Developers of a planned $220 million sports arena in Philadelphia are trying to find a final $10 million financial component by the end of the month, but attempts to borrow the money from the city's pension fund are probably futile, an official involved in the negotiations said yesterday.
"When we get it all resolved I think we will end up not using the pension fund," said Samuel Katz, financial adviser to Spectacor, which plans to build the Spectrum 2 arena. Katz said the problem involves differences in the parties' views about how the loan should be priced.
Ben Hayllar, Philadelphia's finance director and one of the pension board members, said yesterday the loan would be an attractive investment for the fund, but restrictions on how pension moneys can be invested may ultimately force the arena's owners to find the financing elsewhere.
"We would like very much to do this deal," Hayllar said. "The problem is that the requirements of the pension board and financial requirements of the borrowers may not get together."
Hayllar declined to be specific about what might block the deal, but noted that the pension fund's investing restrictions might not be palatable to developers of the arena.
The bulk of the financing is coming from private sources, with about $9 million in state aid and a $6.5 million loan from Philadelphia topping the pot. The missing $10 million could be secured from a variety of other sources, Katz said, including equity investors or additional subordinate bank loans. Reports that the developers are pursuing negotiations with private union pension funds are untrue, Katz said.
Although Katz called the final portion "not a superbly huge issue," developers are somewhat pressed for time to find the money. The city council plans to break for the summer at the end of this month, and must approve a complete package by then in order to avoid a delay that could raise overall financing costs.
