EXCLUSIVE: Soccer Stadium Financing is Riddled With Questions, Says Former Financial Advisor


Friday, December 29, 2023


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Hilltop Securities letter to Pawtucket Officials

GoLocal has secured a copy of the “confidential” letter sent to City of Pawtucket officials by its then-municipal advisor, which raised concerns about the financing scheme for the new minor league soccer stadium.

The five-page letter written by Hilltop Securities, a national advisory firm, warned city officials about the ever-increasing cost of the proposed stadium, Tidewater Landing, raised issues about the structure of the deal, and flagged there were not enough protections.

GoLocal previously unveiled that Hilltop subsequently resigned over the concerns.


Until now, Pawtucket officials have refused to release the letter and then delayed its release for more than 45 days. Ultimately, GoLocal secured the letter via an Access to Public Records Act (APRA) request. 

Pawtucket is in the process of issuing more than $46 million in bonds to finance the privately owned stadium. The state of Rhode Island has pledged $14 million in Rebuild monies, and the City of Pawtucket has pledged $10 million in ARPA monies. The total in public money is now $70 million.

The Hilltop letter raises numerous questions:


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Stadium construction was stopped during the summer and then restarted PHOTO: GoLocal

Bank Financing Fails

“The City and working group were initially informed that a bank, or consortium of banks, would provide conventional construction financing of the Project. As you are aware, the proposed bank financing has been replaced by C-PACE funding (originally to be provided by Twain, which we were informed withdrew from the Project, and is now reportedly to be provided by Stonehill), as well as EB5 funding (to be provided by a Special Purpose Entity created by KT Capital),” wrote Hilltop in the June 22, 2023 letter to Pawtucket officials.

C-PACE is Commercial Property Assessed Clean Energy financing is a tool that provides long-term, fixed-rated financing for commercial and industrial properties.

“We have not investigated or discussed with these firms any aspect of their funding of the Project, but as issuer of tax increment bonds, you should be aware that the aforementioned changes have created both credit and inter-creditor issues. Further, the financial close by the Developer on the private financing should, with adequate assurance of Project delivery, occur before or simultaneously with the issuance of tax increment financing,” wrote Hilltop.


Questions About Financing Structure and Use of EB5

“We discussed our concerns regarding the funding sources, specifically EB5 funding, with you and the other members of the working group the week of May 22. On the May 24th working group call, Stifel, the City’s lead underwriter, (along with Citigroup, the “Underwriters”), on the Proposed Bonds, informed the working group that EB5 funding (i) would not be suitable for the Project in their view, and (ii) would prevent them from underwriting the proposed bond issue. It is also important to note that in the case of C-PACE financing, funds are limited to eligible projects typically related to energy efficiency, renewable energy, or other green projects,” wrote Hilltop.

What is EB5 financing? Brookings defines the EB5 program development and structure as “difficulties in accessing traditional domestic financing brought on by the Great Recession, along with a rise in the number of wealthy investors in developing countries, have led to a recent spike in interest in the EB-5 Immigrant Investor visa program. Through this federal visa program administered by U.S. Citizenship and Immigration Services (USCIS), immigrant investors may eventually secure permanent residency for themselves and their immediate family by investing at least $500,000 in a U.S. business.”

Hilltop wrote that “Counsel to the Developer indicated that they would reach out to KT Capital to explore alternative sources of funding. On the May 31st working group call, it appeared that the Developer had not pursued any alternatives to EB5 funding during the prior week. During the working group call, several members of the working group requested that the Developer work to identify an alternative. We understand that the underwriters and other participants have met or intend to meet with KT Capital and other lenders, but we have no knowledge of any resolution of the above issues.”


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Hilltop Securities raised concerns about the core structure of the financing of the stadium.


“Not a Typical Source of Funds to Finance Construction of a Stadium”

Further, Hilltop raised more questions about the very structure of the financing, “As we have discussed, it has been our experience that EB5 funding is not a typical source of  funds to finance construction of a stadium and recommend that closing with respect to the  Bonds not occur until monies sufficient to fund construction of the Project, net of Bond  proceeds, are on hand.”

“The Developer is requesting the City make a long-term commitment on funding its portion of the debt associated with the Project, the repayment of which is subject to completion of the Project, with our understanding that funding of the Project in full is not yet secured. This risk is mitigated by requiring funding, in full, be on-hand for the Project prior to or simultaneously with the issuance of the Bonds. In addition to such risk, the City is assuming the risk of the economic viability of the team, the league and the other components of the Project, and should only proceed with the issuance of the Bonds once it has ascertained the risks related to the initial development of the Project and its on-going operation and related mitigants, as well as the risks and mitigants associated with the funding of the Project and its ability to generate the increment to repay the Bonds,” Hilltop wrote.

“In addition to the funding concerns, other concerns have arisen and are:


• The City’s legal team has expressed concern about the Project completion guarantee and the Underwriters have been told that the guarantor cannot be publicly identified.  We believe investors would desire the name of the provider of the completion guarantee be included in offering documents as well as a vetting of the guarantor and conditions precedent to their funding;


• the College of the Holy Cross recently published a study on stadium financing which reports that the Worcester Red Sox stadium and other recent projects are performing below projections;


• both the Johnson Market Study and MuniCap’s (the City’s TIF and Revenue Consultant), revenue projections need to be updated due to the passage of time since they were completed in March 2023;


• The Developer needs to demonstrate that they have firm costs for the Project by entities that have the ability to post construction surety policies sufficient for the completion of the Project, as evaluated by the City’s engineer or construction management team or firm;


• The Developer needs to demonstrate to the City, and the Underwriters, a bankable plan of finance with definitive terms, names of counterparties and conditions to their funding. At a minimum, this plan of finance should include cost escalators and sufficient time for construction to account for construction inflation and supply chain issues as well as a sensitivity analysis for a range of interest rates demonstrating that the financing still is viable;  


• The Developer should also list their involvement in and performance of recent stadium projects, demonstrating their ability and financial wherewithal to deliver the Project and have a tenant/team to make the Project viable on a long-term basis.”


In an August 16, 2023 letter to Pawtucket Mayor Donald Grebien and Bianca Policastro, the executive director of the Pawtucket Redevelopment Agency, top Hilltop Securities executives notified the city of the firm’s resignation.


That letter was first disclosed by GoLocal, and it referenced Hilltop’s letter of concerns — now unveiled.


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Developer Brett Johnson PHOTO: LinkedIn

Stadium Cost Explodes

In November, GoLocal unveiled a key consulting document for the proposed City of Pawtucket’s bond issuance to finance the proposed minor league soccer stadium, which unveils that the cost of the minor league soccer stadium has jumped up yet again — by an additional $13.7 million — now, to $137.7 million.

In 2022, the developer of the stadium, Brett Johnson, projected the cost of the stadium to be $81 million.

Now, the price of the stadium has increased by 70% in less than two years.



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