This story is an updated version of a story I wrote recently for Forbes.com.
The drumbeat of the Barclays Center’s arrival in Brooklyn has been growing louder over the past few months–and it blasted full volume as Jay-Z christened the rusty-chic arena with eight sold-out concerts.
Jay-Z, who famously grew up in the nearby Marcy housing projects, has been pounding as loud as anyone in his role as public face of the building and its main tenant, the Brooklyn Nets. He owns a tiny slice of the team, yet he’s been attaching himself to the entire arena with an eagerness that would make a remora blush.
There are the big-ticket items, like agreeing to perform eight concerts and helping to design the Nets’ new logo. But Jay-Z has also helped with the little things. He chose the cutlery for the building’s luxury suites. He selected one of the building’s signature watering holes. And he personally picked the champagne. Why would a business-savvy guy who can get $3 million to perform at a birthday party–and has a net worth of nearly $500 million–waste his time on such trivial matters?
The answer is simple: as he does with just about everything he touches, Jay-Z is set to profit at every turn from his involvement with the Barclays Center. Yes, he picked the cutlery, but he also gets free use of one of the arena’s $550,000-per-year luxury suites. Sure, he helped secure a bar-restaurant, but it’s an outpost of his own 40/40 Club. And as for the champagne, well, it’s the $300-per-bottle Armand de Brignac in which he holds a financial interest (a connection detailed in my Jay-Z biography, Empire State of Mind).
Then there’s Jay-Z’s much-trumpeted equity. He holds a small stake in the Nets, only one-fifteenth of one percent, according to the New York Times, but he owns a larger piece of the arena itself–one fifth of one percent. That may still seem trivial, but o.2% of a $1 billion building is $2 million, about ten times more than his piece of the team is worth, and almost certainly more profitable.
Then there are the concerts themselves, which should provide him with an even more handsome profit. The Barclays Center’s 18,000-seat capacity is about 30% larger than the average arena in which Jay-Z plays. With eight sellout shows, that’s 144,000 tickets sold. Even if the prices fall short of Jay-Z’s $119-per-show average, he should easily gross somewhere around $15 million for the shows, taking home at least $5 million for his troubles. It’s also possible that he was guaranteed an even larger sum in advance.
Jay-Z paid $1 million for his stake in the Nets back in 2005, long before the Barclays Center ever existed. Though accounts vary on how much of the team he actually received (celebrities often receive more than they paid for as an incentive to buy), it seems that some of his stake was converted into a piece of the Barclays Center when Russian billionaire Mikhail Prokhorov bought a majority share of the team in 2009, perhaps with a sweetener added to keep him on board.
Assuming the numbers published recently by the New York Times are correct, Jay-Z’s equity in the team and the building add up to $2.2 million or so today, not counting all the aforementioned synergies. If Jay-Z had invested $1 million in an S&P 500 index fund in 2005, he’d have returned about 20%. His initial investment in the Nets, by contrast, has more than doubled, boosting his other brands along the way. If time is money, it’s clear Jay-Z’s was well-spent.
Read the original story here.