How Forest City Ratner won the Coliseum contract
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Every Tuesday and Thursday for the last month, Forest City Ratner Cos. executive Jim Lester and two colleagues spent up to 10 hours at a conference table in the Nassau County offices in Mineola, eating wraps and macaroni salad and negotiating his company's contract to redevelop Nassau Coliseum and the plaza around it.
Across the table sat two lawyers hired to get the best deal possible for Nassau. They poked and prodded, asking for better terms on everything from who paid for capital improvements to how much the county would get before construction even began.
On Mondays and Wednesdays, the lawyers -- John R. Gowell, known as Jay, and Josh Meyer -- would go through the same process, but with representatives from Madison Square Garden Co., which was competing with Forest City Ratner for the Coliseum job.
"It was a marathon," said Gowell, who, like Meyer, is a partner at Pannone Lopes Devereaux & West, a Providence, R.I.-based firm with offices in Manhattan. "It was very intensive."
The last negotiating stretch lasted about four weeks, ultimately ending with last week's announcement that Forest City Ratner won the bid with a final lease that gives the county 8 percent of all gross revenue. In the end, it was the financial impact on the county that became the deciding factor, officials said.
'They bent over backwards' to winThe final weeks of the process were different from for most requests for proposals because Nassau County Executive Edward Mangano asked both finalists to develop completed, signed leases -- a move that Lester called "surprising," "a little nerve-wracking" and something he had never been asked to do before.
"This was not easy," said developer Bruce Ratner, who heads Forest City Ratner.
MSG spokeswoman Kimberly Kerns declined to comment.
County officials said they tried to focus both finalists in the final weeks on limiting the county's expenses, particularly for utilities and maintenance, taking ownership and control of the arena as early as possible, and giving the county revenue even before a newly renovated arena opened.
They also attempted to suggest to both parties that they rethink decisions that were not as favorable to the county, Gowell said. Gowell, for instance, encouraged both finalists to consider committing to additional revenue payments before and during construction. Ratner agreed, while MSG ultimately did not, Gowell noted.
"Part of that is strategic, since we wanted to have a developer that's willing to put skin in the game on Day 1, even when it's going to cost money," he said. "The Forest City team was much more aggressive."
Lester said many of the county's requests were not unusual for a real estate deal, leading a development company like Forest City Ratner, which opened Brooklyn's Barclays Center last year, to be more willing to consider them.
Businessman Bert Brodsky, who chairs Mangano's business advisory council and was involved in some of the later discussions, said the difference between the two finalists came down to "flexibility."
"Barclays wanted this project, even to the point where as an example, [Barclays Center chief executive] Brett [Yormark] said, 'I'll move to Long Island,' " he recalled. "They bent over backwards to get it."
The tipping point: financialsUniondale developer Scott Rechler, who partnered with MSG in its bid, said MSG's involvement in the process ultimately got the county a better deal.
"Part of my rationale in getting involved initially and engaging MSG to be active bidders was to ensure that there was a competitive process," said Rechler, who heads RXR Realty. "My primary goal was accomplished."
Rechler said MSG's experience in renovating arenas led executives to determine what was possible financially.
"MSG is in the business. Sometimes, when you're in the business, you know what you know; you know the facts for what they get for other venues," Rechler said. "The economics don't lie."
MSG chief executive Hank Ratner "felt firmly that the economic package he was putting forth was already aggressive relative to what you could do and be successful," Rechler added.
But Bruce Ratner said Friday that he expected the deal would be a win for the county -- and would make Forest City Ratner money as well.
"I don't have any qualms at all," he said.
The final month of negotiations capped a process that began with four bidders -- Forest City Ratner, MSG, Syosset developer Ed Blumenfeld and Bayville's Bernard Shereck. At the start of the process, some community representatives believed MSG's presence, local ownership and experience might lead it to win the bid.
Hofstra University president Stuart Rabinowitz noted that he and other school officials spoke with MSG representatives throughout the process and held multiple brainstorming sessions with Rechler and other key players in the MSG project in the early stages, while he hadn't met with or spoken to Ratner since last fall.
"We knew the MSG/Rechler proposal intimately," Rabinowitz said. "They involved us in the planning process."
But by the end, it became clear to those inside the negotiating room earlier this month that the differences between the proposals -- particularly in terms of economics -- would be the ultimate decider.
By Aug. 9, when the final contracts were delivered, "the numbers spoke for themselves," Gowell said.
"Towards the end, we were pushed as far as we could on everything," Lester said.
Even Rechler said that when he saw both packages, he thought "the scale of the difference was eye-opening."
Mangano, for one, said the significant differences between the two finalists' financial offerings made the decision an easier one. "I was relieved," he said.
So, last Tuesday, the county's internal selection committee unanimously chose Forest City Ratner. On Thursday at 11:22 a.m., Mangano called Ratner to tell him the good news.
"He said he could cry," Mangano recalled.
Ratner, meanwhile, had been waiting anxiously for the call. He knew Mangano would call before a scheduled 11:30 a.m. news conference, and believed the county executive would call the winner second. As the minutes ticked by, Ratner thought his chances improved.
As it turned out, Mangano called the winning group first.
Said Ratner to Mangano during the conference Friday: "You did the right thing. You made the right choice."
With Laura Figueroa
and Robert Brodsky
The Dolan family owns a controlling interest in MSG and Cablevision, which owns Newsday.
RATNER'S COLISEUM DEAL
$229 million, financed by Forest City Ratner's Nassau Events Center
13,000 seats, with the ability to go down to 4,000 as needed
Six New York Islanders regular or preseason games; Brooklyn Nets preseason game; a minor league American Hockey League team; lacrosse; arena football; college basketball; and professional boxing
2,000-seat theater; 2,500-seat amphitheater that can be converted to an ice-skating rink in winter; up to six restaurants, a bowling alley or movie theater; and about 50,000 square feet of retail space. Jay Z's Roc Nation entertainment company will help bring in acts.
About 5,000 spaces
Estimated to generate $10.9 billion in economic activity over 30 years, including 1,331 construction jobs and 2,500 full-time, part-time and seasonal positions
Source: Forest City Ratner Companies