Skip to main content

Why luxury suite sales this week are needed to market arena bonds

A counter-protest in response to the "Time Out" rally. An Bruce Ratner op-ed in the New York Daily News. The release of new renderings of the Atlantic Yards arena, office tower, and first residential building.

Let me try to put Forest City Ratner's recent efforts in some perspective. The office tower rendering is aimed to help attract an anchor tenant and get the building started. The rendering of a residential rental tower, with half the units subsidized, is aimed to maintain public support for the project.

But, more than anything else, the developer's efforts are about getting the arena built. That means the public must be convinced it's viable and, crucially, buyers of luxury suites must be recruited. The guarantee of certain suite revenues, I believe, will back bonds for the now-$950 million arena.

(Rendering from New York Post.)


Matthew Schuerman of WNYC, in a report on Tuesday, not only broke news of the arena's missing green roof, but also started making the point about marketing:

The reason behind releasing these images now wasn't so much to grab headlines, although they have, so far. but in order to prep the public and the press for marketing purposes. Forest City Ratner is going to begin marketing its luxury boxes at its arena later this month and wants to attract a company to rent office space in this new building.

Suites on sale

Luxury suites go on sale this Thursday, May 15. Crain's reported that 20% of the 130 suites have been sold to “friends and family,” according to Nets Sports Entertainment CEO Brett Yormark, but the Nets are trying very hard to get others on board.

The Nets actually sent 185 of the city's top CEOs a Tiffany key chain with a key, and one of those keys is to a free suite. And Jay-Z and Brooklyn Borough President Marty Markowitz will be there.

Next: arena bonds?

It's a good bet that a quota of suite sales, along with the value of the Barclays Center naming rights agreement and of other, as yet unnamed, partnerships, are part of the package that Forest City Ratner must put together to sell arena bonds. So far, Forest City Ratner has acknowledged that the naming rights agreement "lends itself pretty nicely" to securitization, but hasn't spoken about securitizing suite revenue.

But suite revenue has been part of other arena deals.Consider the 1999 sale of $315 million asset-backed securitization financing for the STAPLES Center in Los Angeles, at that point, the largest-ever financing for a professional sports arena.

The developers announced:
The future revenue streams used for the securitization come from contractually obligated fees from the arena's naming rights, a portion of the luxury suite and premier seat licenses, the concession leases, the ten Founding Partner corporate sponsorships and an exclusive ticket sales agreement with Ticketmaster-California Inc.

Multiple that by three and you've got Brooklyn and a much higher-stakes effort. The road is a bit rockier in Brooklyn, given the presence of some pesky lawsuits and skeptical public officials, not to mention some plausible portraits of an arena that surely won't get its full--or perhaps any--shiny titanium skin until the towers around it are complete.

Will the Tiffany key chain recipients be daunted?


  1. Personally, I highly doubt investing in an arena with so many possibilities for failure will sit well with potential investors. Not to mention all those CEOs are posting some of their worst quarters to date. I would be quite surprised if these sold.

    Then again, I could be totally wrong as I am certainly no CEO.

  2. These will sell like hot cakes...I wish I has CEO money, I'd be buying one myself.


Post a Comment

Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…