Friday, December 19, 2008

Good timing, bad timing on AY naming rights deal, arena subcontractors, and construction materials

The Barclays Center naming rights deal for the Atlantic Yards arena, announced in January 2007, was clearly good timing for the Nets, with a record deal reported at $400 million over 20 years.

When Barclays announced its recommitment last month, neither the bank nor Forest City Ratner made clear that deal had been maintained at the same dollar value. I had suggested that Barclays had had some leverage to renegotiate.

New pressure on naming rights

Even with renogitiation, New York, as the country's media capital, offers an especially good platform for naming rights

The AP reported December 15 that the New Orleans Hornets will not have an easy time selling naming rights.

The source was none other than sports economist Andrew Zimbalist (who served as a paid consultant to Forest City Ratner, producing a spurious report on the fiscal impact of AY): "The advertising expenditure is going to have a lower payoff during a time of recession, especially during a time of severe recession."

Also, such naming rights become less of a priority in companies' advertising plans, he said. Marketing executive Tom George told the AP that his company, Octagon, would target "international corporations seeking to make an entry into the United States' market," but noted that the auto or banking industries were no longer on the list.

And Zimbalist, in a nice bit of synergy, cited the Barclays deal as an example of an international company using naming rights to enter the U.S. market.

Construction costs rise, then dip

As for construction of the AY arena, if it goes forward, Forest City Ratner has experienced both bad timing and some amelioration of the damage.

The announced cost projected for the planned Atlantic Yards arena went up 50% since project approval in December 2006. Then again, in the last few months, the number likely has declined from the $950 million figure disclosed in March.

After all, the cost of construction materials has gone down and, with fewer projects going up, subcontractors would be submitting some very competitive bids.

Bad timing on steel

However, it looks like Forest City Ratner may have experienced some unfortunate timing regarding at least some of those construction materials.

In September 2007, Nets CEO Brett Yormark told an interviewer, "We've just ordered steel and we're expecting, hopefully, to break ground, in October-November."

Now, however, the price of steel has fallen some 30 percent.

4 comments:

  1. You should rename your blog...Straw Man Review.

    What you do is thoroughly dishonest. You have a history of setting up straw men--a shortage of HUD funds will no doubt hurt financing of the Atlantic Yards housing component, an investigation into tax exempt bonding for sports facilities will eliminate it for the Barclays Center, one of the judges in any given case seems sympathetic to the critics, etc. etc. In almost every case, there is no wiggle room. It is presented as fact...not alternate explanation necessary or in your mind, possible. And so many times, you've been wrong. The IRS DID grandfather the Barclays Center in its ruling. Shaun Donovan WILL revise housing finance rules at HUD to permit more funding for projects like Atlantic Yards.

    The reason for all this false hope is that make grand assumptions based on a little knowledge or no knowledge at all.

    Having pumped up the idea that Barclays' might terminate its naming rights deal, you are now questioning whether the deal is worth the full $400 million, based not on an affirmative notice but on the lack of one. The original details of the $400 million deal, you may recall, was not attributed to the bank or the Nets. (You also fail to note with any regularity that the relationship between Barclays' and the Nets has been enhanced by Barclays' agreement to serve as co-partner in seeking financing.)

    Yet another straw man laid bare.

    Now, the straw man is the purchase of steel at inflated prices. Are you privy to the contract between Ratner and the manufacturer or contractor? How can you be so sure that there isn't some clause that permits either side to adjust the price ON DELIVERY?

    You criticize the mainstream media for not filling their pages with daily, if not hourly, updates on Atlantic Yards, and yet you commit the most egregious error any "reporter" can commit--you assume you know everything. You don't. You can't. It's the arrogance of the internet.

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  2. It's funny that Bobbo/NetIncome/Mr. W. is charging "arrogance of the Internet" without looking into the mirror. After all, he's the guy who declared in October that "Construction IS underway."
    http://www.netsdaily.com/?p=6577

    I've cited a shortage of funds for the city and state housing finance agencies, NYC HDC and NYS HFA, as affecting tax-exempt bonding. Could Donovan change the rules? Perhaps not on his own, but, as I described earlier this year, a Democratic administration might make a difference.
    http://atlanticyardsreport.blogspot.com/2008/03/why-atlantic-yards-depends-on.html

    An investigation in tax-exempt bonding for sports facilities is still ongoing. We'll see how that one turns out.

    One of the judges in the EIS appeal case was indeed sympathetic to the critics. His skepticism about AKRF was in marked contrast to the ESDC.

    As for numbers, Mr. W. has a point. We're not certain about the original numbers in the naming rights agreement. And we're not certain about the final numbers.

    But if the relationship has been enhanced by Barclays agreement to serve as co-partner, maybe that means that Barclays gets additional revenue--in other words, a sweetener (for which I said they had leverage) for maintaining the naming rights agreement at a mutually acceptable level.

    Perhaps the steel contract is flexible, as well.

    I'll admit it: I don't know everything. Does my pseudonymous (and not very brave) critic caveat things as well?

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  4. Bobbo should sign his name Bob Windrem.

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