|Shares Out. (in M):||206||P/E||0.0x||0.0x|
|Market Cap (in $M):||206||P/FCF||0.0x||0.0x|
|Net Debt (in $M):||0||EBIT||0||0|
New York Liberty Development Corporation Second Priority Liberty Revenue Refunding Bonds, Series 2010 (Bank of America Tower at One Bryant Park Project)
$206,200,000 5.125% Series 2010, Class 1, due January 15, 2044 Price 98.036% CUSIP 649519AD7
$145,400,000 5.625% Series 2010, Class 1, due January 15, 2046 Price 102.780% CUSIP 649519AC9
$ 87,100,000 5.625% Series 2010, Class 2, due July 15, 2047 Price 100% CUSIP 649519AE5
$211,300,000 6.375% Series 2010, Class 3, due July 15, 2049 Price 100% CUSIP 649519AF
Property: Bank of America Tower at One Bryant Park
Balance of CMBS Loan: $650,000,000
Balance of Liberty Bonds Loan: $650,000,000
Aggregate Balance of Loans: $1,300,000,000
Location: New York, New York
Property Type: Office
Net Rentable Square Feet: 2,354,345
Appraised Value: $2,200,000,000
Appraised Value PSF: $934
Aggregate Loan PSF: $552
Loan to Value Ratio: 59.1%
Underwritten Net Cash Flow: $131,252,784
Underwritten Aggregate Debt Yield: 10.1%
Underwritten Aggregate DSCR: 1.95x
The Borrower is a limited liability company organized and existing under the laws of the State of Delaware and has two members - One Bryant Park Development Partners LLC, a limited liability company organized and existing under the laws of the State of New York (the "Durst Member"), and B of A. The Durst Member has a 50.01% interest in the Borrower and is affiliated with the Durst Organization, and B of A has a 49.99% interest in the Borrower. The Borrower is a single purpose entity, all of the assets of which are pledged or mortgaged to the Collateral Agent as referred to below.
Concurrently with the issuance by the Issuer of the Series 2010 Liberty Bonds pursuant to the Indenture, the Issuer made a loan of the proceeds of the Series 2010 Liberty Bonds in the principal amount of $650,000,000 to the Borrower pursuant to the Liberty Bonds Loan Agreement. Recourse against the Borrower under the Liberty Bonds Loan Agreement and under the Liberty Bonds Note is limited to the Mortgaged Property and the related collateral held under the Collateral Agreements.
The Liberty Bonds Loan and the CMBS Loan will be secured by a Consolidated, Amended and Restated Leasehold Mortgage, Assignment of Leases and Rents, Fixture Filing and Security Agreementfrom the Borrower as mortgagor, to the Collateral Agent as mortgagee, pursuant to which the Borrower will grant to the Collateral Agent as security for the Obligations, the CMBS Note, the CMBS Loan Agreement, the Series 2010 Liberty Bonds, the Liberty Bonds Note, the Liberty Bonds Loan Agreement, the Collateral Agency Agreement and any and all other Loan Documents, to secure a principal indebtedness of $1,300,000,000, among other collateral, (i) a mortgage Lien on, and a security interest in, all of the Borrower's right, title and interest in and to the ESDC Ground Lease and the Facility, the Brandt New Net Lease, the Improvements, all Personal Property, all Accounts, Insurance Proceeds and Condemnation Proceeds, and (ii) a pledge and assignment of all Leases and Mortgaged Rents from the Facility.
Here is a link the Official Statement ("OS") for more information: http://emma.msrb.org/SecurityView/SecurityDetails.aspx?cusip=649519AD7
|Subject||RE: some initial questions|
|Entry||05/21/2011 08:58 PM|
1. The debt yield is defined as net cash flow/aggregate balance of loans. Underwritten cash flow is defined as NOI less capex less TI less leasing commissions. Through Classes 1 - 3 the debt yield is $131.2 mm/$1,300 mm or 10.1%. Through the Class 1 bonds the debt yield is $131.2/$1,002 or 13.1%. The cap rate based on the appraised value is 6% ($131.2/$2,200). This seems conservative as Class A midtown NYC office buildings have recently changed hands at cap rates as low as 4%. 4-5% seems like the right range for current cap rates. Effectively if you think 5% is the right cap rate the value of the building would be 20x (the reciprocal of 5%) underwritten cash flow of $131.2 or $2,624 mm and you'd be in the property at a LTV of 38% ($1,001 mm/$2,624 mm).
