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September 26, 2009
Ten questions: Prokhorov-Nets deal
ESPN.com
By Chris Sheridan
Click through to read the whole thing, but here are the most relevant Atlantic Yard-related questions of ten posed in this speculative article.
2. Will the sale go through?That's a big, big question, because the Nets sale is contingent on Ratner's obtaining financing and control of the land for his mammoth Atlantic Yards project in Brooklyn by the end of the year.
Part of the answer will come in the next few weeks, as Ratner and the Nets have a date in the New York State Court of Appeals on Oct. 14; a group opposing the Brooklyn project is seeking a reversal of its previous court loss in which it challenged eminent domain procedures used to acquire land for the project. The Nets are confident of victory, saying they are 25-0 in court cases related to the Brooklyn project, and they note that the U.S. Supreme Court has already declined to hear the appeal from the group fighting Ratner.
In the Nets' eyes, they're entering the bottom of the ninth with a sizeable lead.
3. So if the Nets win in court on Oct. 14, that's the last hurdle?Not exactly. The group opposing the Brooklyn project, "Develop Don't Destroy," has indicated it will seek other avenues to delay the start of construction through the end of the year, because if Ratner and the Nets don't sink a shovel into the ground in Brooklyn by Dec. 31, they will lose access to tax-exempt bonds that Ratner is planning to use to finance a portion of the 22-acre, $4.9 billion development. The law that created those bonds has been rewritten, but the Nets project was grandfathered in with the caveat that their special exemption expires Dec. 31.
After initially predicting a 2007 opening, the Nets are now projecting their $800 million Brooklyn arena will be ready for the 2011-12 season.
4. Why would Prokhorov target the Nets from among the available franchises in the league?Unlike the Charlotte Bobcats and Memphis Grizzlies, both of whom are locked into long-term leases tied to the construction of their recently built arenas, the Nets are desirable because of the size of the market they play in, because the team is on a year-to-year lease at the Meadowlands (and therefore is potentially portable) and because the upside of relocating to Brooklyn -- becoming a major threat to the Knicks' hold on the New York metropolitan area's fan base -- is so huge.
Also, Ratner was so eager to make a deal to secure additional financing for the Atlantic Yards project, because of the tightening of the credit markets, that he yielded to many of Prokhorov's terms in order to speed up the deal. Remember, Ratner paid $300 million when he bought his share of the Nets. This sale places the franchise's overall value at $250 million, which means Ratner is taking a substantial haircut.
7. How will the other owners react to having a free-spending Russian billionaire in their midst?Will his checks bounce? Forget all the other stuff about background checks, personal skeletons and/or questionable connections. Is his wealth verifiable? And how much of it is in cold, hard cash? The legitimacy of the money behind this deal is the No. 1 question the 29 other owners will have, and NBA bylaws require that only three-quarters of the owners approve the sale.
And let's be real here: The more frugal of the league's owners will be especially welcoming to any prospective owner who would try to spend his way to the top and pay the luxury tax, since that money is divided among the non-taxpaying owners. With Mark Cuban and James Dolan both a lot less free-spending than they once were, the owners would like nothing more than to bring aboard a guy with extremely deep pockets and little conscience when it comes to opening up his wallet. (When CSKA Moscow's basketball team, partly owned by Prokhorov, won the Euroleague title in 2008, the players in the victorious locker room sprayed each other with Magnum bottles of Cristal champagne that cost $650 apiece.)
9. What happens to the Prokhorov deal if Ratner is unable to break ground in Brooklyn by Dec. 31?The deal would be off; the team would still be Ratner's, it would go back on the market, and there would immediately be a franchise as a candidate to relocate to Seattle (if a new arena deal is approved), Anaheim, Kansas City, St. Louis or some other city with designs on getting an NBA team.
The Nets have never had a strong fan base in New Jersey and routinely play before thousands of empty seats. Ratner, tired of absorbing millions in operating losses annually on the Nets, would presumably find another buyer. And as noted above, the Nets are singularly attractive among franchises with the "For Sale" sign posted because they are not locked into a long-term lease.
10. So, does the Prokhorov deal go down, or not?When a deal this big is contingent on getting something built in New York, it's inherently tenuous. There are tons of wonderful architecture and infrastructure around New York, nearly all of it built decades and decades ago. Just ask the people who have been waiting 50 years for the Second Avenue subway to be built. You'll find them by the thousands packed like sardines on the Lexington Avenue subway line, the only one serving Manhattan's densely populated Upper East Side.
Unless your name is Donald Trump or you own a baseball team, it takes forever to get stuff built in New York, and all it takes is one or two temporary restraining orders from one or two judges sympathetic to Ratner's opponents to grind the process to a halt and possibly keep that first shovel from going into the ground by Dec. 31.
With that in mind, we should call this one a 50-50 proposition. But Ratner has overcome a ton of hurdles already on the Atlantic Yards project, so we'll tilt the odds in his favor: 60-40 that the big Russian has his hands on the Nets by the time the 2009-10 season ends.
NoLandGrab: Comparing a City project like the Second Avenue Subway with the State's proposed Atlantic Yards project doesn't exactly lend credibility to this article's predictions, but it does suggest that, as usual, Ratner's done deal is anything but. Also, the Nets won't be in court. The ESDC, tool of developer Bruce Ratner, will be in court. October 14th will be the date arguments are presented and it's up to the Court as to when a decision will be made.
Posted by steve at September 26, 2009 5:49 PM