SBJ/November 17 - 23, 2003/This Weeks Issue

Ratner’s $275M bid for Nets just a start

The bidding for the New Jersey Nets has only just begun, with Bruce Ratner's offer of $275 million setting a bar that will likely be raised over the next few weeks.

New York Islanders co-owner Charles Wang reportedly bid $265 million when initial bids were submitted last Monday. The team of developer Charles Kushner and Sen. Jon Corzine, D-N.J., offered $250 million, while relative unknown Stu Feldman, the CEO of New York-based investment firm Chelsey Capital, put in a bid of $257.5 million.

Some of the bidders, however, indicated that they will resubmit higher offers, said a source close to the talks. The competitive process could bring the final sale price to $300 million, the source predicted.

The Ratner, Wang and Kushner-Corzine bids all included guaranteed financing. While there were a few contingencies built into each offer, none is dependent on getting a new arena for the Nets.

Ratner

Ratner is trying to build an arena in Brooklyn, N.Y., as a centerpiece of a large commercial and residential development. He has asked for the state and city governments to cover $18 million of annual debt service on the arena, said a source with ties to the city government. Skeptics are asking how Ratner will get that sort of backing, and how he'll make it work financially with only one tenant.

But Dan Doctoroff, New York deputy mayor of economic development, said the city is close to reaching an agreement with Ratner, a developer who already has built up much of the section of Brooklyn where the arena would be built.

"I wouldn't characterize the discussions as far apart at all," Doctoroff said. "We are very encouraged."

Doctoroff said the city is prepared to make an economic contribution equal to the projected tax revenue the arena project would generate, including player payroll taxes.

"I've said all along there is the real potential here for a win for the community, the city and for [Ratner] financially," Doctoroff said.

Although many still believe Ratner has only an outside chance of getting the Nets, his bid is being taken very seriously by YankeeNets, the holding company that owns the team.

The YankeeNets board will likely meet this week to discuss a strategy for moving forward, possibly eliminating two of the bidders or inviting all to participate in a second round, a source said.

Minority YankeeNets shareholder Mort Olshan, who has a $75 million investment in the team, could be the swing vote if the major shareholders on the fractured YankeeNets board can't come to an agreement.

Many insiders believe the bidder with the best chance of ultimately landing the club is Wang. The founder of Computer Associates, Wang would move the Nets to Long Island, where he hopes to build a new arena for the Islanders. In the interim, moving the Nets to Nassau Coliseum would trigger a contractual clause that would allow the Islanders to renegotiate their lease with arena manager SMG. The lease is known to be the worst in the NHL and is something the last three Islanders owners tried in vain to escape.

Lehman Bros. and Goldman Sachs are jointly representing YankeeNets in the sale process.

All of the potential ownership groups were declining comment last week.

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