Skip to main content

Forest City borrows $20 million from NBA lenders to counter Nets' losses

Despite suffering serious losses, more than $30 million a year, the owners of the New Jersey Nets have adjusted a key loan that could help the team limp toward a transition to a new Brooklyn arena.

The Forest City Enterprises press release issued yesterday sounds like gobbledygook:
Forest City Enterprises, Inc. (NYSE: FCEA and FCEB) announced today that Brooklyn Basketball, LLC, in which the Company has an equity interest, has secured an extension of a $65 million credit facility related to the National Basketball Association (NBA) Nets professional basketball team. At closing, Brooklyn Basketball reduced the principal of the facility to $45 million through a $20 million add-on facility funded by a routine borrowing by the team under the NBA's League-wide Financing Facility.

The credit facility, through JPMorgan Chase Bank, N.A., has been extended to September 9, 2010, with a second extension available to June 9, 2011. The $20 million add-on is a combination of five-year and seven-year fixed-rate notes.


What does that mean? Well, as far as I can tell, it means that the owners of the Nets had already borrowed $65 million and not only extended that loan, but lowered the principal on it by taking out a separate $20 million loan.

Reasons to hang on

And, among the 12 teams in the 30-team league that were interested in a loan, the Nets borrowed the maximum. Remember, Forbes reported in December that the Nets were among only seven teams that declined in value, and the Nets experienced the largest retreat, of 13%.

A new arena paid for by naming rights (and maybe just taxpayers), with many luxury suites, would raise the value of the team enormously. That's why, as Forest City Enterprises struggles financially, selling off viable properties, Atlantic Yards likely will be held until the bitter end.

Forest City and partners have invested $250 million in Atlantic Yards, above and beyond the Nets. That's the largest single investment the company has made, an official told investors in October 2007, declaring it "risk-appropriate."

While that's actually less than the direct public subsidies for the project, it still indicates a commitment that Forest City is unlkely to walk away from soon.

NBA adds $200 million

Here's the background. The AP reported February 27:
The NBA has lined up $200 million to distribute to teams interested in additional cash, which the league considers a sign it remains strong in a slumping economy.

Between $13 million and $20 million will be available to each of 12 teams that have expressed interest in the funds, commissioner David Stern said Thursday. The money can be used for any purpose, including helping teams deal with operating losses incurred because of the economy.

It should not, Stern said, be construed as a bailout. At a time when credit markets have been frozen, investors saw the NBA as a safe bet.

"It's exactly the opposite" of a bailout, Stern told The Associated Press "This was a show of strength in the creditworthiness of the NBA's teams."

...The league has an existing $1.7 billion credit facility, essentially a line of credit established by lenders from which teams can borrow. The league had been interested in growing the facility when the credit markets seized up last fall.


FCE's comment

Yesterday's press release concluded:
"This is another example of our companywide strategy of proactively managing debt maturities across the full range of our business interests," said Charles A. Ratner, Forest City president and chief executive officer. "As always, we appreciate the support of our lenders in this effort, and I congratulate our internal team that secured the extension."

Comments

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…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …

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…

"There is no alternative": DM Glen on de Blasio's affordable housing strategy

As I've written, Mayor Bill de Blasio sure knows how to steer and spin coverage of his affordable housing initiatives.

Indeed, his latest announcement, claiming significant progress, came with a pre-press release op-ed in the New York Daily News and then a friendly photo-op press conference with an understandably grateful--and very lucky--winner of an affordable housing lottery.

To me, though, the most significant quote came from Deputy Mayor Alicia Glen, who, as the Wall Street Journal reported:
said public housing had been “starved” of federal support for years now, leaving the city with fewer ways of creating affordable housing. “Are we relying too heavily on the private sector?” she said. “There is no alternative.” Though Glen was using what she surely sees as a common-sense phrase, it recalls the slogan of a politician with whom I doubt de Blasio identifies: former British Prime Minister Margaret Thatcher, a Conservative who believed in free markets.

It suggests the limits to …