BrooklynArena,LLCandSubsidiary

ConsolidatedFinancialStatements

FortheperiodJuly1,2015throughJanuary29,2016andJanuary30,2016
throughJune30,2016

BrooklynArena,LLCandSubsidiary
TableofContents

Page(s)

IndependentAuditorsReport.......................................................................................................................................1

ConsolidatedBalanceSheet..........................................................................................................................................3

ConsolidatedStatementofOperations.........................................................................................................................4

ConsolidatedStatementofMembersEquity..............................................................................................................5

ConsolidatedStatementofCashFlows.........................................................................................................................6

NotestoConsolidatedFinancialStatements...........................................................................................................715









IndependentAuditor'sReport

TotheMemberof
BrooklynArena,LLCandSubsidiary

Wehaveaudited theaccompanying consolidatedfinancial statementsof Brooklyn Arena, LLC and its subsidiary,
whichcomprisetheconsolidatedbalancesheetasofJune30,2016,andtherelatedconsolidatedstatementsof
operations,membersequity,andcashflowsfortheperiodsfromJuly1,2015throughJanuary29,2016(dateof
acquisition)andJanuary30,2016throughJune30,2016.

Management'sResponsibilityfortheConsolidatedFinancialStatements

Managementisresponsibleforthepreparationandfairpresentationoftheconsolidatedfinancialstatementsin
accordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica;thisincludesthedesign,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
consolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor'sResponsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of America.
Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthe
consolidatedfinancialstatementsarefreefrommaterialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidatedfinancialstatements.Theproceduresselecteddependonourjudgment,includingtheassessmentof
therisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetofraudorerror.Inmaking
thoseriskassessments,weconsiderinternalcontrolrelevanttotheCompany'spreparationandfairpresentationof
theconsolidatedfinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,
butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany'sinternalcontrol.Accordingly,
weexpressnosuchopinion.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedand
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is
sufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion,theconsolidatedfinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,the
financialpositionofBrooklynArena,LLCanditssubsidiaryasofJune30,2016andtheresultsofitsoperationsand
itscashflowsfortheperiodsfromJuly1,2015throughJanuary29,2016andJanuary30,2016throughJune30,
2016inaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.

PricewaterhouseCoopersLLP,200PublicSquare,18thFloor,ClevelandOH44114
T:(216)8753000,F:(216)5667846,www.pwc.com/us


EmphasisofMatter

AsdescribedinNote1,thechangeinownershipoftheCompanyonJanuary29,2016resultedintheapplicationof
pushdownaccounting.TheassetsandliabilitiesoftheCompanywereadjustedtofairvalueuponthechangein
ownership.

September30,2016

 BrooklynArena,LLCandSubsidiary
ConsolidatedBalanceSheet
June30,2016

June30,2016
Assets
Currentassets
Cashandcashequivalents 26,994,022
Restrictedcashandescrowedfunds 11,166,424
Accountsreceivable,lessallowanceof$239,171 9,266,189
Accountsreceivableaffiliates 3,790,995
Prepaidexpensesandotherassets 783,383
Totalcurrentassets 52,001,013

Arena,net 649,796,356
Intangibles,net 184,390,537
LoantoAffiliate 4,394,984
Totalassets $890,582,890

LiabilitiesandMember'sEquity
Currentliabilities
Accountspayableandaccruedexpenses 8,319,939
Deferredrevenue 53,971,868
Other 94,182
Totalcurrentliabilities 62,385,989

Financingleaseobligation 557,847,995
Totalliabilities 620,233,984

Commitmentsandcontingencies

Member'sequity 270,348,906
Totalliabilitiesandmember'sequity $890,582,890

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

3
 BrooklynArena,LLCandSubsidiary
ConsolidatedStatementofOperations
FortheperiodJuly1,2015throughJanuary29,2016andJanuary30,2016throughJune30,2016

PostTransfer PreTransfer
January30,2016 July1,2015
June30,2016 January29,2016
Revenues
Sponsorshipandsuites $30,985,185 $38,643,181
Eventsandotherincome 30,019,805 45,298,597
Ticketing,facilityandrelatedfees 8,023,449 8,480,559
Concessionrevenue 7,442,434 7,218,445
Totalrevenues 76,470,873 99,640,782
Operatingexpenses
Events 39,965,974 49,236,235
Operatingandmaintenance 14,885,475 19,172,233
Selling,generalandadministrative 2,642,303 4,578,062
Totaloperatingexpenses 57,493,752 72,986,530

