Hello Nassau: Ratner wins bid to revamp Coliseum in "100% privately financed" deal (where's the catch?)
|Rendering by SHoP of revamped Coliseum; don't be|
surprised to see new signage for sponsorships
On paper--at least the paper we've seen--it sure looks like the bid by a Bruce Ratner-led team to revamp and downsize the creaky Nassau Coliseum looks like a better deal for Nassau County, which announced yesterday that Ratner's Nassau Events Center (NEC) had bested a proposal by Madison Square Garden.
Over 34 years, NEC would pay a minimum of $194.5 million rent, versus $112.1 million by MSG. (Newsday reported that the Coliseum's current finances were a wash, given that rent and concession revenue were offset by maintenance costs.)
All good for the taxpayer?
So this seems far better than the plans to replace the Coliseum with a new building, a process rejected by taxpayers, though it did cost the arena its main tenant, the New York Islanders, which is moving to Brooklyn no later than the 2015-16 season.
Even so, I have to wonder when Nassau County Executive Ed Mangano yesterday announced "a historic public-private partnership... a 100% privately financed Coliseum that will share revenue with the County at zero expense to the taxpayer."
After all, Atlantic Yards was supposed to be "almost exclusively privately financed." Subsidies and tax breaks are in considerable--the New York City Independent Budget Office calculated that Forest City Ratner would save $726 million. (That number was inflated by a then-larger sum for arena bonds, but it left out additional government aid, such as in getting EB-5 financing, or free land)
So the Nassau deal could include government aid that doesn't show up as a direct subsidy. Newsday reported "phased-in payments in lieu of taxes from new restaurants and entertainment options surrounding the Coliseum." Payments in lieu of taxes can mean a benefit for the payer, such as the lower rate on tax-exempt bonds for the Brooklyn arena.
Also, as with Atlantic Yards, the Nassau Coliseum deal could include significant renegotiation down the line. Remember, Bruce Ratner, in the Times's words, has a "reputation for promising anything to get a deal, only to renegotiate relentlessly for more favorable terms."
Also, I'd bet that the Coliseum exterior, however elegantly pristine in the renderings produced by Barclays Center facade-meisters SHoP, will be enhanced by sponsorships and naming rights. No, there's no direct cost to the county in giving Ratner naming rights to sell, but it's an asset that should be part of a cost benefit analysis--though that was not done so regarding the Brooklyn arena.
NEC will invest a minimum of $229 Million in renovating the Coliseum and the Plaza to create a first class destination. During the initial 34 year lease term, Nassau County will receive 8% of gross revenue, 12.75% of parking fees with a minimum guaranteed payment of $4 Million a year escalating by 10% every five years, resulting in a minimum lease term payment of $195 Million to the County. With options exercised, the minimum lease payment grows to $334 Million. Similarly, the Plaza area, now concrete, will be transformed and will generate the greater of $400,000 a year in rent or 8% of the gross revenue. In addition, Nassau County maintains rights for future development on the site.Among the points recommended by the county's RFP Committee:
- NEC will pay for Coliseum maintenance after the current lease expires on August 1, 2015, relieving the county from such expenses.
- NEC will pay rent during the preconstruction approvals period and the actual construction period, allowing the county to gain $2 million "while shedding millions in expenses."
- NEC pledged a minimum annual rent of $4.4 million, or $1.4 million more than MSG’s proposal, with a 10% increase ever five years, rather than MSG's proposed 5% every five years.
- NEC's rent is calculated based on 8% gross revenues yielded by both the Coliseum and Plaza Improvements plus 12.75% of parking revenue, while MSG would add $1.50 per ticket sold.
- Under the NEC proposal, the County retains control over any future development of the Coliseum site.
At the press conference yesterday, Mangano said there'd been no discussion about the New York Islanders breaking their lease and moving to the Barclays Center before the scheduled Fall 2015 date. He said it was "not contemplated in the contract."
As Newsday described the proposals:
Ratner's $229-million proposal calls for a renovated 13,000-seat arena, a 2,000-seat indoor theater, an outdoor amphitheater, restaurants, an ice-skating rink and retail space. The Islanders would play a combination of six regular or preseason games at the renovated Coliseum.
Ratner is working with Syosset-based developer Ed Blumenfeld; Guggenheim Partners, a financial services firm; entertainment company Live Nation; Roc Nation, the holding company of entertainer Jay Z; and Legends, the food and beverage company owned in part by the New York Yankees.
MSG's $250 million proposal called for a renovated 14,500-seat arena and an entertainment complex with restaurants, bowling, billiards and an Islanders-themed sports bar.
MSG was partnering with Baltimore-based development firm Cordish Cos. and Uniondale-based RXR Realty, headed by Scott Rechler.
But anyway, Forest City Ratner will indeed be the Nassau Coliseum developers, which means it’s going to be their problem how to figure out to make over an arena with no anchor sports tenant and hefty competition from the Garden, the Prudential Center (now with less feeble owner), and, yes, Barclays. It’s conceivable that FCR will try to bundle its two arena properties somehow to offer something that the other local arenas can’t, but unless that’s “We won’t book you into Brooklyn unless you play your second local night on Long Island,” I’m not sure what that’d be.That's not implausible. Some touring acts might otherwise choose MSG or New Jersey, but if they get the right deal for Long Island, they'd do it.
As for today's announcement, I wouldn't be surprised if Jay-Z is a part of it, or at least mentioned. No, he's not a Long Islander, but his star power continues to grow.
Reaction: NEC and MSG
“We are grateful to be selected to revitalize Nassau Veterans Memorial Coliseum,” Forest City Ratner boss Bruce Ratner said in a statement. "We understand and proudly accept the tremendous responsibility that accompanies this project and the impact it has on future generations of Long Islanders."
"We are ready to get to work to deliver a world-class Coliseum and a thriving sports, entertainment and retail center that Long Island deserves. Our partnership group is focused and prepared to bring the best to Nassau and to fulfill the County’s goals of vital job growth and significant economic activity. It is time for Nassau County to have an iconic and celebrated venue that will have something for everyone to enjoy and which will redefine the customer experience."
MSG hinted at Ratner's inside track, given the developer's role in helping Nassau on the RFP: “While we are disappointed with the County’s decision, we are not at all surprised given the history of this project, and will be watching closely as this process moves to the County Legislature. We continue to believe that Madison Square Garden’s proposal, expertise and proven track record represent the best and most realistic opportunity to revitalize the Nassau Coliseum."