CLEVELAND, Feb. 1, 2016 /PRNewswire/ -- Forest City Realty Trust, Inc. (NYSE: FCEA and FCEB) announced today that its subsidiary, Nets Sports and Entertainment, LLC (NS&E), has completed the previously announced sale of its equity interests in both the Barclays Center arena and the Brooklyn Nets basketball team to Onexim Sports and Entertainment Holding USA, Inc. (Onexim). As previously disclosed, the transaction values the team at approximately $875 million and the arena at $825 million, inclusive of debt for each asset. The transaction was approved in December by the Board of Governors of the NBA, and achieves the NBA's objective of having ownership and control of both assets under one owner.
"We are pleased to complete this important transaction, which aligns with our strategic focus on core retail, office and apartment assets in strong urban markets, and on using proceeds from non-core asset sales to further improve our balance sheet and selectively invest in entitled development opportunities in our core markets to drive future growth," said David J. LaRue, Forest City president and chief executive officer.
The purchase price for NS&E's non-controlling 20 percent equity interest in the team was $125.1 million. For the arena, the purchase price for NS&E's 55 percent equity interest was $162.6 million, after adjusting for the settlement of certain outstanding capital obligations between NS&E and Onexim. Based on total 2015 unaudited net operating income for Barclays Center, the purchase price for NS&E's interest in the arena represents a cap rate of approximately 5 percent.
Forest City owns approximately 62 percent of NS&E. NS&E expects to receive total proceeds, in a combination of cash and notes receivable, of approximately $287.7 million. For its interest in the arena, NS&E received $70 million in cash at closing, before transfer taxes and closing costs, together with a 3-year promissory note with principal of $92.6 million, paying semi-annual interest at 4.5 percent. Of the cash at closing, Forest City expects to receive approximately $54 million, after closing costs and estimated transfer taxes, in reduction of a priority loan advanced on behalf of the NS&E partners. For its interest in the team, NS&E received a 5.5-year promissory note with principal of $125.1 million and interest at 4.5 percent per annum accruing through maturity. Onexim principal Mikhail Prokhorov provided credit enhancement of the notes with an Operating Support Agreement. The terms of the notes include accelerated repayment provisions in the event of a sale or recapitalization of either asset prior to maturity. NS&E also has limited rights to transfer, assign or sell the notes, subject to approvals from Onexim and the NBA.
Evercore ISI advised NS&E on the sale of its interests in the team and arena and provided a fairness opinion to NS&E.
About Forest City
Forest City Realty Trust, Inc. is an NYSE-listed national real estate company with $10.0 billion in consolidated assets. The company is principally engaged in the ownership, development, management and acquisition of commercial and residential real estate throughout the United States. For more information, visit www.forestcity.net.
Safe Harbor Language
Statements made in this news release that state the company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. The company's actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors. Risks and factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, its ability to remain qualified as a REIT, the possibility that the anticipated benefits of qualifying as a REIT will not be realized, or will not be realized within the expected time period, its inability to meet expectations regarding the accounting and tax treatments of qualifying as a REIT, the impact of issuing equity, debt or both to satisfy its E&P Distribution and any other future distributions it is required to make as a REIT, the impact of the amount and timing of any future distributions, the impact of covenants that would prevent it from satisfying REIT distribution requirements, its lack of experience operating as a REIT, legislative, administrative, regulatory or other actions affecting real estate investment trusts, including positions taken by the Internal Revenue Service, the effect on the market price of its common stock following its conversion to REIT status and the E&P Distribution, the impact to its deferred tax liability balance upon conversion to REIT status, the impact of current lending and capital market conditions on its liquidity, its ability to finance or refinance projects or repay its debt, the impact of the slow economic recovery on its ownership, development and management of its commercial real estate portfolio, general real estate investment and development risks, using modular construction as a new construction methodology and owning a factory to produce modular units, vacancies in its properties, risks associated with developing and managing properties in partnership with others, downturns in the housing market, competition, illiquidity of real estate investments, bankruptcy or defaults of tenants, anchor store consolidations or closings, international activities, the impact of terrorist acts and other armed conflicts, its substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by its credit facility and senior debt, exposure to hedging agreements, the level and volatility of interest rates, the continued availability of tax-exempt government financing, the impact of credit rating downgrades, effects of uninsured or underinsured losses, effects of a downgrade or failure of its insurance carriers, environmental liabilities, conflicts of interest, risks associated with the sale of tax credits, the ability to maintain effective internal controls, compliance with governmental regulations, increased legislative and regulatory scrutiny of the financial services industry, changes in federal, state or local tax laws, volatility in the market price of its publicly traded securities, inflation risks, litigation risks, cybersecurity risks, cyber incidents, its ability to achieve its strategic goals are based on significant assumptions, and its ability to complete non-core asset sales, as well as other risks listed from time to time in the company's SEC filings, including but not limited to, the company's annual and quarterly reports.
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SOURCE Forest City Realty Trust, Inc.
Jeff Frericks, Vice President - Capital Markets, 216-621-6060; Jeff Linton, Senior Vice President - Corporate Communication, 216-621-6060