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July 20, 2009

The real value of the station naming rights (far less than $4M, or even $2M), and the MTA's stonewalling about setting the price

Atlantic Yards Report

The MTA is not so into sharing, and they're bad at math, to boot.

So, was the Metropolitan Transportation Authority's (MTA) sale of naming rights to the Atlantic Avenue/Pacific Street station for $200,000 a year over 20 years "a goodly sum," as the New York Times described it in an editorial last month?

No, since, as I describe below, the present value cost to developer Forest City Ratner to slap "Barclays Center" on the stations would be far less than the $4 million sum casually used by the press, and even well less than $2 million.
...

Michael D.D. White, in his Noticing New York blog, was the first to argue that the naming rights were undersold, though the WNYC piece linked to suggests it's a very inexact process.

So I queried the MTA via a Freedom of Information Law (FOIL) request:
During or after the 6/22/09 MTA Finance Committee meeting, CFO Gary Dellaverson said MTA staff, in an effort to set a price for the naming rights agreement considered for the Atlantic Ave./Pacific St. station, looked at naming rights deals set by other transit systems. I would like a copy of any memo or report that MTA relied on to analyze the price of such naming rights deals.

Request denied.

So, how much is the "$4 million" deal really worth?

[Corrected] I've revised these figures based on an email from a reader.

With an interest rate of 6.5% (which the Manhattan Institute's Nicole Gelinas called "laughable"), the same for the railyard deal, the present value would be $2,203,701.

With a super-attractive (and unlikely) interest rate of 4%, the present value would be $2,718,065.

But with a more realistic interest rate of 10%, given the cost of corporate borrowing, well, the deal would be worth just $1,702,713 (not $594,575, as I wrote earlier).

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Posted by eric at July 20, 2009 9:19 AM