Russian Equity Partner Comes Aboard on $4B Atlantic Yards Project

The $4 billion Atlantic Yards mixed-use development--the centerpiece of which will be the Barclays Center sports and entertainment arena, future home base of the NBA's Nets team--has new financial backing. Developer Forest City Ratner Cos. Inc. and Nets Sports and Entertainment have just signed a letter of intent to form a strategic partnership with an affiliate of Moscow-based international private investment fund Onexim Group for the development of the 22-acre project. The multi-faceted deal calls for Onexim to invest $200 million.

By: Barbra Murray, Contributing Editor

The $4 billion Atlantic Yards mixed-use development–the centerpiece of which will be the Barclays Center sports and entertainment arena, future home base of the NBA’s Nets team–has new financial backing. Developer Forest City Ratner Cos. Inc. and Nets Sports and Entertainment have just signed a letter of intent to form a strategic partnership with an affiliate of Moscow-based international private investment fund Onexim Group for the development of the 22-acre project. The multi-faceted deal calls for Onexim to invest $200 million.

For Onexim, led by company president and avid basketball fan Mikhail Prokhorov, the transaction marks an entrĂ©e into the U.S. real estate market. In addition to the much-needed cash infusion the company will make, Onexim has agreed to bolster the project by acquiring 45 percent of the 18,000-seat arena–which accounts for approximately $800 million of the Atlantic Yards development cost–and 80 percent of the NBA team, which Forest City acquired in 2004. Additionally, Onexim will have the right to buy as much as 20 percent of the Atlantic Yards Development Company, the entity responsible for developing Atlantic Yards’ 6 million square feet of residential space, 24 7,000 square feet of retail space and 336,000 square feet of office space.

“For Mr. Prokhorov, the opportunity to get involved with an NBA team and the real estate opportunity presented a unique investment combination,” an Onexim spokesperson told CPE. “Timing is everything and this came along at the right time.” As for plans for any future investments in U.S. real estate, Onexim is keeping mum.

Barclays Center will be the first segment of Atlantic Yards to be constructed. “We’re anticipating a formal groundbreaking on the arena by the end of the year, now that all public approvals are in place,” a Forest City spokesperson said. Work on Atlantic Yards’ first residential structure will commence about six to nine months after the arena gets underway. Both are expected to reach completion in 2012, and again, timing is everything. Although the multifamily market is presently taking a bit of a beating, industry experts predict that such factors as the maturing echo-boomer population and anticipated economic recovery will revive demand. “The residential building will be a rental building and it will include affordable housing, so we do think there will be a market for it when it reaches completion.”

If all goes as planned, the Forest City and Onexim transaction will close by the first quarter of 2010.