Josh Kosman
James Dolan is pitching investors in Abu Dhabi to build a second Sphere arena in the glitzy Persian Gulf metropolis – even as he fights an additional $225 million construction tab on his budget-busting Las Vegas venue, The Post has learned.
The billionaire owner of the Knicks and Rangers is in deep talks with the United Arab Emirates about licensing the Sphere – the state-of-the-art, LED-wrapped music hall that lately has played host to a U2 residency – in the cosmopolitan capital of the oil-rich kingdom, a source close to the situation said.
“These are serious talks with Abu Dhabi. They keep going back and forth,” the source told The Post.
That’s after discussions with developers to build Sphere arenas in Saudi Arabia and South Korea have stalled, according to sources – and after Dolan got a headline-grabbing smackdown from London mayor Sadiq Khan, who called the Sphere “bulky, unduly dominant and incongruous.”
Residents in east London near the proposed site complained that the 1.2 million LED screens that light up the exterior of the Sphere would be disruptive.
Khan’s decision infuriated the Sphere’s developers.
“The entire five-year planning process was hijacked by the Mayor and his bogus last-minute report,” a spokesperson for the Sphere had told the Daily Mail.
Abu Dhabi, by contrast, is a draw for business types across Asia and known for its audacious architecture, including the Burj Khalifa, the tallest skyscraper in the world and the Burj Al Arab hotel, which is shaped like a gigantic boat sail.
The city also hosts preseason NBA games and concerts at its newly built 18,000-seat Eithad Arena.
“We are in substantive discussions with multiple international markets,” about building more Spheres, the company said in a recent public statement without naming markets.
A Sphere spokeswoman declined comment.
Meanwhile, Dolan’s 20,000-seat arena in Las Vegas is contesting $224.8 million of capital expenditure accruals primarily related to Sphere construction, “a significant portion of which is in dispute and which the company does not expect to pay,” according to a Dec. 5 securities filing by Dolan’s Sphere Entertainment, which also operates the MSG Networks, which broadcasts Rangers and Knicks games.
There is speculation much of the money is owed to former Sphere general contractor AECOM-Hunt and MJ Dean Construction, which sued Dolan last year in Nevada, according to a source following the legal tussle.
The details of the case, scheduled for a February trial, are under seal.
Representatives AECOM and MJ Dean did not comment.
News of the fresh legal tussle comes after the Sphere’s construction costs rose to $2.3 billion – more than $1.1 billion over budget, partially because of COVID-related delays – before it finally opened its doors in September.
The Sphere has yet to book another act to follow U2, and sponsorship deals needed to offset much of the costs have been slow to materialize. Dolan recently teamed with entertainment giant Oak View Group, co-founded by his former business partner Irving Azoff, as The Post reported.
The company also spent about $85 million on “Postcard from Earth,” a 50-minute nature flick directed by Darren Aronofsky that has gotten mixed reviews and drawn backlash from moviegoers over the staggering ticket prices, which range from $69 to $250 a seat.
As of Sept. 30, Sphere Entertainment has about $428 million in cash, including the $225 million it announced it was borrowing on Dec. 5, an MSG analyst said, when not including advanced cash for future ticket sales and cash at the MSG cable network that cannot be touched. That gives Dolan enough leeway to settle the Sphere-related suits, the analyst said.
Also, Sphere Entertainment generates about $85 million in free cash flow over the course of the year that can help keep the Sphere in the black.
“There is a little wiggle room,” said the analyst, who asked not to be identified.
However, there are other headwinds. In October, the company faces a payment of as much as $150 million to lenders to the MSG cable networks to refinance $800 million in net debt, the analyst noted.
The company also will have to spend millions more to replace “Postcards,” which is expected to go dark in Vegas next year. Dolan said publicly last week that he expects to be able to reduce costs for the next film.
Also, building a new Sphere arena may not be as expensive as the first one since Dolan has already developed the technology and some content.
“I want to point out that just if we put in a new show, which we will do, it doesn’t obsolete the old show,” Dolan said on an earnings call last month. “Especially as you talk about new Spheres … that those marketplaces obviously haven’t seen ‘Postcards.’”
Sphere Entertainment’s stock rose to $42.25 in early July when it became clear the Sphere would open on time and there was much media coverage of its impressive interior and exterior screens.
Since then, the price has slipped, closing at $31.97 Monday.
This post was originally posted by New York Post
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