Summary:

Queens Ballpark Co. LLC

Primary Credit Analyst:
Ben L Macdonald, CFA, Centennial (1) 303-721-4723; ben.macdonald@spglobal.com

Secondary Contact:
David L Lum, San Francisco + (415) 371-5013; david.lum@spglobal.com

Table Of Contents

Project Description

Rationale

Outlook

Liquidity

S&P Global Ratings' Operations-Phase Base Case And Downside Case

Assumptions

Ratings Score Snapshot

Related Criteria

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Summary:
Queens Ballpark Co. LLC
Project Description
S&P Global Ratings' rating on the New York City Industrial Development Agency's (NYCIDA) series 2006 $547.4
million payment-in-lieu-of-taxes (PILOT) bonds, $58.4 million installment purchase bonds, $7.1 million lease revenue
bonds, and series 2009 $82.28 million PILOT bonds--issued for Queens Ballpark Co. LLC--is 'BBB'. The outlook is
stable.

Queens Ballpark is a 42,000-seat, open-air baseball stadium called Citi Field. It is home to Major League Baseball's
(MLB) New York Mets. The project used the bond proceeds to fund construction of the new ballpark in Queens, N.Y.
The NYCIDA owns the ballpark and leases it under a long-term lease (the stadium lease agreement) to Queens
Ballpark Co. LLC (QBC). The initial lease term is equal to the debt maturity. QBC is a wholly owned subsidiary of
Sterling Mets L.P., which owns the Mets. QBC has a stadium use agreement and sub-lease with the Mets that requires
the Mets to play substantially all home games in the stadium.

Ballpark operating rights are conveyed to QBC under the lease. QBC keeps retained rights revenues and passes all
other stadium revenues to Sterling Mets L.P. under the stadium use agreement. Retained rights revenues include
luxury suite premiums, specific seats, concessions, merchandise, signage, advertising, naming rights, and specific
parking revenue.

The NYCIDA is servicing the PILOT bonds, installment purchase bonds, and lease revenue bonds with payments
received from QBC. QBC uses retained rights revenues to fund the PILOT, installment purchase, and rent payments.

QBC and Sterling Mets L.P. covenant not to materially affect the retained rights, and amendments to the lease
agreement and use agreement require independent approval from the bond insurer and NYCIDA, respectively.

Rationale
The following strengths support the rating:

• The Mets are an established baseball franchise with a solid fan base in the New York metropolitan area. Team
ownership is strongly committed to the market. The current owners, the Wilpon family and others, have been
involved with the club since 1980 and took majority control of the team in 2002.

• The New York City metropolitan area is the largest media market in the U.S. and has sound demographics. The
team draws from a local population of more than 20 million, and it has above-average demographics and a strong
corporate base.

• Sound security for bondholders, including Queens Ballpark's obligation to make annual PILOTs secured by a series
of leasehold PILOT mortgages, similar to a real estate tax lien. Bondholders also benefit from the terms of a
nonrelocation agreement, in which the Mets agree to play substantially all home games at the ballpark.

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 Summary: Queens Ballpark Co. LLC

The ratings reflect the following risks:

• Historically, attendance has directionally moved in line with team performance. We expected attendance to drop
after the opening year in 2009 to a stabilized and sustainable level. However, attendance has subsequently been
volatile, ranging from 2.15 million in 2014 to 2.78 million in 2016. The average attendance since 2010 has been 2.4
million, and while attendance dropped from 2016 to 2017, the stadium still maintained attendance of 2.46 million in
2017.

• The project's ability to generate cash flow is sensitive to economic cycles. A smaller percentage of total revenue
compared with other stadium projects (about 35%) is under short- to medium-term contracts, so the project
depends more on ticket sales and concession revenue.

• Competition from other new stadiums in the New York region for luxury amenities, which has affected pricing and
occupancy rates of the contractually obligated income during the debt's term.

