Forest City Enterprises, Bruce Ratner's parent company, announced Monday that it had closed on the sale of its and associated investors' stakes in the Nets and Barclays Center. The Russian oligarch now controls 100 percent of the team and arena, as well as 85 percent of Nassau Coliseum, also purchased from Ratner.
The details, as released by FCE, indicate that Prokhorov once again walked away a financial winner, even if his prized possession is a loser.
According to the FCE press release and various reports, Prokhorov laid out only $70 million in cash --and another $210 million in low interest notes-- to gain control of the two assets, valued at $1.7 billion -- $825 million for the Nets and $875 million for Barclays Center. The Russian's outlay was so low because of heavy debts FCE and its affiliate, Nets Sports and Entertainment, owed ONEXIM, Prokhorov's American company, and others. They all needed to be settled as part of the closing.
Specifically, the purchase price for NS&E's 20 percent interest in the Nets was $125.1 million. The purchase price for NS&E's 55 percent interest in the arena was $162.6 million, including the payoff of "certain outstanding capital obligations between NS&E and ONEXIM." Three quarters of that will be paid out over five and a half years at a relatively low interest rate of 4.5 percent.
In the original deal between Prokhorov and Ratner, back in 2009, ONEXIM paid out a reported $223 million in cash, assumed $160 million in team debt and threw in $60 million to cover operating losses while the Nets were in New Jersey. That gave Prokhorov 80 percent of the team and 45 percent of the arena. Since then, the Nets have lost more than $100 million in operating costs, most of it due to the $123 million Prokhorov has had to lay out in luxury taxes.
The two sides had a number of incentives to complete the deal. Prokhorov would like to sell a minority piece of the team, up to 49 percent, but the NBA did not like the way the arena lease was structured in favor of the arena owners.Buying all of both makes it easier to get NBA approval for any sale. Forest City, on the other hand, is changing the way it runs its business, becoming a pure real estate play. It needed to dump assets that didn't fit into that model.
Still undisclosed: what Prokhorov paid for the Nassau Coliseum. He agreed late last year to buy 85 percent of Nassau Events Center, which holds the coliseum lease and is responsible for its transformation into a more modern and more intimate venue. Once the renovation is complete, expected late this year, Prokhorov will have an option to buy the last 15 percent from Ratner.
He recently financed the HSS Training Center in Brooklyn at a cost of $50 million and laid out a $6 million entry fee for an expansion D-League team, the Long Island Nets.
- Forest City no longer owns stake in Brooklyn Nets, Barclays Center - Michelle Jarboe - Cleveland Plain-Dealer
- Forest City completes sale of Brooklyn Nets, Barclays Center arena - Crain's Cleveland Business
- Forest City details arena/Nets sale: only $54M in cash after taxes/closing costs, two loans totaling $217.7M, at 4.5% - Norman Oder - Atlantic Yards/Pacific Park Report