Squeeze play? Braves face ‘Herculean effort’ on new stadium
By Maria Saporta
Published in the Atlanta Business Chronicle on January 31, 2014
For the Atlanta Braves to break ground on a new stadium in Cobb County by Jan. 1, 2015, a “Herculean effort” will be required to get all the legal and financial agreements in place.
The Braves, in fact, will have to accomplish in less than a year what is taking the Atlanta Falcons, the Georgia World Congress Center Authority and the city of Atlanta more than two years to put together. And the new Braves stadium is supposed to open ahead of the new Atlanta Falcons stadium in time for the 2017 baseball season.
Dan Kolber, a veteran Atlanta municipal securities attorney who was a founding partner of Jackson Securities and is now president and CEO of Intellivest Securities, reviewed the memorandum of understanding (MOU) between the Atlanta Braves, Cobb County and the Cobb-Marietta Coliseum & Exhibit Hall Authority.
In a lengthy interview, Kolber, who also writes a column for Atlanta Business Chronicle, said the elephant in the room was whether it would be possible for the Braves and Cobb to be able to negotiate all the agreements and get them approved through the various governmental bodies and then be able to get all the bond documents ready to go to market without any threat of litigation by the end of the year.
Even Cobb Commission Chairman Tim Lee acknowledged the enormity of what needs to happen within the next 11 months. “We know this is a Herculean effort to get done, but we are confident we are going to get it done,” Lee said in a brief interview on Jan. 28. “We will get it done.”
In reviewing the MOU, Kolber outlined the list of “definitive agreements” that would require a resolution by the appropriate governing bodies by the end of the year:
a) Stadium Operating Agreement;
b) Intergovernmental Agreement;
c) the various Bond Documents;
d) the Development Agreement;
e) the Transportation and Infrastructure Agreement; and
f) the Non-Relocation Agreement.
“We have a strong team in place, both at the county, the authority and the Atlanta Braves,” Lee said. “We are committed to working as diligently and as hard as possible. We are meeting at least weekly to identify issues and solutions and the resources necessary.”
The MOU, which was passed by the Cobb Commission in a 4-1 vote in November, does not make the stadium a done deal, Kolber said. The non-binding agreement does not even include a standard “break-up fee” or a “stand-still covenant” that would have protected Cobb County if the deal were to fall apart.
“It would have been in Cobb’s interest to have a ‘break-up fee’ or ‘stand-still covenant,’ ” Kolber said. “If you exercise your option to not continue negotiations, you pay us a predetermined amount of amount of money. It would be a lot of money to discourage them from leaving” the negotiations.
Lee, however, dismissed that concern.
“They are not going to walk away,” Lee said. “They have just become one of our largest landowners. They are moving forward at lightning speed, and folks need to hold on for the ride.”
In the past couple of weeks, officials with the Braves have purchased the property in Cobb County, selected an architect for the stadium and narrowed the list of developers who would create a year-round mixed-use project around the stadium.
But Kolber said that does not change the significant legal and financial hurdles that exist to issue $300 million in tax-exempt bonds for the $672 million stadium project.“Traditionally, it’s a long, long process to do a bond deal,” Kolber said. “I’ve done a $2 million bond deal that has taken years.”
Kolber said Jackson Securities worked on refinancing a total of $266 million in water-sewer bonds for the city of Atlanta — a noncontroversial project.
“It took us four years to actually issue the bonds,” Kolber said. “The underwriters want to be sure they are not exposed to any risk. Everything has to be perfect. There can’t be any threat of litigation. Before the bonds can be issued, everything has to be squeaky clean. That’s why it’s easier to, either judicially or politically, stop a bond issue than to make it happen.”
Several organizations already are looking into taking legal action against Cobb County over the Braves stadium deal.
“Yes, there are legal challenges in the works,” confirmed Rich Pellegrino of the Cobb Immigrant Alliance, which has been one of the opponents of the stadium.
Lee said the Cobb Commission is aware of the potential litigation. “As soon as possible, we are going to go to market with the anticipation that someone may intervene, and we will allocate the appropriate resources to manage through that,” Lee said. “All we can do is plan for the best and prepare for the worst.”
If the Braves and Cobb are unable to nail down all aspects of the deal by the end of the year, there are questions as to what options exist for the baseball team.
In looking over the operating agreement between the Atlanta Braves and the Atlanta-Fulton County Recreation Authority, the Braves have four options to renew their lease at Turner Field in five-year increments.
In other words, the Braves have until Jan. 1, 2016, to exercise an option to extend their Turner Field lease for another five years. Currently the Braves’ lease expires on Dec. 31, 2016. If it chooses to exercise that five-year option, the Braves could end up playing at Turner Field through 2021. “It is in their sole discretion,” confirmed Violet Travis Ricks, executive director of the Recreation Authority.
But the operating agreement between the Braves and the Authority does not identify what would happen if the Braves needed to extend their lease for only one or two years, which could give the authority some leverage. The city of Atlanta represents two-thirds of the authority and Fulton County represents one-third.
Officials from the Atlanta Braves were contacted for this story and they said they would respond. But because of early deadlines due to the winter storm, Atlanta Business Chronicle was not able to get their response in time to include in this story.