• Limitation of the annual PILOT, which--under specific circumstances--may drop below annual PILOT bond debt
service payments, causing a shortfall. The PILOT cannot exceed the value of the equivalent real estate taxes of the
site and stadium if it were subject to property taxes, and it could decline if the stadium's value declines, tax rates go
down, or the method to assess the market value is reclassified. The original debt tenor is long at 40 years, longer
than that of most comparably rated projects.

The 2017 season was somewhat disappointing for the Mets, who finished fourth in their division with 70 wins and 92
losses (a 43.2% win/loss percentage). This follows two seasons in 2015 and 2016 in which they made it to the
postseason and achieved 55.6% and 53.7% win-loss ratios. The team started the 2017 season with a full roster of top
rated pitchers, but lost four of five to injury early in the season and subsequently performed more poorly than initial
expectations. The early part of the season was also relatively cold, and attendance for the season fell about 12% to
2.46 million from 2.78 million in 2016 (2016 had the highest attendance since the team moved to Citi Field in 2009).
The positive momentum in ticket sales, suite sales, concessions, and parking seen over the previous two years slowed
in 2017. The turnstile numbers also fell as a percentage of ticket sales compared to the previous year. However,
revenues from advertising were up, and we expect stable to increased revenues in 2018 over 2017.

The project's debt service coverage ratio (DSCR) for 2017 was 2.78x, down slightly from the 2.94x in 2016 and also a
little below our expectation of 2.9x for 2017. This was entirely driven by attendance being lower than we expected.
Looking forward, we expect the DSCR to follow our forecast, with a minimum of 2.15x and average of 2.35x going
forward. We expect attendance will remain within the range of about 2.1 million to 2.8 million, with the volatility
driven by a combination of on-field performance and general economic conditions.

In our base case, we assume attendance stabilizes in 2019 at about 2.3 million. Over the long term, we assume
revenues will grow by less than 1% annually and that expenses will grow by 2%. Over the forecast period, coverage of
all obligations averages 2.35x with a minimum of 2.15x.

Construction phase SACP: N/A

Not applicable because the stadium has been operational since 2009.

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 Summary: Queens Ballpark Co. LLC

Operations phase SACP: bbb

• As per our criteria "Project Finance Operations Methodology" and "Key Credit Factors For Social Infrastructure,
Accommodation, And Entertainment Project Financings" (both published Sept. 16, 2014), the project has a market
exposure assessment of low, with a competitive position of fair. With no country risk, this results in a preliminary
operating phase business assessment (OPBA) of '7'.

• The OPBA of '7' and the given minimum DSCR of 2.15x map to our 'BBB' rating category, resulting in a preliminary
operations phase SACP of 'bbb'.

• We assess the project's liquidity as neutral. There is no refinancing risk and no counterparty dependency in the
project, resulting in an operations phase SACP of 'bbb'. Taking all these factors into account, as well as that there
are no framework and transaction structure adjustments for the project, the senior secured rating is 'BBB'.

Counterparties
The project rating is not tied to any counterparty. The stadium is owned by NYCIDA on a long-term lease and
operated by sponsors. The project has the necessary cash flow to absorb an increase in operating expenses if a
replacement operator charged a premium over the current operations.

Modifiers
The modifiers have no impact on the project rating.

Outlook

The stable outlook reflects our expectation for strong and predictable financial performance, with a DSCR above
2.15x. This is mainly due to a stable operating expense profile and adequate revenue from contracted sources.
While 2017 saw weaker team results and a 12% fall in attendance from 2016, we expect 2018 total attendance and
revenue to be up from 2017. While attendance is volatile and does fluctuate year by year, we expect attendance to
average closer to 2.3 million over the long term.

Downside scenario

We could raise the rating if stadium performance improved such that the minimum coverage through the debt term
were in the higher end of the 1.75x-2.50x range. This could occur if, for example, attendance stabilized at the upper
bound of historical levels at about 2.5 million-2.8 million. However, given the cyclic nature of attendance and its
correlation with on-field performance, which fluctuates over time, we'd need to see historical attendance at these
levels over several years before adjusting our long-term expectation.

Upside scenario

We could lower the rating if the stadium failed to maintain the current level of revenue, operating expenses far
exceeded expectations, and the project significantly underperformed, resulting in coverage levels in the lower end
of the 1.75x-2.5x range on a sustained basis.

