Alibaba’s Joe Tsai Set To Buy Brooklyn Nets And Barclays Center For Record $3.3 Billion
Brooklyn Nets are on the verge of changing hands two years ahead of the expected transfer of the NBA team from Mikhail Prokhorov to Joe Tsai. Alibaba cofounder Tsai agreed to pay $1 billion last year for 49% of the Nets and $1.35 billion in three years for the remaining stake in the team. But the accelerated timetable, first reported by the New York Post, is expected to be announced as soon as Friday, according to multiple sources.
Tsai is not just taking control of the basketball franchise, he’s also agreed to buy Prokhorov’s stake in the Barclays Center where the Nets play in a seperate transaction. The combined cost of the team and arena is expected to be as much as $3.3 billion, including debt. It smashes the previous record sale price of a sports team set last year when hedge fund manager David Tepper paid $2.28 billion for the Carolina Panthers. The NBA record was set in 2017 by Tilman Fertitta who paid $2.2 billion for the Houston Rockets.
The ownership transfer continues a transformational summer for the franchise, which has long played second fiddle to the Knicks in the New York market. The team acquired a pair of all-NBA free agents this summer in Kevin Durant and Kyrie Irving and are expected to be one of the NBA’s marquee franchises when Durant returns from his torn Achilles.
The ownership transfer still needs to be approved by the NBA, but Tsai will sail through after being vetted during his minority stake purchase in 2018. The NBA is eager to add Tsai to its ranks with his ties to China, an NBA hotbed with 300 million fans. He sits on the board of NBA China. The arena and team deals are expected to close simultaneously by the end of September, assuming no hiccups arise.
The Taiwan-born Tsai is the vice chairman of ecommerce giant Alibaba and its second largest shareholder after fellow cofounder Jack Ma. Tsai’s net worth of $9.2 billion is a tick below the $9.8 billion of Prokhorov. Tsai will replace Prokhorov as the eighth richest sports team owner in the world and second wealthiest in the NBA after Steve Ballmer. Tsai also owns the WNBA’s Liberty.
Buying control of the arena is an important, albeit expensive, step for Tsai. He secured an amended lease to the arena during the 2018 agreement that steered most basketball revenue to the club instead of the arena company. But under the original agreement, Prokhorov had retained control of the revenue for concerts and other non-Nets events at the Barclays Center. The NBA strongly prefers that its clubs control the operating rights for the buildings in the which they play.
The $1 billion Barclays Center has underperformed financially since it opened in 2012. It is the fourth most popular concert venue in the U.S., according to Billboard, but revenues have consistently failed to meet expectations. The arena revenue shortfall for the 2017-18 season was $34 million on a $183 million projection. Even worse, costs were $7 million higher than expectations. As a result, the arena was $21 million in the red, instead of the projected $24 million of projected profit.
The Nets kicked off a new TV deal during the 2017-18 season that averages $50 million a year. Tsai must hope his new stars can raise the bar at Barclays though. The Nets ranked last in the NBA in attendance last season at 14,941 per game after finishing 29th the previous year.