Interestexpensefinancingleaseobligation 14,262,130 19,387,156

Interestexpenserelatedparty 8,738,489
Depreciationexpense 10,053,682 19,276,734
Amortizationexpense 4,799,464
Netloss $(10,138,155) $(20,748,127)

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

4
 BrooklynArena,LLCandSubsidiary
ConsolidatedStatementofMembersEquity
FortheperiodJuly1,2015throughJanuary29,2016andJanuary30,2016throughJune30,2016

PreTransfer
OneximSportsand NetsSportsand
Entertainment,LLC Entertainment,LLC Total
45% 55%

BalanceatJune30,2015 $173,259,860 74,407,539 $247,667,399

Capitalcontributions 1,551,600 1,896,400 3,448,000

Distributions (7,650,000) (9,350,000) (17,000,000)

Netloss (9,336,657) (11,411,470) (20,748,127)

Equitytransfer (157,824,803) (55,542,469) (213,367,272)

BalanceatJanuary29,2016 $ $ $

PostTransfer
OneximSportsand NetsSportsand
Entertainment,LLC Entertainment,LLC Total
100% 0%

InitialcapitalizationonJanuary29,2016 $280,487,061 $280,487,061

Netloss (10,138,155) (10,138,155)

BalanceatJune30,2016 $270,348,906 $ $270,348,906

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

5
 BrooklynArena,LLCandSubsidiary
ConsolidatedStatementofCashFlows
FortheperiodJuly1,2015throughJanuary29,2016andJanuary30,2016throughJune30,2016

PostTransfer PreTransfer
January30,2016 July1,2015
June30,2016 January29,2016
Cashflowsfromoperatingactivities
Netloss $(10,138,155) (20,748,127)
Adjustmentstoreconcilenetlosstonetcashprovidedby(usedin)operatingactivities:
Depreciation 10,053,682 19,276,734
Amortization 4,799,464
Interestexpenseonconvertedloanfromaffiliate 8,738,489
Changesinoperatingassetsandliabilities:
Accountsreceivable 16,675,924 (17,484,516)
Accountsreceivableaffiliates (7,021,969)
Prepaidexpensesandotherassets 4,686,188 (3,635,973)
Deferredcosts 218,002
Accountspayableandaccruedexpenses (751,785) (2,599,780)
Accountspayableaffiliates,net 1,335,673
Deferredrevenue (15,521,371) 11,862,271
Financingleaseobligationaccruedinterestexpense 662,961 (235,195)
Netcashflowsprovidedby(usedin)operatingactivities 3,444,939 (3,272,422)

Cashflowsfrominvestingactivities:
InvestmentintheArena (457,771) (13,955,019)
Acquisitionofmember'sinterest (2,958,419)
Depositsintorestrictedcashandescrowedfunds,net (1,359,917) (1,659,384)
Paymentsfromrestrictedcashandescrowedfunds 5,834,746
Netcashflowsusedinprovidedbyinvestingactivities (4,776,107) (9,779,657)

Cashflowsfromfinancingactivities:
Proceedsfromfinancingleaseobligation 7,173,763
LoantoAffiliate (4,394,984)
Capitalcontribution 3,448,000
Distributions (17,000,000)
Netcashflowsusedinfinancingactivities (4,394,984) (6,378,237)

Netdecreaseincashandcashequivalents (5,726,152) (19,430,316)

Cashandcashequivalents,beginningoftheperiod 32,720,174 52,150,490

Cashandcashequivalents,endoftheperiod $26,994,022 $32,720,174

Supplementalcashtransactions
Interestpaid $(13,599,172) (16,593,838)

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

6

BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

1. Organization

BrooklynArena,LLC(BrooklynArena),aDelawarelimitedliabilitycompany,owns100%membershipinterestsin
BrooklynEventsCenter,LLC(BrooklynEvents),aDelawarelimitedliabilitycompany,(collectively,theCompany).
Through its subsidiary, Brooklyn Arena operates the Barclays Center (the Arena), a stateoftheart sports and
entertainmentarenalocatedinBrooklyn,NewYork.

