The New York Mets will get a huge windfall this year from lower debt payments thanks to owner Steve Cohen’s 2021 refinancing of the bonds used to finance the construction of Citi Field.
The ballpark, which opened in 2009, was financed with 40-year and 37-year PILOT (payment in lieu of taxes) bonds at interest rates between 4.3% and 6.5%. Back then, the Mets were owned by the Wilpon and Katz families, who operated the New York City-owned ballpark (formerly known as Queens Ballpark LLC) through a lease agreement with the New York City Industrial Development Agency (NYCIDA) until 2049.
When the 67-year-old Cohen, who is worth an estimated $19.8 billion, bought the Mets in 2020 for $2.42 billion, he also acquired Queens Ballpark (the Wilpons and Katzes retained 5% each).
In 2021, Cohen refinanced Queens Ballpark’s bonds at lower interest rates and also injected its balance sheet with $50 million. The refinancing is also lowering the PILOT payments. Prior to the refinancing, the stadium was paying $44 million annually. (QBP also pays annual rent of $500,000.) This year, the payment will plummet to less than $5 million. Long term, the refinancing will continue to pay dividends as the PILOT debt service is about $37 million annually (see chart below).
Moody’s Investors Service issued a report last week in which it gave QBC a Baa2 rating (two notches above the minimum to be considered investment grade) and a stable outlook. The report states: “Since the billionaire hedge fund manager Steven A. Cohen acquired the New York Mets and the lease for Queens Ballpark Company LLC in November 2020, he has demonstrated strong ownership support for the ballpark, the on-field team and the Mets organization. Cohen injected substantial equity to support Ballpark's operating costs, including the PILOT payments, during a time of substantial stress owing to a materially shorter season with no fans in attendance at home games in 2020 and reduced attendance in 2021 because of the pandemic. Moreover, new ownership immediately and continually invests in the on-field team product with one of the highest payrolls in MLB. This willingness to support the team, and the ballpark if needed, is expected to continue as Cohen remains the wealthiest owner in the MLB and among the wealthiest owners in all of professional sports globally.”
The ballpark’s debt coverage ratio—net operating income (NOI) of the collateral to the required debt service payments—was 2.86 times in 2022, the highest since 2017.
The bond refinancing was tethered to the ballpark’s lease being amended. Owing to the amended Stadium Use Agreement in 2021, all ticket revenue is now pledged and allocated to QBP. The initial agreement pledged about 60% of ticket revenue while the new agreement adds the remaining 40%. This 40% additional ticket revenue was about $43 million annually pre-pandemic producing cash flow available to pay the PILOT payments that ultimately are used to pay the debt service on the PILOT bonds.
Aysha Seedat, an analyst at Moody’s, tells Forbes, “The refinancing was beneficial because of the interest rate savings over the long-term life of the debt, but more importantly the reduction in near-term debt service to allow for recovery post the pandemic given the debt was issued in a much more uncertain time.”
In 2022, the Mets generated revenue of $244 million at their ballpark and net income of $127 million, both record highs.
MORE FROM FORBES
MORE FROM FORBESBaseball's Most Valuable Teams 2023: Price Tags Are Up 12% Despite Regional TV WoesBy Mike OzanianMORE FROM FORBESCiti Field Scores Record Revenue And Profit For New York Mets In 2022By Mike OzanianMORE FROM FORBESHow Fred Wilpon And Saul Katz Are Still Profiting From The New York MetsBy Mike OzanianMORE FROM FORBESBaseball's Highest-Paid Players 2023: Shohei Ohtani's MLB-Record Total Lands Him At No. 1By Justin Birnbaum
