Las Vegas Sands, seeking casino license, leases Nassau Coliseum for $241M. A win for EB-5 middleman Mastroianni. What about the immigrant investors?

The Nassau Coliseum deal is certainly working out for controversial EB-5 middleman Nicholas Mastroianni II, given a $241 million transaction with Las Vegas Sands, though it's unclear whether the immigrant investors who put $100 million into the building's renovation will benefit similarly.

Let's recap. As I reported, after operator Mikhail Prokhorov shuttered the county-owned Coliseum in 2020 during the pandemic, the lease somehow reverted to control by Mastroianni of the U.S. Immigration Fund, not the 200 investors who each put up $500,000 in a purportedly job-creating enterprise, in exchange for green cards for themselves and their families, expecting to get their money back in five years, by 2022.

Though a key document suggested the investors would assume the lease in the event of default, it also gave the manager (Mastroianni), control of the Company. That scenario—as I wrote—resembles a mortgage default that leaves the mortgage broker, not the mortgage issuer, in charge.

Note: Mastroianni also raised $349 million for Atlantic Yards/Pacific Park from Chinese EB-5 investors, but said earlier this year that that was being restructured, which suggests the repayments, already overdue--after five-year terms and two one-year extensions--were being further extended.

 

Casino coming?

In January, Newsday reported, Las Vegas Sands proposes multibillion dollar project on Nassau Coliseum site. Beyond the casino, the $4 billion project would include outdoor community spaces, hotels, and "a world-class live performance venue honoring the long legacy of live music at the Nassau Coliseum," Sands officials told Newsday.

That implied demolition of the Coliseum, the lease of which Sands was expected to take over, with Nassau County legislative approval. The overall site around the venue is 72 acres. Master developer RXR has the right to partner with the holder of the Coliseum lease, according to Newsday.

A more recent Newsday article suggested the proposed live performance venue would contain 4,500 seats, on relative par with, say, Radio City Music Hall, capacity 5,960, rather than trying to compete with the nearby USB Arena, which seats up to 19,000 for concerts. 

The downsized Coliseum seats about 15,000 for concerts. Both have truncated capacity for hockey and other sports. A new music venue, however, likely wouldn't offer a place for the G-League Long Island Nets to play, as noted by NetsDaily.

Much competition for casino

Sands is competing with several other bidders for the three gambling licenses in and around New York City, including Queens, Manhattan, and Coney Island. A decision is expected next year.

From Newsday:

Former New York Gov. David A. Paterson, a senior vice president at Sands and part of the team pitching the plan to the state, said the company is committed to bringing opportunities for minority and women-owned businesses.

What a surpise that Paterson might be working for a questionable development project! Back in 2015, I wrote about how he was shilling for EB-5 projects.

Buying out the lease

On Oct. 26, Newsday reported, Las Vegas Sands paid $241 million for Nassau Coliseum site lease. That was based on a Form 10-Q quarterly filing with the Securities and Exchange Commission, which states:

Nassau Coliseum
On June 2, 2023, the Company closed on its acquisition of the Nassau Coliseum, an entertainment arena in the State of New York. The Company paid an aggregate amount of $241 million, consisting of $221 million upon closing and a $20 million deposit made in 2022. The purchase of the Nassau Coliseum, which continues to operate following the closing of the sale, primarily included the fixed assets related to the arena and the right to lease the underlying land from the owner, the County of Nassau in the State of New York. This transaction resulted in the recognition of $92 million of goodwill. The Company purchased the Nassau Coliseum with the intent to obtain a casino license from the State of New York to develop and operate an Integrated Resort. There is no assurance the Company will be able to obtain such casino license.

That includes a 99-year lease agreement with Nassau County, which includes annual rent payments, "including additional rent payments contingent on certain events occurring as defined in the agreement." 

While a "one-time rent payment of $54 million was made under the finance lease liability within two business days of the lease term commencement date... future minimum lease payments are $1 million for the period ending December 31, 2023, $6 million for each of the years ending December 31, 2024 through 2027, and $1.77 billion thereafter.

Newsday noted that the $92 million “goodwill” premium represented more than the property’s true value. Perhaps it reflects the upside.

The winner is...

Newsday reported:

Mastroianni, in an interview Thursday, said he and investors held “debt of approximately $120 million” on the Coliseum site as various plans over the past decade failed to come to fruition. Mastroianni said his group sold the lease to Sands at a discount even though he believes it’s worth at least $350 million, now that the company has a 99-year lease.

Unanswered is how much debt Mastroianni had assumed--he did pay rent to Nassau County from a settlement Prokhorov provided-- and whether and when the investors have been/will be repaid--and how much.

Keep in mind that, Manager Mastroianni in December 2020 pushed the immigrant investors to move some portion of their loans to a separate EB-5 project in Manhattan, diminishing the debt attached to the Coliseum.

As I wrote, that apparently successful move likely would deliver more interest income to Mastroianni as middleman while also reducing the total Coliseum debt owed by Nassau Live—also Mastroianni.