PriortoJanuary29,2016,themembersofBrooklynArenawereNetsSportsandEntertainment,LLC(NS&E)and
OneximSportsandEntertainment,LLC(OS&E)witha55%and45%ownershipinterest,respectively.OnJanuary
29,2016,NS&EandOS&EcompletedatransactionwherebyNS&EsolditsmembershipinterestinBrooklynArena
toOS&Efor$162.6million,comprising$70.0millionincashand$92.6millioninapromissorynote.Thisacquisition
resultedinOS&EconsolidatingtheCompanysaccountsunderASC810,Consolidations(ASC810),andresultedin
a controlbased acquisition for OS&E, which was recorded as a business combination under ASC 805, Business
Combinations(ASC805)(SeeNote2).TheCompanyisnowwhollyownedbyOS&E.

NatureofBusiness
TheArenaisthehomeofaprofessionalbasketballteam,theBrooklynNets(Nets),andaprofessionalhockey
team,theNewYorkIslanders(Islanders).TheArenaalsohostsliveentertainmentevents,suchasconcerts,family
shows,andotherentertainmentevents.

2. SummaryofSignificantAccountingPolicies

BasisofPresentation
The accompanying consolidated financial statements include Brooklyn Arena and its whollyowned subsidiary,
BrooklynEvents,andarepresentedusingtheaccrualbasisofaccountinginaccordancewithaccountingprinciples
generallyacceptedintheUnitedStatesofAmerica.Allsignificantintercompanytransactionsandbalanceshavebeen
eliminatedinconsolidation.

AsaresultoftheacquisitionoftheCompanyduringthecurrentyear,thenewbasisofaccountingrecordedbyOS&E
hasbeenpusheddowntothefinancialstatementsoftheCompany.Financialactivitypriorandsubsequenttothe
acquisitionisreflectedasPreTransferandPostTransfer,respectively,intheCompanysconsolidatedfinancial
statements.

UseofEstimates
ThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnited
StatesofAmericarequiresmanagementtomakeestimatesandassumptionsaboutfutureevents.Theseestimates
andunderlyingassumptionsaffectreportedamountsofassetsandliabilitiesatthedateofthefinancialstatements
andreportedamountsofrevenuesandexpensesduringthereportingperiod.Suchestimatesincludedvaluationof
accountsreceivable,longlivedassetsandotherliabilities.Inaddition,estimatesareusedinrevenuerecognition,
expense recognition, prepaid expenses, accrued expenses, and depreciation and amortization of assets. These
estimatesarebasedonmanagementsbestjudgmentatapointintimeandactualresultscoulddifferfromthose
estimates.

7

BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

ArenaSale
Asaresultoftheacquisition,theCompanyappliedthenewbasisofaccountingtoitsnetassetsinaccordancewith
ASC805.TheCompanyhiredathirdpartyvaluationfirmtoassistindeterminingthefairmarketvalueofcertain
longlivedassetsandliabilities.ThefollowingtablesummarizestheallocationofthefairvalueoftheCompanys
tangibleandintangibleassetsandliabilitiesonJanuary29,2016.

Arenaandrelatedintangiblesrecordedattransfer
ArenaandImprovements $659,392,265
Agreementrelatedintangibles 189,190,001
$848,582,266

Debtrecordedattransfer
Financingleaseobligation $(557,185,034)

Cashrecordedattransfer
Cashandcashequivalents $29,761,760

Noncashworkingcapitalrecordedattransfer
Restrictedcashandescrowedfunds $9,806,507
Accountsreceivable,net 25,942,113
Prepaidexpensesandotherassets 5,469,571
Accountspayableandaccruedexpenses (9,165,909)
Deferredrevenue (69,493,239)
Accountspayableaffiliates (3,230,974)
$(40,671,931)


TheCompanyassessesandconsidersfairvaluebasedonestimatedcashflowprojectionsthatutilizediscount
and/orcapitalizationratesthatitdeemsappropriate,aswellas,availablemarketinformationatthedateof
acquisition.Estimatesoffuturecashflowsarebasedonanumberoffactorsincludingthehistoricaloperating
results,knownandanticipatedtrends,andmarketandeconomicconditions.Thefairvalueofthetangibleassets
oftheCompanyconsidersthevalueofthepropertyasifitwerevacant.TheCompanyalsoconsidersanallocation
ofpurchasepricetoinplaceagreementsthatmayhaveanoperatingintangiblevalue.

