Skip to main content

Today, state entity poised to approve refinancing of Barclays Center bonds, saving Prokhorov millions

Today, at an 11 am meeting (which will be webcast), the "dummy not-for-profit" Brooklyn Arena Local Development Corporation (BALDC) is expected to approve a refinancing of a "all or substantially all" of the remaining portion of the $511 million tax-exempt bonds used to pay off construction of the Barclays Center.

(The overall total of payments, given interest, is far more than $511 million.)

Details on the amount and interest rate are unavailable in the board materials (also below), but surely the decision, which aims to take advantage of today's local interest rates (versus the original 2009 bonds), will save arena operator Mikhail Prokhorov's Onexim Sports & Entertainment tens of millions of dollars. Prokhorov, who owned 45% of the arena operating company, bought the majority from Forest City Ratner/Forest City Enterprises around the end of last year.

The fig leaf of state ownership of the arena--which is then leased for a song to the arena operator--allows for tax-exempt bonds and lower interest rates. Bonds are repaid out of arena revenues, which are considered payments in lieu of taxes, or PILOTs.

Also planned is approval of an unspecified amount of first-ever taxable bonds, which presumably will have a higher interest rate, but--despite no guarantees of public backing--will benefit from the association with a governmental entity.

(The BALDC, which has no dedicated staff or budget, is a creation of an Empire State Development alter ego/affiliate, the Job Development Authority, or JDA, but is essentially an ESD alter ego. The use of the BALDC meant the bonds avoided the scrutiny of the Public Authorities Control Board.)

Limited details

Limited information on the bond issuance appears beginning on p. 52 of the 61-page of the board materials. The document indicates that some bonds may not be refunded, and also points to "any additional PILOT bonds issued in the future."

Attachments (see. p. 56) include exhibits, such as a Preliminary Official Statement, which are being provided to the Directors only. (The BALDC directors are various state officials.) So much for transparency.

Underwriters = bonus for felon Barclays

The underwriters are Goldman Sachs as "book running Senior Manager," with the participation of Siebert Brandford Shank, a MWBE firm, and Barclays Capital as Senior Managers.

Barclays was chosen (see p. 55) for its "experience with and support for the project." In other words, because Barclays bought naming rights, it gets bond issuance fees. Sweet!

As I've argued, Barclays should not be doing business with New York State, and should lose the naming rights deal, because the company's plea to a felony--for rigging the foreign exchange market--should make it a "prohibited person" under state rules.

Counsel appointment and fees

Most of the board materials related to hiring special counsel and adopting board resolutions.

Counsel fees--see p. 31 of the board materials--can equal up to 2% of overall bond proceeds. Bizarrely enough--see for example p. 31 and p. 38--another entity, the New York Transportation Development Corporation (which has issued bonds for JFK airport work) is also involved in the process. This other development corporation is also a JDA affiliate.

State assistance and the opportunity for leverage

The move today, on the one hand, seems understandable. Who wouldn't want to refinance at a lower interest rate?

However, it should serve as a reminder that New York State actions are now in service to a Russian billionaire and, as I've written, it's unlikely governmental leaders would have been as generous had the applicant been a Russian oligarch.


Also, it could be an opportunity for New York State to exercise leverage.

After all, as I suggested in October 2014, a nonbinding clause in a state document (right) says the arena operator and/or team would pay additional fees to Empire State Development, the public agency that formally owns and leases the arena, for the right to have a second professional sports team.

That clause was in the 2/18/05 Memorandum of Understanding that original arena developer Forest City Ratner signed with New York City and New York State, public parties involved in the Atlantic Yards deal.

But it was nonbinding. And ESD refused to answer my queries about it. It was plausible for the public parties to ask for more, because it implies that the arena would gain additional revenue from another team, eased by the significant public contribution--direct subsidies, tax breaks, giveaway of naming rights, override of zoning, inside deal on railyard development rights--that allowed arena construction.


BALDC Board Materials Aug. 8, 2016

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 …