The Real Deal New York

MTA to sell $1B in Hudson Yards bonds

Issuance is a first for the agency
September 14, 2016 02:30PM

A rendering of Hudson Yards

A rendering of Hudson Yards (credit: Related Companies)

The Metropolitan Transportation Authority is set to issue bonds backed by real estate for the first time in its history.

The state agency, which runs New York City’s subway system, plans to sell $1.06 billion worth of bonds Wednesday and use the revenue it gets from leasing the land beneath Hudson Yards to developers Related Companies and Oxford Properties Group to pay them off, according to Bloomberg.

Goldman Sachs is underwriting the bonds and proposed interest rates of 2.63 to 2.75 percent on bonds maturing in 2056, sources told the business publication. Monthly rent payments will cover the bonds.

According to Scott Richman of Whitehaven Asset Management, the bonds may simply draw interest because the MTA is a new player on the bond market and investors are keen to diversify.

“For the mutual funds, this entity will count as a different name and for better or worse a different name is actually worth a lot in the municipal market,” he said. “So even though it might have a similar credit backing to a much larger issuer, that will create demand within the space.”

A recent report found that Hudson Yards will contribute $1.78 billion to the MTA’s coffers during construction through ground lease payments and air rights purchases, and another $89 million annually after completion.

Last month, The Real Deal went behind the scenes to break down how Related and Oxford are financing the megaproject, which includes $14 billion in debt and equity to date.

Scheduled for completion in 2029, Hudson Yards will include nine apartment buildings, three office buildings and a million square feet of retail space. 15 Hudson Yards, the first residential building in the complex, launches sales this week.[Bloomberg]Konrad Putzier