Citizens Capital Corp. has entered the arena-finance fold, planning to use securitization to pay for the construction of a multiple-use, hotel/golf resort and convention complex in downtown San Antonio. The company will also launch a securitization proposal to help finance a sports facility that will house the National Basketball Association's Houston Rockets.
In a deal it has underway, Dallas-based Citizens is seeking land to build a $400 million complex containing hotels, a golf course and fitness spa, an arena and convention center, restaurants, a retail power center, a cinema and entertainment plex, multi-family and single family residential components, and commercial and industrial warehouse and professional office sites.
In addition to income generated from the mortgages of each building, revenue from lease rental income streams from tenants occupying the industrial warehouse, office, retail, commercial, restaurant, apartment, cinema and entertainment facilities will be pooled by Citizens and sold to investors in an asset-backed bond, said Billy Hawkins, president of the company.
Moreover, Hawkins added, revenue from signage opportunities, "both internal and external to the facility," would add to the income stream generation.
The transaction is similar to the spate of casino securitizations that have surfaced lately, in which a casino real estate developer floats a bond based in part on future lease payments from retail tenants in order to help finance the construction of a facility.
As most states become gaming friendly, this sort of build-it-and-they-will-come mantra has ushered in the masses to pay and play at establishments in locales as diverse as the Ojibwa Indian Reservation and Ledyard, Conn.
Of his company's project, Hawkins says, "it's really just using the best of corporate and real estate finance to get a transaction done that's typically done from a municipal financing standpoint.
"What this type of transaction does is it eliminates the necessity of having to be dependant on a vote from the residents who reside in that taxing jurisdiction, or for the approval of some type of council or governmental body," Hawkins said. A higher coupon rate offsets the fact the bonds are not tax exempt like their municipal brethren, he added.
After a referendum was shot down last week in Houston that called for a $255 million mostly municipal financing of a new arena for the Houston Rockets, Hawkins made a proposal to city officials (he did not name them) connected to the project.
The arena is expected to house the Houston Rockets, the WNBA's Houston Comets, professional hockey, concerts, family shows, college events, civic events and conventions. This multi-use facility is exactly the type of project Hawkins says his company targets.
A vote to increase the rental car and hotel taxes to finance the construction of a new, basketball-friendly arena for the San Antonio Spurs was passed last week, making securitization plans virtually obsolete. But Hawkins said he was disinterested before the measure was passed, because the $175 million deal is a standalone project that lacks multiple revenue streams.
"We don't necessarily want to have someone such as the Spurs for a tenant," Hawkins said. "Our concentration would be more in the private sector in terms of trade shows, conventions, exhibits, special entertainment events, as well as scheduled entertainment events. We just believe that gives you more dates throughout the year than you could get from a typical NBA team."