Rising interest rates "pose the newest threat to completion
of the Target Center buyout and Timberwolves sale," with a
December 31 deadline approaching. Henry Savelkoul, chair of the
Metropolitan Sports Facilities Commission said that the Federal
Reserve's announcement that it will boost interest rates another
3/4 of a point will make the Timberwolves/Target Center
transaction "very difficult." Since the summer, when state and
city financing of about $54M was approved to buy the downtown
arena -- and another $25M or so set aside to refinance other
outstanding debt on the building -- interest rates have gone up
two full percentage points. Debt service on a new mortgage for a
publicly owned Target Center could be as much as $1.4M more per
year than projected, according to Savelkoul (Weiner & Hartman,
Minneapolis STAR TRIBUNE, 11/22).
SOLUTIONS? According to Savelkoul, one possible solution is
issuing shorter term bonds than the previously agreed-upon 30-
year long bonds. Short term financing could bring down the
interest rates. Wolves buyer Glen Taylor and team and arena
sellers Marv Wolfenson and Harvey Ratner are facing a December 31
deadline to close on the sale of the team. That sale is
contingent on the Sports Facilities Commission buying the Target
Center. There is a "risk" that interest rates will continue to
rise, "placing the entire financing package in jeopardy" for
buying the arena. As of now, ticket taxes will pay the mortgage
on the arena, but if that does not cover it, then the Commission
may ask the city to cover the payments through a liquor and hotel
tax (Weiner & Hartman, Minneapolis STAR TRIBUNE, 11/22).