IntangibleassetsincludeamountsforinplaceagreementvaluesthatarebasedontheCompanysevaluationof
thespecificcharacteristicsofeachagreement.Inplaceagreementsincludethosecoveringnamingrights,suites,
sponsors,concessions,ticketing,andlivesportsandentertainmentorganizations.Factorsconsideredwere
earningsthattheCompanyexpectedtoreceiveintheremainingyearofeachagreementandchargesfortheuse
ofcontributoryassets,includingworkingcapitalandfixedassetsthatwerederivedfromeachagreement.

ThefollowingtablerepresentsthevaluationadjustmentsmadetotheCompanysbalancesheetonJanuary29,
2016.

Valuationadjustmentsrecordedattransfer
Intangibles $189,190,001
Arenavaluationadjustment (231,724,139)
Adjustmenttoworkingcapital (20,170,773)
Financingleaseobligation (13,050,000)
ConversionofLoanPayable 142,874,700

8

BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

CashandCashEquivalents
The Company considers all cash balances on deposit with financial institutions and highly liquid instruments
purchasedwithanoriginalmaturityofthreemonthsorlesstobecashequivalents.

RestrictedCashandEscrowedFunds
RestrictedcashprimarilyconsistsofPILOTPaymentsinexcessofthenetdebtservicerequirements.Escrowedfunds
representthebalanceofamountsfundedinaccordancewiththeArenaLease.AsofJune30,2016,restrictedcash
andescrowedfundsconsistofthefollowing:

RestrictedCash $ 2,094,366
EscrowedFunds 9,072,058
Total $ 11,166,424

AccountsReceivable
Accountsreceivablearerecordedatnetrealizablevalue.TheCompanymaintainsanallowancefordoubtfulaccounts
toreserveforpotentiallyuncollectiblereceivables.Theallowancefordoubtfulaccountsisestimatedbasedonthe
Company'sanalysisofreceivablesaging,specificidentificationofreceivablesthatareatriskofnotbeingpaidand
otherfactors.

ConcentrationofCreditRisk
FinancialinstrumentsthatmaypotentiallysubjecttheCompanytoaconcentrationofcreditriskconsistprimarilyof
cash and cash equivalents and accounts receivable. The Company maintains cash deposits with major financial
institutionswhichfromtimetotimemayexceedfederallyinsuredlimits.TheCompanyperiodicallyassessesthe
financialconditionoftheinstitutionsandbelievesthattheriskofanylossisminimal.

Therearenocustomers,otherthanourcontractualagreementswiththeNetsandIslanders,thatrepresented10%
ormoreofaccountsreceivableasofJune30,2016orrevenuesforyearendedJune30,2016.

PrepaidExpensesandOtherAssets
Prepaid expenses represents costs incurred for insurance which are amortized on a straightline basis over the
relatedperiodofinsurancecoverage,andcostsincurredforvariousfutureeventswhicharepaidinadvanceand
expensedwhentheeventsoccur.

Arena
Thearenaisreportedatcost.Depreciationiscomputedonastraightlinebasisovertheestimatedusefullivesof
itslonglivedassetsasfollows:

Arena 31.5years
Buildingimprovements 15to20years
Furniture&Equipment 3to31.5years

AsofJune30,2016,Arenaconsistsofthefollowing:

Buildingandland $ 616,549,186
Furnitureandequipment 43,300,852
Less:Accumulateddepreciation (10,053,682)
Arena,net $ 649,796,356

9

BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

Intangibles
TheCompanysintangibleassetsarereportedatcost.Amortizationiscomputedonastraightlinebasisoverthe
estimatedusefullivesofitslonglivedassetsasfollows:

Agreementrelatedintangibles 14to23years

AsofJune30,2016,Intangiblesconsistofthefollowing:

