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Bloomberg, Forest City Still Commited to Barclays Center

In New York and Cleveland, two key supporters of Barclays Center said Friday they’re willing to commit political and financial resources to the arena, pledging to get it done this year.

Mayor Michael Bloomberg not only re-endorsed the project. He attacked the city’s own Independent Budget Office for failing to think bigger about the project in an analysis that questioned whether city subsidies to the arena are a good deal. Meanwhile, officials of Forest City Enterprises, the Cleveland firm that is the team’s biggest stockholder--and finances most of its losses, said it has the money to complete Barclays Center. Previous reports, including one on NetsDaily, questioned whether FCE would be able to move without new investors.

In spite of an Independent Budget Office report that the arena (not the entire 22.5-acre project) would be a net loss to taxpayers, Bloomberg extolled the arena, saying "we’re going to this one done".

"I don’t know what the IBO studies would have shown back when they tried to establish the value of Central Park or Prospect Park or anything else," Mayor Bloomberg told reporters. "These are the kinds of projects you have to do because without that we don’t have a future, and we’re going to get this one done.

"…If you count the costs, but don’t count the benefits, it doesn’t make any money. The Atlantic Yards is a project that we really need—it will be great for this city, it will be great for Brooklyn," Bloomberg said.

Meanwhile, in a conference call with stock analysts to highlight second quarter results, Charles Ratner of Forest City Enterprises said the Nets’ biggest investor (and Bruce Ratner’s parent company) has the capital needed to do the deal…and said "all parties", presumably including the Empire State Development Corp., are prepared to move even if new litigation is filed by opponents of the project.

Two days earlier, Forest City reported losses sustained by the Nets had eased a bit, but continue. The $3 million reduction in the second quarter was described as "modestly lower" by Forest City’s chief financial officer Bob O’Brien during the conference call.

Charles Ratner—Bruce’s cousin—spoke of the anticipated ground breaking by year’s end. (Jay-Z said this week it will take place in "early December".)

Charles Ratner: "We fully anticipate that the milestones necessary to close on Atlantic Yards and begin construction on the Barclays Center arena will be reached by year end. We’re working closely with public parties, including the MTA, the city, and the state to finalize and document the agreement. The mayor, the governor, and the borough president all continue to be fully and publicly supportive of our project.

"We have made presentations to and continue to meet with the rating agencies and underwriters to enable us to move forward with a tax-exempt bond offering for the arena. Our sponsors, and particularly our partners from Barclays, have been steadfast in their support for the project.

"On the legal front, project opponents have appealed a favorable 4-0 ruling we received in May on the eminent domain issue. This appeal is scheduled to be heard in October and we anticipate a favorable resolution shortly thereafter. While other legal objections will undoubtedly be raised, all parties involved are aware of these issues and continue to move forward to a closing by year end."

Later in the call, Charles Ratner and Joanne Minieri, president and chief operating officer of Forest City Ratner, took questions from stock analysts Jay Haberman of Goldman Sachs and Mark Bifford of Oppenheimer.

Haberman: Can you give us a sense of additional capital that you’ll need to spend, I guess, in the next year or so, in development plans beyond the arena?

Minieri: As Chuck indicated in his opening remarks, we do expect that, before the end of the year that the state would ratify the Modified GPP (General Project Plan). Then we would raise the bond financing necessary to proceed with the project. We continue to manage the cash requirements necessary to proceed and have adequate cash, in our estimates, to fulfill those obligations.

Charles Ratner: As we indicated both when we were selling the equity and in our last calls… we have in our sources and uses provided adequate liquidity to close the transaction which we fully anticipate doing.

Haberman: Are you anticipating any further development beyond the arena at this point?

Minieri: Obviously, the arena will be the first building that we will begin to develop. Within several months, we will expect to proceed with the first residential project. You know, it’s so interesting, because the arena has taken on the spotlight of this development. But as we all know, the majority of this project provides for a housing development. So we fully intend to fulfill our obligations under the project plan, so we will proceed.

Bifford: There was an article out talking, putting dollars around the amount that you plan to raise, I think the number being out there was around 700 million [dollars] and that the cost of the arena was going to be between 800 and 900 million. I’m just wondering, that incremental 100 to 200 million, do you already have that invested--is that 800 to 900 million inclusive of what you’ve already invested into the property?

Minieri: Yes, it is.

Bifford: Okay, so then the incremental amount would only be in probably the 50 to 70 million range--is that a pretty good estimate?

Minieri: Plus or minus. Probably a little bit more, but yes, it’s a reasonable estimate--it may be a little higher, as we close down all the numbers and the actual rate occurs and pricing is done, etc.

Charles Ratner: I want to repeat that the equity it’s going to take to close this transaction we have anticipated.

There were no conference call questions about a change in Nets' ownership but Charles Ratner did say the company is in negotiations on a variety of projects but would not sell low simply to gain a quick cash hit.