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 Summary: Queens Ballpark Co. LLC

Liquidity
We assess the project's liquidity as neutral. Each bond series has a debt service reserve fund that's required to be
funded at 150% of maximum annual debt service. These reserves are available to fund any shortfall in debt service
payments, but they may also be used during a work stoppage or economic downturn. The reserve funds are
adequately funded with surety policies provided by Assured Guaranty (AA/Stable/--), providing total liquidity of about
$60 million.

S&P Global Ratings' Operations-Phase Base Case And Downside Case

Assumptions
Base-case assumptions
• We have used management budget assumptions in 2018. Our projection begins with 2019 figures for attendance
that have stabilized at 2.3 million. We use six-year averages for revenue and a three-year average for operations and
maintenance costs as we've seen them at a higher stable level over the past three years.

• Luxury suite premium: 2% until 2035 and 1.5% during the last 10 years of the debt term.

• Contractually obligated income (COI) price decrease: 3% in 2024 and every 15 years thereafter.

• Retained seats revenue: 0.75% until 2035 and 0.5% during the last 10 years.

• Food and beverage concessions: 0.75% until 2035 and 0.5% during the last 10 years.

• Merchandise concessions: 0.75% until 2035 and 0.5% during the last 10 years.

• Parking: 0.75% until 2035 and 0.5% during the last 10 years.

• Signage/advertising/naming rights: 1% until 2035 and 0.5% during the last 10 years.

• Other income: 0.75% until 2035 and 0.5% during the last 10 years.

• Stadium operations/capital spending: 2% until 2035 and 2.5% during the last 10 years.

Base-case key metrics

• Minimum DSCR; 2.15x

• Average DSCR: 2.35x

Downside Case Assumptions

• 12% decline in attendance and game-day revenue in 2018, with revenue growing at base case assumptions
thereafter.

• COI price decrease: 5% in 2024 and every 15 years thereafter.

• Work stoppage: A one-year work stoppage in 2022. There are no ticket, concession, or parking revenue collected
during that year. Attendance takes three years to return to a downside stabilized level (80% in year 1 and 90% in
year 2).

• Stadium operations/capital spending stress: 5% over base case.

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 Summary: Queens Ballpark Co. LLC

• Inflation stress: 1% over base case for the first five years.

Downside Case Key Metrics

• The project meets our 'bbb' category performance expectations on the downside case, surviving the market and
operational stresses for at least five years without depleting liquidity sources.

Ratings Score Snapshot

• Operations phase business assessment: 7 (1=best to 12=worst)

• Preliminary SACP: 'bbb'

• Downside impact on preliminary SACP: None ('bbb' downside)

• Capital structure and average DSCR impact on preliminary SACP: None

• Liquidity: Neutral

• Comparative analysis assessment: None

• Counterparty assessment limitation: None

• Operations phase SACP: 'bbb'

Modifiers (Senior Debt)

• Parent linkage: De-linked

• Structural protection: Neutral

• Extraordinary government support: None

• Sovereign rating limits: 'AA+'

• Full credit guarantees: None

• Senior debt issue rating: 'BBB'

Related Criteria
• General Criteria: Guarantee Criteria, Oct. 21, 2016

• Criteria - Corporates - Project Finance: Project Finance Framework Methodology, Sept. 16, 2014

• Criteria - Corporates - Project Finance: Project Finance Operations Methodology, Sept. 16, 2014

• Criteria - Corporates - Project Finance: Key Credit Factors For Social Infrastructure, Accommodation, And
Entertainment Project Financings, Sept. 16, 2014

• Criteria - Corporates - Project Finance: Project Finance Transaction Structure Methodology, Sept. 16, 2014

• General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013

• Criteria - Structured Finance - General: Counterparty Risk Framework Methodology And Assumptions, June 25,

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 Summary: Queens Ballpark Co. LLC

2013

• Criteria - Corporates - Project Finance: Project Finance Construction And Operations Counterparty Methodology,
Dec. 20, 2011

• General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009

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