Newark a Good Backup Plan for Nets

The Nets’ ownership still insists it plans to play games at the Atlantic Yards site in Brooklyn sometime in the foreseeable future. But there is now some doubt that Bruce Ratner will actually move the franchise to Brooklyn: Last week, the Newark Star Ledger reported that the owner of the New Jersey Devils, Jeffrey Vanderbeek, and the mayor of Newark, Cory Booker, have held preliminary talks with Ratner and his Nets associates about moving the franchise from the Meadowlands to Newark.On Friday, Ratner issued a statement: “The team is, very simply, not for sale, and any stories that suggest or insinuate that we would be interested in listening to those conversations are flat-out false. We are focused on breaking ground on the Barclays Center in Brooklyn later this year, and building all of Atlantic Yards, nothing else.”That should have ended the story. But in the stadium and arena game, the talks between Vanderbeek and Ratner may be more of a starting point than an endpoint. There are some compelling factors that make it a sensible move for Ratner and Vanderbeek to marry their business interests.Vanderbeek, who controls the revenue streams at the new Prudential Center in Newark, could use the extra tenant to go along with the Devils, his Ironmen indoor soccer team, Seton Hall basketball, and concerts and shows.Ratner is losing an estimated $40 million annually by playing in the Meadowlands, and he is at least two years away from playing in Brooklyn. When Ratner first announced that he wanted to move his basketball team to Brooklyn in 2005, the arena was the centerpiece of the Atlantic Yards deal, worth more than $4 billion, and its projected cost was in the neighborhood of $500 million. Three years later, the building’s price tag is $950 million and could very well exceed $1 billion by the time it is completed.Originally, Ratner had hoped to get much of the arena funding from a naming rights deal with the British financial company, Barclay’s Bank: The bank has a deal in place to pay somewhere between $300 and $400 million over 20 years for the building’s naming rights. But Ratner needs a lot more than that right now to make the building a go. Will corporate sponsors buy into what is currently just a hole in the ground in this economy?In March, Ratner told the New York Times he was scaling back on his Atlantic Yards plan, and that some elements of the project, including the Miss Brooklyn building, were being eliminated for the time being because of the country’s economic slowdown. But he also said plans for the arena were continuing.Ratner can leave the Meadowlands without penalty in 2010 for Brooklyn, or he can stay in the building until 2013 if the Brooklyn building’s opening is delayed for any reason.Moving to Newark, on the other hand, is not necessarily going to be easy, and it may be a very tough sell. The way the NBA and NHL work financially may mean that Ratner will have to sell his team or become a part-owner of the Devils.Getting the Nets into Vanderbeek’s building is simple on paper, but it is also extremely complicated, because of how revenues generated inside his building are distributed. Ratner would need access to monies from luxury boxes, club seats, and in-arena concession areas. Vanderbeek would theoretically have to give up lucrative revenue streams from NBA games that he would normally keep from non-Devils events in the building. But Ratner could not financially survive without getting the lion’s share of those revenues.Vanderbeek and Ratner would have to create a partnership along the lines of those in Chicago, Dallas, or Washington to succeed. In 1988, Bulls owner Jerry Reinsdorf and the late William Wirtz, owner of the Blackhawks, decided to build jointly a new Chicago arena, sharing in its cost and sharing the revenues generated in the building. The partnership has grown over the years to include a share in a Chicago sports channel that is owned by Comcast, Reinsdorf (who also owns the White Sox), the Tribune Company (which owns the Cubs), and the Wirtz family. Reinsdorf and the Wirtz family are also cross-promoting the White Sox and Blackhawks, with events at both the arena and at U.S. Cellular Field, the White Sox ballyard.Mark Cuban bought a stake in the new Dallas arena when he purchased the Mavericks from Ross Perot Jr. in 2000. Perot Jr. and Dallas Stars owner Tom Hicks also worked out a partnership in the new building, which opened in 2001.In Washington, Abe Pollin had owned both the NBA’s Wizards and the NHL’s Capitals and controlled the revenues at the city’s new arena. In 1999, Pollin sold his interest in the Caps to Ted Leonsis and Lincoln Holdings, which Leonsis founded and has remained the chairman and majority owner of. As part of the deal, Lincoln Holdings also has a piece of the Wizards, a piece of the WNBA’s Mystics, and 44% of Pollin’s Washington Sports and Entertainment management company. Leonsis has the first option to buy out Pollin if he decides to sell his teams or Washington Sports and Entertainment.Owners in New York (the Dolan Family), Toronto (Maple Leaf Sports and Entertainment), Philadelphia (Comcast), Denver (Stan Kroenke), Los Angeles (Phil Anschutz), and Atlanta (Atlanta Spirit LLC) fully own or have financial stakes in both the NHL and NBA teams that play in local arenas. Revenues generated in the building for all events can then be applied to specific team needs.There are only two NBA teams that share arenas who are “secondary tenants” when it comes to the home court. The Boston Celtics’ ownership has no ownership stake in their building but has worked out a new contract agreement with the Boston Bruins management to remain in the building until 2021. This allows the franchise to get more money from premium seating and in-building advertising.Donald Sterling’s Los Angeles Clippers play games at Anschutz’s building with limited access to revenues generated from high-end seating. Over the years, Sterling has rejected moving to other arenas and has decided that being the third tenant behind the Lakers and Kings is fine with him — even though it probably costs him big money.Ratner would be getting all of the revenues generated in a Brooklyn arena and might eventually want to pursue an NHL presence in the building as well. But the Brooklyn building is still years away from opening, and Ratner will still be losing money at the Meadowlands, which means the possibility of moving to Newark is definitely real. The longer the Brooklyn building is delayed, the possibility of the Nets staying west of the Hudson increases. But to get to Newark from East Rutherford is going to require a lot of creative accounting to make the business of the New Jersey Nets work.evanjweiner@yahoo.com

Newark a Good Backup Plan for Nets

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