Agreementrelatedintangibles $ 189,190,001
Less:Accumulatedamortization (4,799,464)
Intangibles,net $ 184,390,537

The Company reviews its longlived assets to determine if its carrying costs will be recovered from future
undiscounted cash flows whenever events or changes in circumstances indicate that recoverability of longlived
assets may not be supported. Significantestimates aremade in thedeterminationof future undiscounted cash
flows.WhentheCompanydoesnotexpecttorecoveritscarryingcosts,animpairmentlossisrecordedtotheextent
thecarryingvalueexceedsfairvalue.NotriggeringeventforimpairmenttestingoccurredfortheperiodJanuary29,
2016(dateofacquisition)throughJune30,2016.

DeferredCosts
DeferredcostsprimarilyrepresentedcostsincurredinconnectionwithobtainingthePILOTBonds.Thesecostswere
amortizedoverthetermofthefinancingleaseobligationusingtheeffectiveinterestratemethod.Fortheperiod
July1,2015throughJanuary29,2016,approximately$439,000hasbeenexpensed.

DeferredRevenue
Deferred revenue represents cash received from sponsorship, suite license and future events which will be
recognizedasrevenuewhenearned.Deferredrevenueispresentednetofapproximately$4,095,000ofadvance
sponsorshipandsuitelicensebillingsthatareoutstandingatJune30,2016,butpertaintothenextfiscalyear.

FairValueofFinancialInstruments
TheCompanyestimatesthefairvalueofitsdebtinstrumentsbydiscountingfuturecashpaymentsatinterestrates
thattheCompanybelievesapproximatecurrentmarketrates.Theestimatedfairvalueisbaseduponmarketprices
of public debt, available industry financing data, current treasury rates, recent financing transactions and other
factors.ThecarryingamountoftheCompanysaccountspayableandaccruedexpenses,otherpayables,andnet
financingleaseobligationapproximatefairvalue.

CommitmentandContingencies
Liabilitiesforlosscontingenciesarisingfromclaims,assessments,litigation,finesandpenaltiesandothersources
are recorded when it is probable that a liability has been incurred and the amount of the assessment can be
reasonablyestimated.AsofJune30,2016therewasnolosscontingenciesaccrued.

RevenueRecognition

SponsorshipsandSuites
Sponsorshipsandsuitesrevenuearerecognized,netoffulfillmentcosts,onastraightlinebasisoverthetermofthe
respectivecontracts.FortheyearendedJune30,2016,totalfulfillmentcostswereapproximately$4million.

Ticketing,facility,andrelatedfees
TicketingrevenueisbasedonticketsalesearnedinconnectionwiththeIslandersandothereventsthattheCompany
producesorpromotes.TicketingfeerevenueisbasedontheArena'sshareofticketsalefeesinaccordancewiththe

10

BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

agreementwithTicketmaster.Inaddition,theCompanyalsoearnsafacilityfeeforevents.Feesarerecognized
whentheeventoccurs.

Eventsandotherincome
Eventandotherincomeresultsfromthesaleoftickets,andvenuelicensefeesearnedinconnectionwithevents
thatthecompanydoesnotproduceorpromote.Eventandotherincomearerecognizedwhentheeventsoccur.

Concession
ConcessionsrevenueisbasedontheArena'sshareofgrossreceiptsinaccordancewiththeagreementwiththe
Arenaconcessionoperator.Concessionrevenueisrecordedatthetimetheconcessionisprovided.Inaddition,to
theextenttheconcessionoperatorgeneratesaprofitattheendofthefiscalyear;theCompanyrecordsitsshareas
providedforintheagreement.

GrossversusNetEventRevenueRecognition
TheCompanyreportsrevenueonagrossornetbasisbasedonmanagement'sassessmentofwhethertheCompany
actsasaprincipaloragentinthetransaction.TotheextenttheCompanyactsastheprincipal,revenueisreported
onagrossbasis.ThedeterminationofwhethertheCompanyactsasaprincipaloranagentinatransactionisbased
onanevaluationofwhethertheCompanyhasthesubstantialrisksandrewardsofownershipunderthetermsofan
arrangement. Generally, when the Company is the promoter or copromoter of an event the Company reports
revenueonagrossbasis.WhentheCompanyactsasanagent,revenueisreportedonanetbasis.

