Tag: Bruce Ratner

Brooklyn New Arena

Barclays Center officially opens doors in Brooklyn


Brooklyn has a professional sports team again — but this ain’t baseball.

And the new, intentionally-rusted looking Barclays Center is not going to be confused with Ebbets Field.

Still, this could be something good for Brooklyn. It certainly will be good for the Nets (much better than their Jersey homes).

Friday was the official ribbon cutting at the Barclays Center, which will first host a series of Jay-Z concerts before the Brooklyn Nets (which Jay-Z owns a sliver of) bring NBA basketball to the building next month. (By the way, ask any reporter his/her least favorite event to cover and ribbon cuttings will be near the top of the list. They are dreadful.)

But those that have seen the building, like John Schuhmann of NBA.com, are impressed. It’s supposed to be a state-of-the-art inside — with Jay-Z designing some of the touches — and have all the luxury suites that drive the finances of NBA teams these days. Schuhmann said the building is very vertical and very intimate.

Remember this — the Barclays Center is really just an anchor to a larger Brooklyn Yards real estate project. A new arena with an NBA team is the kind of glitzy part developers need to get the massive residential and retail complex near it approved. But make no mistake, former Nets owner Bruce Ratner and current one Mikhail Prokhorov will make a lot more off the real estate than they will the Barclays Center and Nets.

It’s not unlike the model AEG used in Los Angeles — Staples Center was a building needed to change the image of the area to Los Angeles residents, but the real money was in the hotel/residential/restaurant/retail complex called LA Live around it.

The Barclays Center is open now, officially — ribbons were cut, speeches made and hands shaken. This will be good for the Nets. And it will probably be good for Brooklyn.

Now lets get to the games.

About the owners losing money, it’s really complicated


There are NBA owners who have wondered if player endorsements should not be money in the basketball related income pool — those players wouldn’t make their money if not for the teams.

But what about the other side of that coin — money the owners make on other businesses because they own and NBA franchise as well. Owners have complex finances and there are other projects they have that directly or indirectly feed off the NBA teams. For example, Cavaliers’ owner Dan Gilbert has casinos he got a sweetheart deal to build based on his NBA team’s popularity during the LeBron era, for example. That’s not money the Cavs make, but it’s money the owner would not have gotten without also owning the Cavs.

Which brings us to the Brooklyn Nets, the name they will take on next season. Bruce Ratner owned the team until he sold last year to Mikhail Prokhorov and it is one of David Stern and the owners talking points about how Ratner sold the team at a loss.

But Malcolm Gladwell tells a different, more complex story at Grantland. One that involves Ratner making a lot of money on his Atlantic Yards real estate deal — where the new arena will be central to new housing and retail — and needing the Nets to make sure the city and many residents were behind him taking over an existing neighborhood to get this built.

Ratner has been vilified — both fairly and unfairly — by opponents of the Atlantic Yards project (where the Nets new home is going up). But let’s be clear: What he did has nothing whatsoever to do with basketball. Ratner didn’t buy the Nets as a stand-alone commercial enterprise in the hopes that ticket sales and television revenue would exceed players’ salaries and administration costs. Ratner was buying eminent domain insurance. Basketball also had very little to do with Ratner’s sale of the Nets. Ratner got hit by the recession. Fighting the court challenges to his project took longer than he thought. He became dangerously overextended. His shareholders got restless. He realized had to dump the fancy Frank Gehry design for something more along the lines of a Kleenex box. Prokhorov helped Ratner out by buying a controlling interest in the Nets. But he also paid off some of Ratner’s debts, lent him $75 million, picked up some of his debt service, acquired a small stake in the arena, and bought an option on 20 percent of the entire Atlantic Yards project. This wasn’t a fire sale of a distressed basketball franchise. It was a general-purpose real estate bailout.

Did Ratner even care that he lost the Nets? Once he won his eminent domain case, the team had served its purpose. He’s not a basketball fan. He’s a real estate developer. The asset he wanted to hang on to was the arena, and with good reason.

This is essentially what AEG did with Staples Center (minus the eminent domain) — they got a piece of the Lakers and were able to build a new, modern arena around which they have now built the L.A. Live complex — home to shops, restaurants, condos, the Nokia Theater, hotels and the West Coast headquarters of ESPN. AEG made a lot of money off all that, something that would not have been possible without the energy of Staples and particularly the Lakers. Frankly, Kobe Bryant should be getting a check from L.A. Live.

Which all comes back to how complex figuring out whether a team made or lost money can be. Did Ratner lose money on the Nets in the real sense of the word? If an NBA owner has control of both the arena and the team, there is a lot of ways money can be moved around. Remember, only 40 percent of in-arena sponsorship money is counted by the league as “basketball related income,” but if the owner also owns the building he gets the other 60 percent, too.

NBA finances are a complex web. No doubt the recession has hit the owners and NBA franchises, but be careful about believing everything the league tells you about money lost.

Books show Nets with $44 million loss in 2008-09 season

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Did NBA teams lose money last year? And if so, really how much?

In the absence of the owners and players union sitting down and actually talking, the question of loss has become the talking point of the NBA lockout. There has been plenty of back-and-forth between the NBA and the players union — and we can throw in the New York Times — about this subject.

Darren Rovell at CNBC did something smart — when Bruce Ratner’s Nets Sports & Entertainment LLC owned the Nets, the books were public. Still are. So Rovell went and looked at them and broke down the year before the team was sold to Mikhail Prokhorov.

What he found is that while the reported loss by the team that year was $77 million, wipe out the amortization — which the league says it does not include in it’s loss numbers — and the loss falls to $44 million.

But that’s where the controversy starts on how the owners and players define losses and responsibility for those losses.

I said that there were two other numbers, which could be disputed. Let’s look at those. The first one is depreciation, which in this sense is the allocation of costs distributed over a certain period of time. In this case, the reported depreciation by Nets Sports & Entertainment is $2,041,611.

The players association says that depreciation shouldn’t be included in the losses. The owners say it absolutely should because it does reflect the cost of expenses that could be related to growing revenues. If the players get a certain percentage of revenues, the owners claim they should be responsible for some of the costs to get to those higher revenues.

The other disputed number is interest. The Nets for the 2008-09 season had $13,412,981 in interest. The players association again says that that shouldn’t be included in the losses. With depreciation, the actual loss might not be taken in the year it is credited to. With interest, the ownership is actually writing a check. The players can argue they shouldn’t share in this, but there’s no debate that that is a real loss.

I tend to side with the players on interest — it is not their responsibility if an owner took out loans to buy a team. But for fun, even if you wipe depreciation and interest off the books, the Nets still lose in the neighborhood of $28.5 million. That’s a chunk of change. You can see why an owner would be frustrated.

There needs to be some balance in the system. Should some of that kind of loss be covered by revenue sharing from larger market owners? Yes. Should a reduction in players’ salaries (via a reduced share of basketball related income) be part of it? Yes. But the Nets were bad and played in a bad building, and if an owner loses money because of that I have a hard time thinking the players should cover too much of the losses.