Nets Arena in Brooklyn’s Atlantic Yards Fends Off Challenge (original) (raw)
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New Nets Arena Wins Another Court Challenge
- Dec. 1, 2009
The developer Bruce C. Ratner won another court challenge to his $1 billion basketball arena in Brooklyn on Tuesday, just as he began the sale of the bonds for the long-delayed project.
The financial underpinnings of the project, the cornerstone of the 22-acre Atlantic Yards development, also emerged on Tuesday when two rating agencies assigned an investment grade rating for the majority of the 646millioninbondsfortheproject.Inaddition,thedeveloperandhispartnerswillusea646 million in bonds for the project. In addition, the developer and his partners will use a 646millioninbondsfortheproject.Inaddition,thedeveloperandhispartnerswillusea131 million subsidy from the Bloomberg administration and invest $293.4 million of their own to build the 18,282-seat arena at the intersection of Atlantic and Flatbush Avenues.
Mr. Ratner, who is already doing construction work on portions of the site, plans to start selling the bonds this month and to take possession of the entire property early next year. The arena is expected to be completed by June 2012, when the New Jersey Nets would move from East Rutherford, N.J., to Brooklyn.
At the same time, the Court of Appeals declined to hear an appeal on a case brought by 26 community organizations in April 2007 that challenged the state's environmental impact statement, blight study and designation of the arena as a "civic project." Last week, the Court of Appeals ruled six to one that the state could exercise eminent domain in claiming businesses, public property and private homes for economic development projects like Atlantic Yards.
Still, the project’s opponents, who have filed three other lawsuits, vowed to continue their fight. “We wonder who will buy this garbage,” Daniel Goldstein, a spokesman for Develop Don’t Destroy Brooklyn, said of the project’s bonds. “There is no business plan to pay off the debt. The rating agencies have lost a lot of credibility. “
Mr. Ratner, chief executive of Forest City Ratner, which was the development partner for the Midtown headquarters for The New York Times Company, and his underwriters, Goldman Sachs, plan to start marketing the bonds this week. In the meantime, he is trying to obtain bond insurance, which would presumably provide a lower interest rate and make the bonds that much more desirable to investors.
Both Moody’s Investor Services and Standard & Poor’s assigned their lowest investment-grade rating to the bonds, although it is the same rating that was given to similar bonds for the new Yankee Stadium in the Bronx and for Citi Field in Queens.
The developer plans to sell 500millionintax−exemptbondsand,separately,another500 million in tax-exempt bonds and, separately, another 500millionintax−exemptbondsand,separately,another146 million in subordinated debt. The revenues to pay the bonds would come from the sale of luxury boxes, premium seats, advertising and sponsorships, as well as ticket revenues and concessions. Barclays Bank has already signed a $20 million-a-year naming-rights deal for the arena, which will be called Barclays Center.
Both rating agencies highlighted the city’s commitment to the project, but noted the weak financial condition of the Nets, and the uncertainty, given the recession, of predicting revenues from premium seating and sponsorships. Mr. Ratner recently signed a deal to sell an 80 percent stake in the Nets to the Russian billionaire Mikhail D. Prokhorov, who would cover the team’s operating expenses for the next several years.
Moody’s said it did not anticipate that the remaining three lawsuits would be a problem.
“The lawsuits are not an issue as far as the rating is concerned,” said Rick Donner, a vice president at Moody’s. “The rating assumes that the lawsuits will be settled and that the project will move forward. The proceeds of the bond issuance will be held in escrow until vacant possession is obtained, which basically means that the lawsuits have been settled and the sponsors have possession.”
Correction:An earlier version of this article misidentified the case that the Court of Appeals declined to hear. Earlier versions also stated incorrectly that Moody’s Investor Services and Standard & Poor’s rated all of the 646millionbonds;theyratedonlythe646 million bonds; they rated only the 646millionbonds;theyratedonlythe500 million in tax-exempt bonds, not the $146 million in taxable bonds.
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