Atlantic Yards/Pacific Park Report

Though the Barclays Center is still struggling, with revenues far behind what's necessary to pay off construction bonds, the bond ratings agency Moody's yesterday offered a more positive outlook on those bonds, affirming the Ba1 (highest notch of junk) but declaring the outlook now stable, rather than negative.  The bonds were issued by the Brooklyn Arena Local Development Corporation, a state entity, on behalf of Brooklyn Events Center, aka ArenaCo, which subleases the arena. (Note: clients pay ratings agencies, which gives them incentive not to be harsh.) Moody's cited "the demonstrated equity support from ownership"--steady funding from billionaire Joe Tsai--"coupled with the continued cashflow improvement at the Arena that should reduce its reliance on future equity support over time."  That means the arena won't have to draw on reserve funds to cover required PILOTs, or payments in lieu of taxes--the financial legerdemain that allows a tax-exe...

When, in 2016, New York State approved a refinancing of the bonds for the Barclays Center, allowing a lower interest rate and thus smaller payments to bondholders, that offered a clear but indirect benefit to the arena operating company, then owned by Mikhail Prokhorov. Because required PILOTs (payments in lieu of taxes) remained consistent--having been set earlier to correllate with tax assessments , enabling tax-exempt bonds, which offer the arena operator savings compared to taxable bonds--a larger component of those payments could be reserved for O&M (operations and maintenance costs) reimbursements, thus saving the arena operator from paying them. The PILOTs go both to bondholders and the O&M Fund. From 2016 bond document: click to enlarge That increased the amount of O&M funds from some $3 million to more than $11 million a year, as I wrote , and it was part of why Bloomberg characterized the move as Barclays Center Refinancing Saves $90 Million for Prokhorov ...

Yesterday, I wrote about how the sale of the Brooklyn Nets to Joe Tsai had essentially rescued the Barclays Center finances, because it created a new reserve fund. There's more to the story, though we don't have all the details. On 4/10/18, the little-known Brooklyn Arena Local Development Corporation (BALDC), the state entity set up to issue tax-exempt bonds for the arena, held a little-noticed meeting. The parent Empire State Development (ESD) posted a media advisory but not board materials. (I've asked for them, but got no response. Transparency!) At 12:16 of the video , though, there's an interesting passage in which the BALDC board approved allowing a broader range of operating and maintenance spending to come from an account funded by the required annual payments in lieu of taxes, or PILOTs. That in turn lowers the burden on the arena operator, a company owned by Mikhail Prokhorov, to otherwise to contribute to operating and maintenance. But the contours...

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...

The long-dormant Brooklyn Arena Local Development Corporation ( BALDC ), the "dummy not-for-profit corporation" set up for the sole purpose of being the landlord of and issuing tax-exempt bonds for the Barclays Center--which saves the developer and then arena operator tens of millions of dollars--is having a meeting Monday, The purpose, not announced in the meeting notice but in a later-issued agenda (bottom), is to take various corporate actions, including the reissuing of tax-exempt bonds at today's lower interest rates, and the first-ever issuance of taxable arena bonds. The board will also take other actions, including hiring lawyers and adopting various policies. The notion of  refunding bonds means refinancing at a lower interest rate, or to change other terms. It's not an uncommon thing. This refunding of bonds will benefit the arena operator, Mikhail Prokhorov's Onexim, which must pay off arena financing via those tax-exempt bonds--the payments in ...

According to the 2012 annual report from the state Authorities Budget Office (ABO), the New York Job Development Authority (JDA), an affiliate of the Empire State Development Corporation (ESDC, aka Urban Development Corporation), has yet to file the required annual report, due more than a year ago, 6/30/11. Of all the authorities listed, that's the longest delay in filing an annual report. Presumably the JDA, which is a legal entity distinct from ESDC but relies on ESDC staff, also has not filed the report due 6/30/12. JDA and BALDC The JDA is the creator of the Brooklyn Arena Local Development Corporation (BALDC), the special-purpose entity that issued bonds for the Barclays Center arena. And it would be interesting to learn how the BALDC operates, especially since Goldman Sachs earlier this year called a meeting of bondholders , only to step back when it was clear that the investment firm was not authorized to act as the BALDC. I wrote 1/19/11 how both the ESDC and JDA had n...

