Skip to main content

Report says Nets bonds to be sold in November, but many questions remain

NetsDaily, quoting the meat of a one-paragraph squib in Project Finance magazine, says Goldman Sachs is close to launching an $800 million bond issue for the Barclays Center, according to ”sources close to the financing."

Goldman is in the process of having the bonds rated, and expects financing to be in place by the end of November 2008, according to the article.

[Update: What this means, a reader suggests, is not that the bonds would be sold in November, but that the deal would be worked out by then, with the sale in place for when litigation closes.]

Questions about pending lawsuits

The brief article, however, doesn't address some major outstanding questions. For one, how easy is it to rate bonds for risk when major lawsuits remain outstanding? Forest City Ratner executive Andrew Silberfein filed an affidavit in January in the state lawsuit challenging the AY environmental impact statement.

He stated:
Although the decision that was issued by Justice Madden in this case on January 11, 2008 should be helpful in providing comfort to potential investors that there is no significant risk that the courts will annul the approvals for the Atlantic Yards project, 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.

Oral arguments in the appeal will be heard September 17. While it's plausible that the tenor of the discussion may offer clues to the court's decision, it's unlikely that a decision will be issued by November.

A separate state case challenging the use of eminent domain has been filed in state court after being dismissed in federal court and, though the case is a long shot, oral argument is not likely until 2009.

That's not to say that the market can't factor the risk into the cost of the bonds, but surely the cost would be lower should the lawsuits be resolved.

Questions about arena bonds

Will the $800 million in bonds be tax-exempt or taxable? If they are taxable, then Forest City Ratner need not worry about the scrutiny of tax-exempt bonds for sports facilities--specifically the scheme under which bonds for the Yankees and Mets stadiums were issued, and under which the AY arena would be financed--under way in Washington.

But surely the developer wants them to be tax-exempt bonds, given the significant savings--my rough estimate was $165 million--involved.

However, the strategy under which the Empire State Development Corporation (ESDC) and developer Forest City Ratner seek tax-exempt bonds for the Atlantic Yards arena has been acknowledged by the chief counsel of the Internal Revenue Service (IRS) as a “loophole” the agency moved quickly to eliminate.

Also, Rep. Dennis Kucinich (D-OH), who chairs the Domestic Policy Subcommittee of the House Committee on Oversight and Reform, has asked the IRS and Treasury Department to desist from approving any more sports facility deals based on payments-in-lieu-of-taxes, or PILOTs, pending further clarification of their policies.

Does Goldman Sachs believe that the IRS and Treasury Department will have clarified their policies by then?

Comments

  1. Yep, investors looking at the critics' record in those lawsuits must be quaking in their gold laced boots. Bad lawsuits, dubious facts, questionable presentation and at the end of the day, a poor strategy has won the day.

    Get real...or at least get honest.

    ReplyDelete

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…