Cutting the Nets…naming deal. in half.

Things could be better for the basketball team known as the New Jersey Nets.  They did finally win a game, upping their record to 1-19, but they’re already 15 games behind league leader Orlando.  On top of that, there is a lot of murmuring regarding their proposed move to Brooklyn.  Yes, it looks like its going to happen…the question is, once it does happen, who’s going to pay for it?

Barclays Bank’s highly publicized 20-year, $400 million naming rights deal for the Nets’ proposed arena near downtown Brooklyn actually only contributes half that much toward the cost of the $900 million arena, according to a “preliminary official statement” that Goldman Sachs sent this week to major institutional investors. (via North Jersey)

Hmm…that doesn’t sound good.  A team looking for money essentially gets a $10 million dollar a year naming rights deal in the largest market in America.  Granted, we are in a recession so teams are a little more flexible on asking prices, but to compare, the Giants were asking for $30M a year for their naming rights (yes, different sports, different popularity levels, etc. And no, they have not signed a deal as of yet), it seems like a pretty wide discrepancy.  Now, lets make “bad” a little bit worse.

The document lists the annual sources of revenue that are supposed to be sufficient to pay off the $500 million in bonds being offered this month by New York State. The urgency results from the expiration at the end of the month of an Internal Revenue Service provision granting tax-free status to sports facility construction bonds.

No interest rate on the bonds is yet listed, and the document warns that “neither the faith and credit nor the taxing power of the state or the city is pledged” to back the bonds in case of default. Instead, a variety of annual revenue streams, such as naming rights, sponsorships (projected $11 million), suite licenses ($2.5 million) and concessions ($4.5 million), are expected to meet the $30 million annual debt service.

So…no backing from the city; revenue streams, from things like concessions, suite licenses and the like, are to pay off the Nets annual debt.

Not that things can’t and won’t turn around, but, please refer to the top of the article where I mention the Nets are 1-19.

If the worst does happen though, and the Nets can’t meet revenue expectations on those things tied to attendance, there is a glimmer of hope; the New York Islanders could possibly become a tenant.  Although the arena may have to be retrofitted to accommodate the Islanders, which undoubtedly result in the spending of more money.

This should make everything very interesting financially when the Nets move to Brooklyn for the 2012 season. On the other hand, maybe LeBron James will be on the Nets, in which case, any worries become moot points.

Tags: Basketball, brooklyn, financial aid, New Jersey Nets

Category: Basketball