As the first of two State Liquor Authority public hearings  on the Barclays Center liquor license approaches at 11 am today, the license application from Levy Restaurants reveals some new details about the plans, and those behind them. However, it does not shed any light on the revelation that alcohol service in "premium, limited access areas of the Arena such as the suites, clubs and the restaurant," alcohol service would continue for an hour after events, no later than 2 am--a detail not disclosed to Community Boards 2 and 6 as they considered, and ultimately supported, the license. Hence the request by local elected officials for further review. (I don't know if the Community Boards have responded yet--the CB 6 executive committee met last night--but expect discussion of the issue today.) It's unclear how many people could potentially use that after-hours service. The New York Post said those 1,000 people in the suites and 4,400 in premium suites. The Net...

Well, we knew that the Brooklyn Arena Local Development Corporation (BALDC), the entity set up to issue tax-free bonds for the arena, was little more than an alter ego of the Empire State Development Corporation (ESDC), even though it is officially a "creation" of the Job Development Authority (JDA), another ESDC alter ego. I was recently alerted to an Investor Update Call scheduled for today, apparently to alert arena bondholders on the progress of construction. The document, issued via the Municipal Securities Rulemaking Board, stated: The Brooklyn Arena Local Development Corporation invites you to participate in an Investor Update Call related to the above-captioned transaction. The RSVP went to a staffer at Goldman, Sachs, Marc Howland. Very curious That sounded odd, given that  the BALDC is a publicly created body, with board members appointed by public officials. How could this be delegated to Goldman? Was the ESDC (also known simply as Empire Stat...

Notice this line from Empire State Development Corporation legal paper's in today's other post (above)? All income from such events would be lost, leaving this venue, financed by PILOT (payment-in-lieu-of taxes) bonds issued by ESDC's local development corporation, Brooklyn Arena Local Development Corporation ("BALDC "), without event income. (Emphasis added) It may just seem semantic, but the BALDC is actually not ESDC's local development corporation. Rather, the BALDC was created by an essentially dormant ESDC alter ego , the Job Development Authority, which allowed it to skirt the review of the Public Authorities Control Board (PACB) and Comptroller. But if the BALDC is the product of the ESDC, then shouldn't there have been a review?

According to the state Authorities Budget Office (ABO), Public Authorities That Have Failed to File Reports in the Public Authorities Reporting Information System as of January 4, 2011 (embedded below), the Empire State Development Corporation (ESDC, aka Urban Development Corporation) and its affiliate, the Job Development Authority (JDA), did not file required budget reports 90 days prior to the start of the fiscal year. I asked the ESDC last week about the reason for the delay and the plans to comply, but haven't heard back. The ABO was beefed up somewhat after reforms strengthening oversight over public authorities, but it can't do its job if agencies don't comply. In July, I reported that the JDA had not filed an annual report; the latest ABO report suggests that it has since done so. I'm waiting for details on that, too. January 2011 Delinquent List

Part 3 of a series T he effort by the New York City Regional Center (NYCRC), the private investment pool federally authorized to accept immigrant investor funds, and developer Forest City Ratner (FCR) to raise $249 million from 498 Chinese millionaires under the EB-5 immigration program may be legal, but there is ample reason to question whether it will serve the public interest . Part 1 of this series concerned the seven-year extension available on Phase 1 of the project should Forest City Ratner not repay the EB-5 loan. Part 2 estimated the developer could save at least $191 million. Part 3 examined the sales effort in China, with the arena front and center, even though it's already funded . Part 4 reported on claims made in China, on video and in person, by public officials supporting the project. Part 5 concerned the value of the development rights, contrasted with those in last year's deal for the Vanderbilt Yard. Part 6 described...