It’s all systems go for the Brooklyn Nets arena, and perhaps an NBA championship banner hanging from the rafters following the 2011-12 playoffs in the borough.
The idea did not seem that far-fetched to current Nets owner Bruce Ratner after both Moody’s Investor Service and Standard & Poor’s gave investor grade ratings for the proposed issuance of $500 million in tax-free bonds.
The ratings, which were just above a junk bond rating, should help pave the way in financing the $1.06 billion Barclays Center arena at the Flatbush/Atlantic avenues intersection.
The arena is the cornerstone of Forest City Ratner’s (FCR) 22-acre Atlantic Yards project, which includes thousands of market and below-market rate units of housing.
The bonds must be sold by the end of the year in order to be tax free as grandfathered in by the federal government, which recently outlawed stadiums and arenas to make PILOT (payments in lieu of taxes) on bond issuances.
“We’re very happy that we got investment grade from Moody’s,” said Ratner, president and CEO of FCR. “It’s a major step. It’s taken a long time, but we’re there and it’s just great. We will have everything done by the end of the year.”
According to the Moody’s rating report, the $500 million will be raised through Brooklyn Arena Local Development Corporation, an arm of the state Empire State Development Corporation, and that a substantial amount or $424.4 million will come through equity.
This includes $293.4 million from FCR and the tentative new Nets owner, Russian billionaire Mikhail Prokhorov; $146 million from taxable bonds issued through Brooklyn Arena Holding Company, an arm of the FCR investors; and $131 million from the city.
On giving the investor grade rating, Moody’s cited the strength of the city’s media market, existing sponsorship support for the team, the large amount of equity the developer and its partner are putting in the project and strong reserve funds.
“The rating also reflects the presence of a professional basketball team as the anchor tenant, which is a central factor to the successful sale of corporatesuites and the attraction of sponsors,” according to the report.
“Corporations can entertain at professional sports events and corporate sponsors are interested in not only the local exposure, but also interested in the national exposure realized from appearing on national television during basketball games,” the report added.
While the Nets have started off winless in their first 17 games at press time and are on the verge of breaking an NBA record for losses starting a season, Ratner said it’s all part of a plan to bring a championship contender team to the borough by the end of the 2011-12 season.
“This was really just a year we were rebuilding. We’ve had a lot of injuries. I think long term we have a very good team,” said Ratner.
“We purposely created a situation where we’re going to have cap room to get very good free agents, and that was really the goal and we’re sticking with that strategy,” he added.
