There’s good news for New York City’s subway system: Two rating agencies have given strong marks to the Metropolitan Transportation Authority’s plan to sell $1 billion in bonds to pay for the transit system’s upkeep and expansion.
Kroll Bond Rating Agency and Moody’s Investors Services gave strong marks for the offering, which will be secured by ground leases at Hudson Yards. Low interest rates and the strong pace of development at the megaproject played a role in the MTA’s decision to offer the bonds come September, according to the Wall Street Journal.
“Given the very positive current conditions [we] thought the best course was to securitize the revenues now with very reasonable risks to investors and low rates to the MTA,” the authority said in a statement. The MTA’s capital program for 2015 to 2019 is about $30 million.
According to the Journal, Kroll Bond Rating Agency gave the proposed offer a long-term rating of A-minus with a stable outlook, while Moody’s Investors Service assigned the offering an A2 rating.
According to Kroll, the development’s high property value supports a low loan-to-value ratio.
“This is land in New York City, very valuable land, and it’s one of the last big tracts of developable land in Midtown Manhattan,” said Kroll senior director Alessandra D’Imperio.
JLL has estimated the land value on the eastern portion of the Hudson Yards site at $2.3 billion, compared to land in the western portion, which is valued at $3.7 billion.
Both Kroll and Moody’s said challenges for the MTA include volatility in the real estate market that could cause construction delays, particularly since development of the western half hasn’t yet begun. [WSJ] — E.B. Solomont