Skip to main content

ESDC says it hopes to sell $650 million (not $531 million) in arena bonds even while Atlantic Yards appeal is pending

So, the projected amount of tax-exempt arena bonds would be larger than initially announced, indicating more savings for developer Forest City Ratner.

A New York Times article on July 1 stated:
The Court of Appeals' involvement, announced on Monday, is the latest hurdle to Mr. Ratner's plans to build a $772 million basketball arena, the centerpiece of the project. The developer and his bankers intend to sell about $650 million in bonds for the arena in late September.

That $650 million number was surprising, because, at the June 23 meeting of the Empire State Development Corporation (ESDC) board, a memo stated that tax-exempt arena financing was $531.1 million. (Right; click to enlarge)

The explanation

"The sizing of the tax-exempt and taxable financings is still in flux," ESDC spokesman Warner Johnston responded. "The $531 [million] number in our Board materials was a net number--exclusive of cost of issuance, capitalized interest, debt service reserve and bond insurance. In particular, the latter three are very big numbers. $650 [million] is a good ball park number for the tax exempt bond financing. The taxable piece will be relatively small (maybe $30-$50 million)."

Precise information will be released, he added, when the bond issue is finalized. Indeed, Footnote 1 attached to the board memo (above) states that the arena funding source is, in fact, net of cost of issuance, debt service reserve, and capitalized interest.

The only missing element among the four Johnston mentioned was bond insurance.

Was the board informed?

Was the ESDC informed that the total amount of tax-exempt bonds would be significantly more than $531.1 million. The board was presented only with the documents excerpted here, ESDC spokeswoman Elizabeth Mitchell confirmed: "If necessary, we will update the numbers for the Board at the next meeting, likely to be in September."

The issuer of the bonds would be the Brooklyn Arena Local Development Corporation (BALDC), and the BALDC board would authorize the bond sale.

"The LDC Board will be requested to authorize the bond issue, at which time numbers will be available," Mitchell said. "Neither ESDC nor the State will be liable on LDC bonds."

Would bonds be sold in September?

While the bond issue might be authorized in September, would bonds really be sold, as the Times article indicated, later that month, given that oral arguments in the eminent domain appeal wouldn't be held until mid-October?

Johnston wouldn't give a specific date: "We expect the bond sale to occur in 2009 and we hope to be able to sell bonds while the appeal is pending."

That could be dicey. I suspect that means that, should the questions and demeanor of the judges at the oral argument indicate they'd likely uphold the dismissal of the case, the bonds would then be marketed. I'd be surprised if the bonds would be sold before oral argument.

Another potential snag might come from the expected lawsuit against the Metropolitan Transportation Authority for its willingness to renegotiate the deal for the Vanderbilt Yard with Forest City Ratner. While such a lawsuit might not pose a legal roadblock to the bond sale, it could make investors pause--or add a risk premium to the sale.

Sale process

Before bonds can be issued, they must be authorized by the BALDC board and the bankers underwriting the deal must arrange for bond insurance and a rating for the bonds.

Comments

  1. Leaving out those three numbers is standard sports finance bait-and-switch, and its to the spokesman's credit that he clarified so quickly. The capitalized interest is required because the arena company will need to start servicing its debt right away during construction - before it starts making any money. So the arena company borrows the money needed to make these payments. The debt service reserve is designed to cope with any revenue shortfalls - like a late opening or some other kind of event that keeps the arena closed. So the company borrows another slug of money to sit there available for bondholders. The bond insurance I'm not so sure about. You can pay some of the premium up front, but mostly, like any other insured, you'll be paying month to month or quarter to quarter. But again, they will need to borrow enough to make bond insurance premiums until the stadium opens. Finally there is costs of issuance - basically lawyers', underwriters' and consultants' fees. That will be quite a large number too, depending on whether any of the litigation costs can be included in there. What I don't see anywhere is any indication that the FCR is going to get tax-exempt treatment for costs they were going to finance with taxable debt, so describing them as savings is probably not accurate. That said, providing a net financing amount number without building in financing costs is pretty misleading.

    ReplyDelete
  2. Fwiw, the clarification came only after I queried them, just after the Times article appeared. It took a longer to get a few more details, hence my delay in publishing until now.

    ReplyDelete

Post a Comment

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

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…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…

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…