Bruce Ratner scored roughly half the money he’ll need for his Atlantic Yards arena in a matter of hours yesterday, selling out $511 million in tax-free bonds that were snapped up by investors thanks to their high interest rate and investors’ faith in the project.
Demand wildly outstripped supply for the bonds, with orders totaling $1.9 billion, according to Goldman Sachs, the financial powerhouse that handled Tuesday’s sale.
“The interest in the arena bond offering was beyond our expectations,” the developer said in a statement. “Even more importantly, the overwhelming support from investors is a good sign of confidence in this project.”
Believe it or not, Ratner’s timing was excellent. Though the Atlantic Yards project bears little resemblance to the Frank Gehry fantasyland that Ratner first proposed in 2003, the ailing economy actually helped the bond sale.
“There is a lot of confidence in the municipal bonds market these days,” said Debra Saunders, a member of the New York Board of Municipal Analysts. “The muni-market is viewed as a safe place to go.”
Saunders also pointed out that institutional investors conduct thorough investigations — especially now — before buying any bonds.
“If they bought it, they feel it was priced correctly and the [6.48-percent tax-free interest rate] compensates for any risk,” Saunders said.
The bonds were rated just above “junk” status by the major ratings agencies earlier this month.
The opposition to the project — which dumped fake “junk bonds” into a garbage truck on Wall Street on Monday — criticized the sale as yet another example of Ratner running roughshod over the public interest.
“These bonds went on the market without any oversight from any state officials,” said Daniel Goldstein, spokesman for Develop Don’t Destroy Brooklyn, the main Atlantic Yards opposition group. “The state will be on the hook if the project defaults.”
The bond sale is only the latest blow to those opposed to the project that would completely change the face of Prospect Heights. Most important, New York’s highest court ruled that the state was justified in its use of eminent domain to seize property in the project’s footprint.
With the sale of the bonds completed, the next step is a “master closing,” in which contracts are finalized and eminent domain-empowered seizures of privately owned land actually begin.
Ratner’s stately pleasure dome will be built from funds from a curious mix of agencies, investors and Russian billionaires. Here’s how he’ll put together the final deal:
• Tuesday’s bond sale netted $511 million.
• Ratner will shortly sell $100 million in taxable bonds. They’re similar to the tax-exempt ones — except that investors pay taxes on them.
• Ratner and his new power forward, Russian oligarch Mikhail Prokhorov, who has agreed to buy 80 percent of the New Jersey Nets and 45 percent of the arena from Ratner, will put up $293.4 million of their own.
•Another $156.4 million will come from the city and $104.3 million from the state in the form of infrastructure improvements, according to an Independent Budget Office report.
That adds up to a $1.164-billion basketball arena at the corner of Flatbush and Atlantic avenues.
©2009 Community News Group
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