Operatingandmaintenance
Operating and maintenance expense primarily consists of salaries and benefits, property and generalinsurance,
utilitiesandmaintenancecosts.Thesecostsareexpensedasincurred.

Selling,generalandadministrative
Selling,generalandadministrativeexpenseprimarilyconsistsofnoneventrelatedmarketing,andofficeoverhead
expensesuchasprinting,supplies,phoneservice,etc.

IncomeTaxes
The Company is a singlemember limited liability company. From a federal income tax perspective, there is no
substantivedifferencebetweenasinglememberlimitedliabilitycompanythatistreatedasadisregardedentityand
adivisionthatisincludedinthemembersconsolidatedtaxreturn.Therefore,noprovisionorbenefitforfederal,
stateandlocalincometaxeshasbeenreflectedinthefinancialstatementssincesuchincometaxes,ifany,arethe
responsibilityofthemember.

SubsequentEventsReview
OnSeptember15,2016,BrooklynArenaLocalDevelopmentCorp(LDC)issuedapproximately$493.7millionof
PILOTRevenueRefundingBonds,Series2016,theproceedsofwhichwillbeappliedforthepurposeofrefundinga
portionofLDCsoutstandingPILOTRevenueBonds,Series2009.TheSeries2016PILOTbondsareexpectedtocarry
aconstantinterestrateofapproximately3.6%overtheremainingtermoftheArenaLease.

The Company has evaluated and disclosed events and transactions that occurred between June 30, 2016 and
September30,2016,whichisthedatethefinancialstatementswereavailabletobeissued.

11

BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

3. FinancingLeaseObligation

DuetotheCompanysoptiontopurchasetheArenaattheendoftheleaseterm,theCompanysobligationunder
theArenaLeaseisrecordedasafinancingleaseobligation.

OnSeptember12,2007,andassubsequentlyamended,BrooklynArenaenteredintoaFundingAgreementwith
Empire State Development Corp (ESDC), an agency of New York State, pursuant to which the New York City
Economic Development Corporation contributed, through ESDC, $131,000,000 (Acquisition Price), which
approximatedthevalueoftheland,toacquirethelandfromtheCompany.InMarch2010,thetitletotheArena
landvestedwithESDC.InJanuary2016,asaresultofthearenasale,thefairmarketvalueofthelandwasassessed
at$144,050,000.

AgroundleaseagreementwasenteredintobetweenESDCandLDC.EffectiveonMarch12,2010,LDCsubletthe
land(ArenaLease)toBrooklynEvents.SinceBrooklynEventshascontinuinginvolvementintheformofanoption
topurchasetheArenaattheendoftheinitialleasetermforfairmarketvalue,thereassessedvalueof$144,050,000
isrecordedasafinancingleaseobligation.

InDecember2009,LDCissued$511,000,000inPILOTRevenueBonds,Series2009(PILOTBonds)forthepurpose
ofpayingthecostsofconstructionoftheArena,servicinginterestduringtheconstructionperiodandestablishing
therequiredcollateralreserves.

InaccordancewiththeArenaLease,onMay12,2010andvariousdatesthereafter,BrooklynEventsdepositedcash
into escrow accounts (Escrowed Funds) held by the PILOT Trustee. Escrowed Funds were used to fund
constructioncosts,interestpaymentsduringtheconstructionperiodandcertaincollateralreserveaccounts.Ifthe
Escrowed Funds were insufficient, Brooklyn Events was required to fund the amounts required to complete the
Arena.Noadditionalfundingwasrequiredinthecurrentyear.

TheArenaLeasehasaninitialtermofthirtysevenyearswithsevenconsecutiverenewaloptions:extensionsone
through six are ten years each and the seventh extension is for a twoyear period, for a total number of years
available under the Arena Lease not to exceed ninetynine years. The following are the components of rental
payments:

BaseRentInitialtermatanannualamountof$10.00;renewaltermsatfairmarketrentalvalue.

AdditionalRentEquivalenttothemembersfundingintheCompanythatisultimatelyusedtopayforthe
constructionoftheArenaandfundtheEscrowedFunds,plusanyadditionalcontributionsrequireddueto
costoverruns.

