Billionaire James Dolan has quietly moved to auction off the upscale Tao nightclub and restaurant chain — a move that insiders said looks like a desperate bid to fund the ballooning tab for a costly project in another arm of his entertainment empire, The Post has learned.
The New York mogul’s Madison Square Garden Entertainment — the conglomerate that owns not only the landmark home to the New York Knicks and Rangers, but also Radio City Music Hall and the Rockettes, among other properties — has hired Goldman Sachs to explore a sale of Tao Group, sources close to the situation said.
First-round bids for Tao — whose pricey clubs have long been playgrounds for Wall Street financiers and celebrities like Leonardo DiCaprio, Bella Hadid and Justin Bieber — are being submitted now, two sources with knowledge of the situation said.
Houston Rockets and Golden Nugget Casino owner Tilman Fertitta is a rumored suitor for Tao, one of the sources said.
Last month, a Morgan Stanley analyst calculated that Tao — which operates 32 New York City restaurants and clubs like Beauty & Essex, Lavo and Bar Moxy, as well as dozens of other venues in hotspots like London, Singapore and Dubai — was worth $524 million.
By that estimate, MSGE’s 67% stake in Tao would be worth $274 million, when subtracting Tao’s $85 million in debt. Insiders say that’s a sum that could help Dolan close a $600 million gap in the construction budget for the MSG Sphere, a state-of-the-art entertainment venue he’s building in Las Vegas whose price tag has nearly doubled to $2.2 billion.
Nevertheless, insiders say Dolan wants a premium price well above Morgan Stanley’s valuation as Tao expands beyond its New York City and Las Vegas base to the Middle East and Miami.
“Jim is looking at a 12 times Ebitda multiple,” a source with close knowledge of the sale said, which would be nearly $800 million. “It’s probably worth seven to eight.”
“Lots of rents on Tao properties are up in the next five years,” the source added, explaining why the multiple should be in the single digits. “You also have to continually reinvest.”
The source believes Dolan needing money to fund The Sphere might take a more reasonable price, although the source added that Dolan has a history of exploring and then canceling auctions.
MSGE declined to comment when contacted by The Post on Wednesday.
In 2017, Madison Square Garden had acquired its controlling stake in Tao for $181 million, with Tao founders Marc Packer, Rich Wolf, Noah Tepperberg and Jason Strauss retaining a minority stake in the business.
Tao has lately recovered from business woes that started even before the pandemic. The company was at risk of defaulting on its debt in 2019 after its revenue fell in half. MSG came in and loaned Tao $49 million after Tao lender JPMorgan refused to roll over its full $100 million loan, sources said.
Last year, Tao Group paid $99 million to acquire Hakkasan Group — a global chain of upscale restaurants and clubs with outposts in London, Las Vegas the Middle East and Asia — a deal that was generally considered to be shrewd and lucrative, sources said.
Sources said the Tao sale looks like a key source of cash for Dolan as he looks to raise money for the MSG Sphere. On Dec. 22, the project announced it had borrowed $275 million from a JPMorgan-led lender group.
On Dec. 6, MSGE announced it was going to spin off its namesake arena, along with Radio City Music Hall, the Radio City Rockettes and Christmas Spectacular and other live-entertainment properties into a separate, publicly traded company this spring. Proceeds from that spinoff could total nearly $600 million if it’s successful, according to analysts.
Meanwhile, MSG Networks — the so-called regional sports networks, or RSNs that air local cable-TV broadcasts of Knicks games, as well as those of the NHL’s Rangers, New York Islanders and New Jersey Devils — will remain at the parent company that currently houses the Tao Group and the MSG Sphere.