Wednesday, September 10, 2008

Times: Barclays naming deal has November deadline; FCR seeks $100M in subsidies

The New York Times, which broke news last March about the Atlantic Yards stall, today casts some doubt about developer Forest City Ratner's announced plan to break ground on the Atlantic Yards arena before the end of the year, and reveals--thanks to unnamed sources--that the $400 million Barclays Center naming rights deal requires financing to be closed by November.

It's doubtful that deadline will be met; while it doesn't mean that the Barclays Center deal is on death row, it could lead Barclays to reconsider and/or renegotiate the deal. (FCR wouldn't comment.)

The article also states that CEO Bruce Ratner has asked government officials recently for as much as $100 million in additional cash for the project, citing rising costs and problems in the bond markets, according to anonymous sources. (Remember, Chuck Ratner of parent Forest City Enterprises told investment analysts in April that "we still need more" subsidies.)

Reasons for skepticism

DDDB suggests that additional subsidies would be unacceptable; indeed, the state and city budgets are quite tight. Then again, Mayor Mike Bloomberg and others are big boosters of the project, so some creative solution might be in the works. (DDDB says "The Deal is Coming Un-Done"; that's too conclusory, but we now know how it might come undone.)

The Times article, headlined Brooklyn Arena Builder Plans to Break Ground in December After Delay, is somewhat more skeptical than the optimistic headline, but it could be even more skeptical. (Update: The print issue does have a deck, or subheadline, saying "But Lawsuits and Rising Costs Raise Doubts.")

(Note that the Times still hasn't figured out that Atlantic Yards is a project, not a place, and the railyard is officially called the Vanderbilt Yard--or Yards, as some say. Click on photo to enlarge.)

December groundbreaking?

The article begins:
The developer Bruce C. Ratner has told state and city officials that he plans to break ground in December on his long-delayed $4 billion Atlantic Yards project in Brooklyn, which will feature thousands of apartments and offices in 16 towers built around a glamorous basketball arena for the Nets.

But it is unclear whether Mr. Ratner will be able to meet his own deadline to start one of the most ambitious projects in Brooklyn in decades, given the softening economy, the crisis in the debt markets, rising costs and a persistent group of opponents who have filed one lawsuit after another.


The article doesn't define "break ground." While the developer obviously could hold a ribbon-cutting ceremony, it's hardly guaranteed that pending legal cases would be dismissed, or that additional appeals or legal challenges wouldn't emerge.

The article quotes Daniel Goldstein of Develop Don't Destroy Brooklyn: “There’s no way they’ll get control of the land they need, get the financing, end the litigation and break ground by December." Indeed, even in the event the two lawsuits are cleared this year, it would still take additional time to acquire properties via eminent domain.

Note that the Times's phrase "will feature" suggests that the current plan for 16 towers is a go; evidence suggests the project is seriously in flux.

Bonding problems

The Times reports that the financing plan depends not only on the removal of court challenges but a favorable ruling by the Treasury Department to allow the use of fixed PILOTs (payments in lieu of taxes) to pay off the bonds. The Times could've added that Rep. Dennis Kucinich, an opponent of such use of PILOTs, will hold a hearing September 18 on the financing plans for the Yankees and Mets stadiums, and the AY arena.

If the developer uses taxable bonds, the cost could be an additional $165 million, as I've estimated. The Times suggests that, either way, it would be tough to sell bonds in the current economy; hence the request for more subsidies.

Developer optimism

The Times cites comments by Chuck Ratner yesterday, who told investment analysts “we can make it happen” by the end of the year; the newspaper doesn't note Ratner's general caution about the market for such large projects.

The FCR spokesman Joe DePlasco offers some spin:
While it is a tough market, we have secured more than $1.5 billion in construction loans this year so far,” Mr. DePlasco said. “And this is the most exciting project in the country and the most exciting arena in the world.”


Well, part of that total is Liberty Bonds; another part is state housing bonds. Such tax-exempt bonds are a much better deal than taxable bonds.

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