If there’s one area that truly will impact the world of sports, its the credit markets, where lending has practically halted and no one is handing out tons of free cash like in the past. Any team looking to build a new arena or refinance is probably going to find themselves in a pinch.
The good news is that most of the teams entering new facilities in the next year or two had already nailed down funding before the big problems on Wall Street. The Cowboys, Giants, Jets, Yankees and Mets were well on their way to building their stadiums and should be in OK shape when their facilities open in 2009 or 2010.
The NBA’s New Jersey Nets, on the other hand, are facing some problems in getting their new arena in Brooklyn. Team owner Bruce Ratner has been planning a new facility that would be part of a large, mixed-used development over 22 acres. But there is growing skepticism that he will be able to borrow the money needed to finance such a project. The arena portion alone is expected to cost $950 million.
“It’s got more of an economic stall than a political or a legal stall,” said Michael Rowe, a sports management expert and former president of the Nets told the Associated Press. “I think he missed the curve on when that project was financially viable and now he has to wait for it to come back.”
Ratner hoping to finance the arena through $800 million in tax-exempt bonds, but the Internal Revenue Service has discussed placing restrictions on the type of projects for which those bonds could be used.
Meanwhile, the naming rights sponsor for the arena, British bank Barclays, is dealing with its own difficulties as a result of the struggles in the banking sector. Barclays has committed $400 million to the rights over 20 years, but could back out of the deal if the project is delayed too long. (Barclays at this point has said it is still on board.)
It is worth watching what other arenas and stadiums will be affected by this down the road. There are questions about future homes of the Marlins, Rays and Vikings, for instance. And locally, D.C. United could find financing more difficult—or at the very least, more costly—as it seeks to get a new arena in the District or suburban Maryland. An early proposal called for United to pay for a stadium at Poplar Point using money from real estate development in the area. Chances are, the economics of that are far more questionable than they were a year ago due to a slowdown in the real estate sector.