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December 01, 2009
Nets arena bonds squeak through
Another shoe drops for the Atlantic Yards arena project: Bond rating agency Moody's has given an investment-grade rating to the bonds for the Nets' planned Brooklyn arena. It looks like Nets owner Bruce Ratner paid a high price for the rating, though, cutting the amount of tax-free bonds from $600 million to $500 million, and accepting a rating of Baa3, Moody's lowest level above junk bonds.
The next question is what this means for the bonds' interest rate, and the team's bottom line — each added percentage point of new interest will cost the Nets owners $5 million a year — something that could be answered when the Empire State Development Corporation makes its initial bond offering, as soon as tomorrow. The lowered amount of bonds also means a growing funding gap that must be filled by Ratner and his soon-to-be partner Mikhail Prokhorov: already at $100 million or so, it's now looking closer to $300 million. Prokhorov is a pretty rich guy, and clearly he stands to get lots of intangible publicity benefits from entering the NBA owner's club, but you still have to wonder how much cash he (or Ratner) will be willing to throw at this deal before the investment starts to look like a money pit.
If nothing else, this could get interesting once the inevitable cost overruns show up. The ESDC has said it has "no expectation" of issuing additional public bonds for the project, but admitted it's possible. Paging Richard Brodsky!
The ironic thing about Atlantic Yards, is both Goldstein and Ratner lost. Daniel Goldstein has a property worth LESS than he was offered, and Bruce Ratner has a pyrrhic victory (He no longer owns the Nets, and it will be decades before profitable housing is built).
I have little doubt that the facility will be built, politicians have too much invested in it not to do so (They cannot allow Willets Point, Columbia University, The Second Ave Subway and Coney Island to become uncompleted disasters (As we see in New London, Conn.). I also think, the opponents of this, through bad luck (The allowing of bond sales related to Yankee Stadium, Citi Field, and Atlantic Yards to go through, and the re-relection of Mike Bloomberg)and bad lawsuits (Losing EVERY lawsuit they attempted (The NY State Court of Appeals decision and the bad economy (With a need for jobs), gives political cover to politicians to get these projects done)). What they should have done, is come up with a serious alternative plan for Atlantic Yards (100% affordable housing was NOT it (Does anyone actually think, Daniel Goldstein wants his condo stuck in the middle of projects?. The plan was to do nothing, just like with Willets Point, where people got their way for 40 years, and it finally caught up with them)). If they had a strategy of actually doing something positive, they might have won in the court of public opinion (Preventing the flip-flop by David Patterson on this issue). It is a total mess.
The alternative plan was actually only 60% affordable housing, not 100%. (See http://unityplan.org/.) And I'm not sure the "court of public opinion" is where this one was won or lost — keep in mind that the only NYC stadium to be defeated was the Manhattan Jets stadium, and the most important factors going against that were Shelly Silver's intransigence and Cablevision's deep pockets to hire lobbyists.
That said, this does look like it has the potential to be a lose-lose for all concerned. I really don't see how Ratner is ever going to get his investment back, after all the money he spent to get the Nets, and now upwards of $60 million a year in arena payments. He'll stop hemorrhaging money like he is in Jersey, and he gets control of the land for if and when the housing market ever rebounds, but that's not all that much of a payoff.
Posted by Neil on December 2, 2009 09:36 AM
The "Court Of Public Opinion" really does matter even in NY. Look at Tom Suozzi, he got very arrogant, and chummy with Charles Wang and tried to push through "The Lighthouse Project", and was voted right out of office. Instead of the Coliseum, I am willing to bet the Islanders will end up in Brooklyn with the Nets (That is one way to keep the Cablevision millions flowing to the Islanders (Which they would have lost in Kansas City or any area outside New York)). Maybe Wang will sell the Islanders to Prokhorov?
What will be interesting is to see how long it takes the Arena and the new Carlton Ave Bridge to be actually be completed? My guess sometime in 2012-2013.
Let's stop talking about this the nets will wind up in brooklyn and most likely the islanders will too. Maybe when woody johnson sells the team in another 10 yrs the jets will be headed back to new york too. Iam happy to see the nets coming back to new york. You will probably see king james play in kings county a marketing dream.
Posted by dan on December 2, 2009 10:57 PM
Unless something changes dramatically, the Atlantic Yards arena floor is going to be too small to fit a hockey rink, so no Islanders in Brooklyn.
Public opinion matters in terms of politicians' careers, no doubt - you can see that going back to that Wisconsin state rep who got recalled for casting the deciding vote in favor of a tax hike to pay for Miller Park. But Miller Park still happened.
Posted by Neil on December 2, 2009 11:24 PM
Dan there is no way I see the Jets coming back, unless there is an area set aside for a Stadium well in advance (Shutting down the Polo Grounds Projects (Perhaps some of the WORST in NY), could do it (Keeping in mind, the NY Giants, then the Mets played there, so there is some history there)).
After the fights over a West Side Stadium, Yankee Stadium, Atlantic Yards, Ferry Point Golf Course and The Lighthouse Ptoject (Lighthouse and AY are still not under construction (And I still think Lighthouse will fail) (About a 30 year break from Sports-related construction controversies is needed in NY). Lets hope the new MSG is privatly funded with limited disruptions.
Dan there is no way I see the Jets coming back, unless there is an area set aside for a Stadium well in advance (Shutting down the Polo Grounds Projects (Perhaps some of the WORST in NY), could do it (Keeping in mind, the NY Giants, then the Mets played there, so there is some history there)).
After the fights over a West Side Stadium, Yankee Stadium, Atlantic Yards, Ferry Point Golf Course and The Lighthouse Ptoject (Lighthouse and AY are still not under construction (And I still think Lighthouse will fail) (About a 30 year break from Sports-related construction controversies is needed in NY). Lets hope the new MSG is privatly funded with limited disruptions.