Barclays Center lost money in first half, but less than in 2019 plus new details on sale

Sportico, the new sports business site, reports that publicly available data reports Barclays Center has lost money the first half of 2020, but surprisingly less than it did a year ago, before the COVID-19 pandemic hit.

Here’s the bottom line from Sportico writer Brendan Coffey...

Revenue for the first six months of the year fell almost $50 million overall, led by a ticket sales plunge of 99.9% compared to the first half of 2019. Arena ticket revenue fell from $29.3 million to a mere $28,700—about what the average Brooklynite pays to rent their apartment for a year.

Barclays, home to the NBA’s Nets and the NHL’s Islanders, spent $31.2 million – $2.1 million more than it took in as revenue – in the first six months of the year, according to the disclosures. That’s actually a smaller loss than it reported in the first half of 2019, when it had $76.7 million in revenue and $79.12 million expenses.

Forbes suggested this week that Joe Tsai overpaid for the Nets and Barclays because the arena loses money, but Tsai seemed to dispute the Forbes analysis in a tweet...

The Sportico story is the most recent in a series of reports on the high finance behind the series of transactions that gained Tsai control of the team and arena.

On Wednesday, Norman Oder of the Atlantic Yards Report, working with other public documents, suggested that the way the NBA required the deal be stuck, Tsai didn’t pay as much for the team as reported... tacitly confirming Tsai’s tweet and demonstrating that that the Forbes report missed a big piece in its analysis of the team’s finances.

Specifically, Oder reported that the NBA required Mikhail Prokhorov to set aside $345 million of the reported $2.35 billion sales price as a reserve fund to help the arena’s finances. Recall at that point, Prokhorov still owned the arena operating company. The league had long been concerned about the relationship between the Nets, as tenant, and the arena holding company, as landlord. Under Prokhorov, with him owning both properties it wasn’t such a big concern. But with Prokhorov selling first a share, then total control, of the team, the NBA came up with a plan.

Prokhorov, Oder wrote sent “$17.2 million to support the arena and parking the remaining $327.8 million in a reserve account, primed to deliver cash infusions to help pay arena operating expenses and pay off construction bonds.” Then, when the final deal, which included the arena, was completed, the reserve funds were deposited back into Tsai’s account, in effect lowering the cost of the team by that amount. So, Oder argued, the sale of the Nets wasn’t $2.35 billion, but $2 billion, making it less than what Tillman Fertitta paid for the Rockets.

How’d the details come to light. First the underlying financials have to be disclosed to investors and potential investors in the arena’s half billion dollars in construction bonds. And under the agreement between the state of New York, which owns the arena, and Tsai’s BSE Global, which now holds arena operating rights, Barclays Center must disclose some financial information to the public — and investors, as Coffey notes.

The venue, which opened in 2012, generates revenue from naming rights fees, luxury boxes, concessions, a small fee paid by the Islanders and 10 percent of Nets ticket sales, plus about $7 million in additional Nets payments.

Bond holders won’t be effected by the issue, Sportico noted, because Tsai has has pledged unconditionally to meet the arena’s debt service, the ratings agency Moody’s said in a 2019 downgrade of the arena’s debt.

Compare that to the situation to the east in Uniondale at Nassau Coliseum. Prokhorov holds the operating rights to the coliseum but has refused to pay rent since January and shuttered the arena, laying off all arena workers.

Prokhorov has put his Coliseum interests up for sale, willing to abandon them if a buyer will agree to take on $100 million in arena debt. Nassau, will soon face competition from the UBS Arena at Belmont Park, the state-supported Islanders home now under construction 15 miles closer to New York.

With the status of the Coliseum, home of the Long Island Nets, uncertain, the Nets are reportedly looking for alternatives if the arena remains shuttered. There’s been no word on when the G League will return to action.

• BARCLAYS CENTER FINANCIALS SHOW FIRST HINT OF VENUES’ PANDEMIC PROBLEMS - Brendan Coffey - Sportico
• Was Brooklyn Nets sale a record? Arguably, no. Seller Prokhorov instantly gave up $345M; most went back to buyer Tsai. (So, it was a better deal than Forbes said.) - Norman Oder - Atlantic Yards Report
• With ticket revenues nearly gone and sponsorship income plummeting, Barclays Center is in a deep financial hole (though FY 2020 was looking up) - Norman Oder - Atlantic Yards Report