Friday, May 16, 2008

Suites go on sale, timing unquestioned, ticket prices rise, parking prized

A revamped Barclays Center web site with renderings of luxury suites for the Barclays Center emerged yesterday in tandem with the first effort to sell such suites.

The news coverage could've used more skepticism. The New York Times, unwilling to grapple with the developer's dubious claims about timing, suggested, Construction on the arena is expected to start later this year, assuming that financing being arranged by Goldman Sachs has been completed.

However, that financing depends on the resolution of three pending lawsuits (and possibly more), as even the Times has acknowledged. After all, Forest City Ratner official Andrew Silberfein submitted an affidavit in the case challenging the AY environmental review saying that "there is a serious question as to whether, given the current state of the debt market, the underwriters will be able to proceed with the financing for the arena while the appeal is pending before this Court."

Interestingly, a lawyer for groups challenging the environmental review noted that a threat was not dispositive, and that the bond market should "price the risk accordingly." Still, I'd bet there's no construction until the lawsuits are cleared, and it's likely such suits will linger well into next year.

(Above, a rendering of the showroom at the New York Times building)

"Precipice of failure"?

The sale of suites is part of a strategy to raise funds for the project and also shift public opinion. Develop Don't Destroy Brooklyn, in a press release, contended that the project is "on the precipice of failure." Yes, the credit market is in crisis and lawsuits remain pending. Yes, construction costs are rising. Yes, the arena would be the most expensive in the country by far.

But that still doesn't mean the developer, assuming the lawsuits are ultimately cleared, couldn't "securitize" the naming rights and sponsorship income to back arena bonds. And the lack of $1.4 billion in affordable housing financing, needed to build AY as approved, wouldn't cripple the project, given that Forest City Ratner now has 12 years after the close of litigation and the delivery of property via eminent domain to build just 1.5 million square feet--less than 1000 apartments, assuming 650,000 square feet of office space. It's quite possible some affordable housing financing would be made available over that lengthy time period.

And while political opinion has shifted somewhat--critical supporters like Council Members Bill de Blasio and David Yassky have become more critical--it's not yet a major shift, given that Gov. David Paterson says he supports the project.

Ticket prices going up

The FAQ included a question about ticket prices:
Q. Will the ticket prices remain the same in Brooklyn?
A. While prices have yet to be determined, they will remain comparable and competitive within the marketplace.

Remember, thanks significantly to high-priced suites, the “blended average ticket price” for Nets games would go up dramatically, 73% for regular-season games and 64% for playoff games, I reported last July.

The leap: from $74.98 to $129.72 for regular and preseason games, and from $90.71 to $149.18 for playoff games. The projections surfaced in a document provided by developer Forest City Ratner and unearthed by the lawsuit filed by Assemblyman Jim Brennan and State Senator Velmanette Montgomery. It assumed a move in 2009; prices inevitably would go up.

The price of most tickets likely wouldn't rise as sharply as the "blended average"--which would be distorted by the increase in suites from 29 to 130--but we should get a better sense of what "comparable and competitive" means.

Parking

Another element of the FAQ addressed parking:
Q. Where will I park as a Suiteholder at the Barclays Center?
A. You will have a reserved spot within a one to two block radius from the premium entrance. Important to note that our parent company controls parking both on the Arena site and surrounding areas that will enable us to deliver the most convenient parking access possible to our suite customers.

Remember, one of the rationales for this arena is that it would be at a major transit hub. But the rich aren't expected to take public transit, apparently.

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