Hudson Yards is having a banner week.
On Tuesday, S&P Global boosted the bonds used to build Related Companies’ megadevelopment, Crain’s reported. The ratings agency determined the development is generating enough cash to pay debt holders on an ongoing basis.
The Hudson Yards construction bonds jumped from AA- to AA, reaching the same credit rating as that of New York City.
The development is now home to headquarters for tenants Blackrock, KKR and Pfizer, adding to the generally higher success in terms of rent and occupancy at new properties as compared to the rest of the commercial market. The outlet noted Vornado Realty Trust’s properties near Hudson Yards, which boast an occupancy rate 10 percentage points higher than the citywide average.
The development has had its fair share of naysayers. This summer, City Comptroller Brad Lander admitted the Bloomberg administration was right about the public financing scheme, chided by progressives as being a giveaway to real estate and a bad risk for taxpayers.
“Hudson Yards is giving about $200 million more a year than we expected, and that’s going to grow to $300 million,” Lander said on NY1 in June, going on to admit he was wrong about the risk the scheme posed to the city.
The city issued bonds to pay for billions of dollars’ worth of infrastructure to make the development possible, including an extension of the No. 7 line. The resulting increase in property tax revenue was promised to pay back bondholders, but city taxpayers would be on the hook if revenue fell short of expectations.
Evidently, it hasn’t. The Hudson Yards Infrastructure Corporation reported that payments in lieu of taxes revenue grew by $40 million between fiscal 2020 and fiscal 2023, reaching $160 million. PILOT revenues are anticipated to grow another 44 percent by 2027, according to an S&P analyst.
One of the big defeats for the 28-acre, $25 billion development was the departure of anchor mall tenant Neiman Marcus, which left in 2020 after declaring bankruptcy. Wells Fargo this week agreed to buy the three-story space from Related and Oxford Properties Group for $550 million, planning to convert the retail front into an office for itself.
— Holden Walter-Warner
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