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November 17, 2010
Over the 38-year term for arena bonds, lots of unknowns: continuing revenue, cost of renovations
Atlantic Yards Report
In ratings reports regarding the Atlantic Yards arena, Standard & Poor's assessed both the strengths and weaknesses of the project, justifying a rating of BBB-, or the lowest run of investment grade.
One weakness:
The 38-year debt term is longer than most comparable rated projects.
Well, it's true that the comparably rated bonds for the Yankees' and Mets' new stadiums have 40-year terms, but baseball stadiums generally endure longer than arenas and the two baseball teams have established track records in New York City.
The unknowns: who pays for renovation?
But there are two unknowns that I haven't seen addressed in the bond materials and ratings.
First, the arena would inevitably have to be renovated, given the track record of numerous arenas, as detailed below.
Second, the analyzed revenue--e.g., from naming rights and sponsorship deals--covers a term far shorter than 38 years.
...Short life spans for some arenas
In Seattle, the Washington State Pavilion (1962) was remodeled as the Washington State Coliseum, which in 1967 became home to the Seattle SuperSonics and was rebuilt 27 years later as Key Arena. Some 13 years after that, team owners were unsuccessful in getting public funding for a renovation or new arena, and the team moved to Oklahoma City for the 2008-09 season.
The Miami arena, completed in 1988, lost the Miami Heat in 2000 to the American Airlines Arena. The Florida Panthers left, as did concerts. The arena was sold via an auction in 2004 and demolished in 2008.
The Orlando arena opened in 1989 and, within eleven years, was deemed obsolete. A new arena will open later this year, 21 years later.
The Nets' most recent home, the Izod Center at the Meadowlands, opened in 1981 and lost the team just this year, 29 years later.
None of the four arenas noted above had the luxury suites and premium seating that are now standard.
Still, new bells and whistles surely will become standard. The Atlantic Yards arena won't last 38 years without a major renovation, or becoming obsolete. Who's going to pay?
NoLandGrab: "Who's going to pay?" That's obviously a rhetorical question, because we all know the answer, and it ain't Bruce Ratner.
Posted by eric at November 17, 2010 12:37 PM