Kevin SchultzUsually when a sports team takes up residence in an arena, the team pays rent to either the company or municipality that owns the arena. It’s a typical landlord/lessee relationship, just on a much bigger scale than normal. Sometimes, teams even get a sweetheart deal on that rent money, as they leverage how badly the municipality wants to keep the team in the city by making not so veiled threats to move or not award Super Bowl hosting rights to the city (the NFL has used this tactic quite well over the years, especially with the ever-present threat of Los Angeles).
Yesterday’s Wall Street Journal has a report on the profitability of the Barclays Center, which is apparently not as profitable as its owners originally thought it would be, saying that it is “tens of millions of dollars” behind income estimates. But hidden at the end of the article is the first bit of information we have about the Islanders “iron-clad” 25-year lease with the Barclays Center, and it’s not the typical lease relationship that was described above (emphasis is mine).
But the Islanders also bring risks. The Barclays Center’s owners have guaranteed the Islanders an unspecified annual payment to move them there, according to a report from Standard & Poor’s, which issued ratings on the arena bonds and highlighted the deal as a risk factor.
People familiar with the deal said it runs in the tens of millions of dollars a year. Mr. Yormark described it as a “conservative” deal.
For comparison, the Islanders deal with Nassau County if the referendum had passed was to pay the County $14 million in rent plus 11.5% revenue sharing. Now, it looks as though the Islanders themselves were actually paid to move to Brooklyn. However, we don’t know the full picture. With the Barclays running everything from marketing to concessions and ticket sales, it is entirely possible that Barclays gets a very healthy cut of team revenue streams and is off-setting that by paying the Islanders a yearly stipend. But we don’t know.
After a decade of trying to get his own arena built in Nassau County, it was odd to see Charles Wang become a tenant in someone else’s building. The owner supposedly turned down offers from other municipalities to keep the Islanders in the metro area. Now we have a little bit clearer picture as to why that happened.