PilotPaymentsTheestimatedPILOTPaymentsprovide110%coverageovertheestimatednetdebtservice
requirementsofthePILOTBonds.ThePILOTPaymentsinexcessofthenetdebtservicerequirementsare
depositedintotheRestrictedcashandescrowedfundsandwillbemadeavailabletoBrooklynEventsfor
certainoperatingandmaintenanceexpenses(O&MFunds)oftheArenaprovidedthattheamountonhand
withthePILOTTrusteeisnotlessthan10%oftheremainingcurrentyearsPILOTpayment.

ThePILOTPaymentsmaynotexceedactualtaxes,asdefinedintheArenaLease,andeachPILOTPaymentissecured
byamortgageagreementwhichencumberstheArena.FortheyearendedJune30,2016,thetotalPILOTPayments
madebyBrooklynEventswere$33,212,311ofwhich$30,193,010wasusedtoservicethePILOTRevenueBondsand
thedifferenceisdepositedtotheEscrowedFunds.ThefollowingtablepresentsscheduledPILOTpaymentsdue
undertheArenaLease:

12

BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

YearsendingJune30,
2017 $34,025,662
2018 34,777,856
2019 35,469,206
2020 36,232,029
2021 37,015,049
Thereafter 1,179,834,605
Total 1,357,354,407
Less:imputedinterestcost (820,160,560)
Less:O&MFunds (123,395,852)
Totalpresentvalue 413,797,995
AcquisitionPrice 144,050,000
Financingleaseobligation $557,847,995

ThePILOTPaymentsareallocatedbetweenprincipalandinteresttoamortizeconstructionfundsandaccrued
interestinamannerwhichproducedaconstantinterestrateof8%overthetermoftheArenaLease.ThePILOT
Payments,presentedabove,throughJune30,2021willbeappliedbetweeninterestexpenseandO&MFund.In
theyearssubsequentto2021,principalpaymentstowardthefinancingleaseobligationwillcommenceandbe
fullypaidoffbytheendoftheleaseterm.TotalinterestfortheyearincludedinInterestexpenseis$33,210,381.

4. RelatedPartyTransactions

LoanwithOS&E
PriortoJanuary29,2016,theCompanywassubjecttoaloanagreementwithanaffiliateofOS&E.Totalinterestfor
theperiodendedJanuary29,2016includedininterestexpenseis$8,738,489.

OnJune29,2016,theCompanyenteredintoaloanagreementwithOS&E,wherebyitagreedtoloanupto$50
million.AsofJune30,2016,totalloantoaffiliateisapproximately$4,395,000.

AgreementwiththeNetsandOS&E
TheCompanyhasanagreementtoreimbursetheNetsforthecostsofvariousemployeesandotherArenarelated
expenseswhicharesharedbetweenthetwocompanies.Totalamountpaidunderthisagreementfortheyearended
June30,2016isapproximately$14,327,000.

OnMay12,2012,theCompanyenteredintoa37yearlicensingagreementwiththeNetswherebytheNetshave
certainandexclusiverightsregardingtheuseoftheArena.ThelicensingagreementrequirestheNetstopaythe
greaterofanannualbaselicensingfeeof$6,500,000or10%ofNetTicketRevenue,asdefined,andanancillary
licensingfeeof$494,000,andotherreimbursableexpensestoBrooklynEventsbeginningNovember1,2012which
aresubjecttoannualincreasesequaltothelesserof3%ortheConsumerPriceIndex.Thelicensingagreementalso
requirestheNetstopayaMerchandisingFeeanannualsumof$420,000,increasedby3%eachNBAseason.

Also,theCompanyhassuitelicenseagreementswithOS&E.OS&Epurchasedtwosuitelicenseswithacombined
annualfeeofapproximately$962,000

13

BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

AccountsReceivablefromAffiliates
AsofJune30,2016,accountsreceivablefromaffiliatesconsistsofthefollowing:

Due(to)/fromAffiliate
Nets(1) 1,453,570
OneximSports&Entertainment(2) 2,337,425
Total 3,790,995

(1)PredominantlyconsistsofsharedNetsemployeecosts
(2)RepresentsfundingreimbursementsowedbyOS&E

5. ArenaRevenueAgreements

NamingRightsAgreement
Brooklyn Events and an affiliated entity related through common ownership entered into a Naming Rights
Agreement with Barclays Services Corporation (Barclays), where, in exchange for certain fees and other
considerations, the Arena is named Barclays Center and Barclays is entitled to certain additional sponsorship,
branding,promotional,media,hospitality,andotherrightsandentitlements.ThisAgreementexpiresonJune30
followingthetwentiethanniversaryoftheopeningdateoftheArena,subjecttocertainextensionrights.

