Tuesday, August 06, 2013

Ratner on Nassau Coliseum: "We're giving the municipality money... all privately financed" (plus Barclays offers "intangible" element of pride)

CNBC's Squawk Box yesterday took on Faceoff for Nassau Coliseum facelift, featuring one of the two bidders, Bruce Ratner, whose team is competing against one assembled by Madison Square Gardens.

"First of all, it will be beautiful like the Barclays Center," Ratner said of the Coliseum plans. "Second, it will have a huge number of events. The whole deal today is content, content. We will have 300 events there, 200 are already booked. That's been the strength of our Barclays Center."

Yes, and several Barclays Center shows should go to Nassau. But do note that the plans for Nassau include 83 "parking lot events," which is not exactly the model in Brooklyn.

Ratner said there's "almost no overlap from Barclays," in that 5-10% of Barclays Center customers come from Long Island, which has 3 million people and prosperous counties. "It's a tremendously strong market. I cannot emphasize how strong that market is."


"What kind of subsidy will you ultimately be getting to do this?" Ratner was asked. "How much is the government going to have to put forward?

"This is one of those opposites," Ratner replied. "We're giving the municipality money, not a nickel from the municipality, all privately financed, all privately done. The county will make lot of money from this. In terms of economic impact and in terms of rent."

Nothing for roads?

"One of the great things--it's surrounded by a huge number of roads," Ratner replied. "There's millions of people that go by every day. There's no infrastructure needed. After all, it was a Coliseum before and it is now, so no additional roads and so on. So, actually, it's ready to be done, it is centrally located. I cannot emphasize what kind of incredible location it is and what kind of incredible population."

Hold on. It's never that simple. First, Ratner didn't mention if there would be tax-exempt bonding or other discounts on financing.

More importantly, the deal is not simply that "we're giving the municipality money." Developers of the Coliseum would be required to give Nassau County a percentage of the gross revenue from arena events, and that percentage has not been discussed.

In other words, Ratner (and MSG) would not be building a new arena. They'd be financing a renovation, then taking the lion's share of the new revenues. It's like taking on a new business partner who (I'd bet) gets a larger share of revenues than his actual investment, thanks to his innovative ideas.

So the devil is in the details, and we haven't seen them.

Building local economies?

"Do you buy the argument that these arenas can actually create and build local economies around them?" Ratner was asked. "Because in some areas, it's worked. In some areas, it really hasn't."

Ratner, after responding affirmatively, saw his host confirm, "Brooklyn has been a success."

"Brooklyn has been a success," Ratner repeated, "both in terms of what it is and in terms of local businesses, yes, yes, yes, it does."

Creating and building a local economy? Puh-leeze. Helping some bars and restaurants, sure, but otherwise no.

Perhaps recognizing the flimsiness of his answer, Ratner, as he continued, switched tacks. "But I have to add something: there's the intangible that content provides, making citizens feel proud of their place, making citizens feel like there's a place to go. Entertainment--it has an intangible calculations aside from the economic. People miss that. If we build an opera house, everyone says, great, great, great, it's wonderful. Now we're building an arena, which provides everything from concerts to family shows to boxing to sports. So there is an intangible element that I think is often missed about content and arenas. People only look as at it economically.

That "intangible" value is invoked mainly regarding sports teams and the local pride they can engender. Now Ratner's applying that to the building. I wouldn't deny that some people are proud of "Brooklyn's arena," but his formulation is still a stretch. Opera houses and movie theaters don't get the enormous government help this arena got, either.

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