, it’s pretty early," adding if they identify a buyer,, they'd expect to reach agreement on price by the end of the year. Next come are approvals by the NBA, O'Brien said, which are "a little harder to predict." Evercore, a New York-based hedge fund, has been retained to gauge interest in the club.
Rising team valuations is one part of the company's CEO, David LaRue, said.
"Also in April, we confirmed that we are exploring the potential sale of our minority interest in the NBA Brooklyn Nets. Having successfully brought major-league professional sports back to Brooklyn and developed the world-class Barclays Center as the anchor for our Atlantic Yards project, we are now focused on accelerating development of the residential component of Atlantic Yards. Given the strong market acceptance of the arena, the success of the team, and growing values of NBA franchises, now is an appropriate time to explore such a sale."
In other news out of the conference call, Forest City execs said the profit picture at Barclays Center is in line with its projections. While the arena makes a profit, the team is losing a significant amount of money, perhaps as much as $50 million annually, mainly because of luxury tax payments.
Estimates on how much Nets Sports and Entertainment could receive go as high as $150 to $200 million. The Ratner group's financial arrangements with Prokhorov's ONEXIM Group are complicated by several loans the Russian provided the developer both at the time the arena was being financed in 2010 and this year.
- Forest City: despite B2 delay "disappointment," still bullish on Brooklyn apartment market, de Blasio policies; aim to sell Nets' share by end of year - Norman Oder - Atlantic Yards Report