AgreementwiththeIslanders
OnOctober24,2012,theCompanyenteredintoalicensingagreementwiththeIslanderswherebytheIslanders
havecertainandexclusiverightsregardingtheuseoftheArenaandtheArenaisentitledtocertainrevenues.The
termoftheagreementisfor25NHLseasonscommencingonthefirsthomedateduringtheinitialseason,which
wasinSeptember2015.However,boththeCompanyandtheIslandershavetheright,followingtheconclusionof
the20162017NHLseason,toinitiategoodfaithdiscussionsregardingmodificationofthefinancialarrangements
withintheNYILicenseAgreement,withsuchdiscussionperiodexpiringasofJanuary1,2018.Ifthepartiesare
unable to reach an agreement, resulting in an OptOut Notice, either party may elect to terminate the license
agreementeffectiveasoftheconclusionofthe20182019NHLseason;provided,however,that,intheeventthat
an OptOut Notice is delivered, the Islanders shall also have the right to terminate the NYI License Agreement
effectiveasoftheconclusionofthe20172018NHLseason. ThelicensingagreementrequirestheIslanderstopay
anannuallicensefeeandprovideforanoperatingexpensereimbursementtotheArenasubjecttoapergamecap.
TheArenaisrequiredtopaytheIslandersanannualguaranteedseasonpaymentnetofdirectsalesandmanagement
costs,whichissubjecttocertainadjustmentsasdefinedintheagreement.Theannualseasonpaymentissubjectto
annualincreaseof1.5%eachseasonovertheterm.FortheyearendedJune30,2016,totalpaymentstotheIslanders
wereapproximately$37,519,000.

SponsorshipandProductAvailabilityAgreements
Sponsorship agreements have been entered into with various entities, which entitle the sponsor to certain
marketing,advertising,promotional,media,hospitalityand/orotherrightsandentitlementsinassociationwiththe
Arena,theNets,andtheIslanders.Inaddition,certainagreementsrequireBrooklynEventstopurchasedesignated
goodsandservicesfromthesponsoratratesthatarenolesscompetitivethantheprevailingmarketrates.Terms
oftheagreementsrangefromonetosevenyearsfromtheopeningdateoftheArena,asdefinedineachunderlying
agreement.

SuiteLicenseAgreements
Brooklyn Events has entered into suite license agreements with various entities and, in addition, granted suite
licensesasanentitlementtocertainArenasponsors.Eachsuitelicenseentitlesthelicenseetheuseofaluxurysuite
in the Arena, with most luxury suites containing seats for viewing most events at the Arena. The suite license
agreementsareforvarioustermsrangingfromonetosevenyears.

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BrooklynArena,LLCandSubsidiary
NotestotheConsolidatedFinancialStatements

ConcessionsAgreement
BrooklynEventsenteredintoathreeyearagreement,whichcommencedattheopeningoftheArena,withafood
servicecompany.Underthisagreement,BrooklynEventsreceivesrevenuesbasedonaspecifiedpercentageofall
concession revenue or a guaranteed minimum based on attendance. In addition, to the extent the concession
operator generates a profit at the end of the fiscal year; the Company receives its share as provided for in the
agreement.OnAugust12,2015,thetermoftheagreementwasextendedthroughJune30,2020.

AggregateContractualRevenues
The aggregate contractually obligated annual fees, gross of activation costs, from the naming rights, licensing
agreements;sponsorships,suitelicenses,andconcessionsagreementsforthenextfiveyearsareapproximatelyas
follows:

2017 $58,231,000
2018 37,862,000
2019 25,774,000
2020 24,260,000
2021 23,852,000
Total $169,979,000

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