Forest City Ratner Solidifies $200M Partnership with Russian Investor for Atlantic Yards Project in Brooklyn

May 13, 2010
By Barbra Murray, Contributing Editor

Foreign investment in the U.S. commercial real estate market is picking up and New York City-based Forest City Ratner Companies is among the latest real estate firms to benefit from the increasing interest from abroad. Forest City Ratner has finalized a $200 million strategic partnership agreement with Moscow-based private investment fund Onexim Group–the holding company of billionaire Russian Mikhail Prokhorov–that has given Forest City Ratner’s Barclays Center arena project at the $5 billion Atlantic Yards mixed-use development in Brooklyn a financial boost.

The transaction also involved Net Sports and Entertainment L.L.C., an investor group led by Bruce Ratner, chairman and CEO of Forest City Ratner. Per terms of the new investment agreement, Onexim Group, acting through Onexim Sports and Entertainment Holding USA Inc., shelled out $200 million and walked away with a 45 percent ownership interest in the Barclays Center development, an 80 percent stake in the Nets basketball team, and the option to acquire as much as 30 percent in the Atlantic Yards Development Company, which oversees construction of residential and non-residential projects at Atlantic Yards.

From many analysts’ perspective, the deal is a good one. “Closing of the previously announced transaction to sell a majority stake in the Nets is a positive development,” Sarah McGrath, senior vice president with investment bank Keefe, Bruyette & Woods, told CPE. “This transaction represents a major ‘de-risking’ of the arena/Atlantic Yards project and will provide the cash for an equity infusion into the development. In addition, Forest City will no longer have impact of Nets operating losses.”

Featuring 18,000 seats, the 675,000-square-foot Barclays Center will serve as an anchor of the 22-acre Atlantic Yards development. When all is said and done, in addition to the sports and entertainment venue, Atlantic Yards will encompass 6 million square feet of residential accommodations, 250,000 square feet of retail and 340,000 square feet of office space.

The Onexim transaction helps move things along, McGrath said: “With the announcement, they can begin construction of Barclays Arena in earnest.”