The Real Deal New York

Forest City must pay Prokhorov $31M by August 12

Developer looking to sell stakes in Nets, Barclays Center

August 06, 2015 03:00PM
By Rey Mashayekhi

From left: Barclays Center and Bruce Ratner

From left: Barclays Center and Bruce Ratner

If Forest City Enterprises is unable to divest its stake in the Brooklyn Nets by August 12, it will owe partner Onexim Group — led by Russian billionaire and Nets majority owner Mikhail Prokhorov — $25 million as part of a forbearance agreement made in 2013, plus an additional $6.3 million to fund its share of the team’s capital call for the upcoming NBA season.

Failure to pay up would see Forest City’s share in the team diluted to 8 percent, from the current 20 percent. While the company is seeking to avoid the payment and is holding discussions with its partners, Forest City CEO David LaRue said in an earnings call Wednesday that “if it comes down to it, if we had to make that payment, we would.”

“We think the 12 percent dilution we’d incur as a result of not making that payment would be detrimental” to the value of Forest City’s stake in the Nets, LaRue added.

Forest City Enterprises continues to pursue the sale of its stakes in both the Barclays Center and the Brooklyn Nets, despite admitting that the pace of such divestment has been “slower than we had hoped.” The company owns a 55 percent stake in the Barclays Center and its 20 percent stake in the Nets, through its Nets Sports & Entertainment subsidiary.

The firm, headquartered in Cleveland but with major operations here in New York, reiterated its target of $600 million to $650 million in net proceeds from “non-core asset dispositions” as part of a “shift to core markets,” it said during the call.

Forest City continues to make “solid progress” on its planned conversion into a real estate investment trust, LaRue added, and is confident it will reach the January 1 deadline it has set for making the REIT conversion.