Investors quickly snapped up $511 million in bonds bringing Developer Bruce Ratner one major step closer to building the $1 billion Barclays Center arena at the Flatbush/Atlantic avenues intersection.
Raising half the money to build the arena also brings the borough closer to having its first major professional sports franchise since the Dodgers left Brooklyn following the 1957 season.
In this case, the franchise will be the NBA’s Nets, and the possibility of a National Hockey League franchise.
“The interest in the arena bond offering was beyond our expectations,” said Ratner in a statement and noting that orders from institutional investors across the board were almost four times the supply of bonds.
“Even more importantly, the overwhelming support from investors is a good sign of confidence in this project and in the city,” he added.
Interest on the bonds sold was 6.48%.
The bond sale came a day after opponents of the project held a demonstration outside Standard & Poor’s offices at 55 Water Street in Manhattan.
The protest was against Standard & Poor (along with Moody’s Investor Service) giving investor grade ratings, just above junk bond ratings, for the issuance of the $500 million in tax free bonds.
Opponents at a demonstration called the issuance “Junk Yard Bonds,” and threw make-believe bonds into a garbage truck.
Following the bond sale, opponents kept the heat on the 22-acre project, which on final build out, also calls for thousands of market- and below-market rate apartments,
Specifically, they argued that recent mass transit cuts could have been avoided if the MTA sold Ratner’s company, Forest City Ratner, the eight-acre Vanderbilt railyard, on which most of the arena will be built at its appraised value.
In 2005, the railyard was appraised at $214.5 million, and FCR bought the railyards for $100 million with $20 million down.
The deal also includes FCR making millions of dollars worth of transit improvements and construction of a platform, which is needed for any development over the yards.
“Transit riders should recognize that the MTA cuts are in large part due to this sweeter, sweetheart deal the authority needlessly cut with Bruce Ratner this past summer,” said Develop Don’t Destroy Brooklyn spokesman Daniel Goldstein.
“It is not too late for the Governor and Mayor to make the MTA strike a new deal with Ratner that requires him to pay what he committed to paying—$100 million at closing, rather than $20 million,” he added.
With the $511 million bond sale complete, the rest of the financing for the arena 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.
As this paper went to press, FCR finalized its agreement with Prokhorov’s Onexim company.
Under the terms of the agreement, Onexim will own 80 percent of the Nets, and 45 percent of the arena, subject to approval by the NBA Board of Governors.
Onexim also has an option to acquire up to 20% of the entire Atlantic Yards Project.
The arena project is expected to officially break ground before the end of the year, and Ratner said he hopes to have it completed by the end of the 2011-12 NBA season. He also said he is committed to starting at least one of the residential units.
