NEW YORK CITY-A bond sale has raised more than $500 million toward the construction of the Barclays Center, the basketball arena that will serve as a centerpiece of the $4.9-billion Atlantic Yards project, Forest City Ratner Cos. said Tuesday. The sale had to be completed, and groundbreaking undertaken on the arena, by year’s end in order for the bonds to qualify for tax-exempt status.

“The interest in the arena bond offering was beyond our expectations,” says Bruce Ratner, CEO of FCRC, in a statement issued after the bond sale closed Tuesday afternoon. He notes that orders from institutional investors across the board were almost four times the supply of bonds, which generated $511 million at a 6.48% interest rate. “Even more importantly, the overwhelming support from investors is a good sign of confidence in this project and in the city.” Co-lead underwriters for the deal were Goldman Sachs and Barclays Capital.

Earlier this month, the bond offering, issued through the Brooklyn Arena Local Development Corp., received investment-grade ratings of BBB- and Baa3 from Standard & Poor’s and Moody’s Investor Service, respectively. The agencies cited the poor performance this season of the Nets, which will be housed at the 18,000-seat arena, as one of several factors in their relatively low ratings. On the positive side, New York City’s status as a media market was expected to provide a favorable climate for sponsorship sales for the NBA franchise, according to Moody’s.

For much of the fall, it was an open question as to whether the bond sale could proceed in time to make the year-end deadline for tax-exempt status. At issue was the timing of the New York State Court of Appeals’ decision on whether or not to uphold a lower court ruling that okay’d the Empire State Development Corp.’s use of eminent domain for Atlantic Yards. Oral arguments were not presented before the state’s highest court until mid-October.

The high court issued its ruling just before Thanksgiving, giving its stamp of approval to the ESDC’s use of eminent domain to seize property not already controlled by FCRC. Following the Nov. 24 ruling in favor of the project, FCRC said work would proceed on the Barclays Center, with the goal of completing the arena in time for the 2011-2012 basketball season. In September, FCRC and Russian billionaire Mikhail Prokhorov announced an agreement whereby Prokhorov would acquire an 80% stake in the Nets and a 45% stake in the arena for $200 million.

However, the legal challenges to Atlantic Yards are far from over. Following an appellate court’s ruling earlier this month against the state’s use of eminent domain in the planned Columbia University expansion in Harlem, plaintiffs in the Atlantic Yards case asked the Court of Appeals to reconsider its Nov. 24 decision. Specifically, they requested that the court hold off making any final decision on their motion and appeal until the court rules on the Columbia eminent domain case, which it will hear in early 2010.

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