2. In terms of getting "taken advantage of" in terms of the structure I'm can't answer your question definitively. I don't have any experience in investing in any muni securities that defaulted. Your ability to "control the process" as you could in a corporate bankruptcy is limited and similar to the rights and remedies that CMBS holders have.
The Servicing Agreement establishes that the CMBS Loan will have a priority in payment over the Liberty Bonds Loan. The Servicing Agreement also establishes the relative voting rights of the Holders of the CMBS Loan and of the Liberty Bonds Loan, and provides for the assignment by the Indenture Trustee and the CMBS Trustee to the Master Servicer and the Special Servicer of the sole and exclusive right to take enforcement actions (except with respect to the Issuer and the Issuer's Reserved Rights), to grant or withhold any approvals and to exercise rights and remedies under the Liberty Bonds Loan and Collateral Documents and the Liberty Bonds Financing Documents (with respect to the Liberty Bonds Loan), and under the CMBS Loan Documents (with respect to the CMBS Loan).
3. I believe the answer to your question is "Yes." Here is the security clause from the OS.
The Liberty Bonds Loan (together with the CMBS Loan) will be secured by (i) the mortgage lien granted by the Borrower to the Collateral Agent on the Borrower's leasehold interest under the ESDC Ground Lease in the Facility, including the purchase option, (ii) the pledge and assignment by the Borrower to the Collateral Agent of all tenant leases and rents from the Facility including the tenant lease with B of A, (iii) a lien and security interest in favor of the Collateral Agent in all Personal Property of the Borrower, (iv) a pledge and assignment of contracts relating to the Facility including the property management agreement with Royal Realty Corp., a New York corporation affiliated with the Borrower and the PropertyManager for the Facility, and a contract for the operation of the cogeneration plant located within the Facility, and (v) funds or assets from time to time on deposit in the Collection Account established under the Collateral Agency Agreement and reserve accounts held pursuant to the Loans. Neither the Liberty Bonds Loan nor the Series 2010 Liberty Bonds are secured by any debt service reserve fund or other liquidity facility. However, the Master Servicer (or the Collateral Agent, upon the failure of the Master Servicer as set forth in the Servicing Agreement) will be obligated to make P&I Advances (as referred to below) with respect to the Liberty Bonds Loan (and the CMBS Loan) upon the circumstances described in this Official Statement.
I hope this is helpful and answers your questions. I welcome additional feedback from you and other VIC members.
|Subject||RE: some initial questions|
|Entry||05/21/2011 09:19 PM|
4. As to question 4 that's hard to answer.
The average AAA-rated 10-year municipal bond now yields 94% of the comparable 10-year Treasury yield. The higher the ratio, the more attractive municipal bonds are relative to Treasuries and vice versa.
On a longer-term basis, municipal bonds remain attractive as the 10-year Municipal-Treasury ratio has averaged 86% over the past 20 years.
If the bonds traded merely at parity with the comparable interpolated treasury -- that is at 4.32% (or ~8.64% on an aftertax basis for NYC residents) the bonds implied price would be 114.
If the bonds traded at 86% of the comparable treasury that would imply a bond price of 126 (vs. ~98 today for the Class 1 bonds due in 2044). The yield would be ~3.74% or about 7.48% on an aftertax basis for NYC residents which would be about 320 bps over the comparable interpolated treasury (4.32%). 300 bps over relative to the credit risk seems fair if not overly generous relative to the risk you're taking (in other words I think you could make a strong case for a tighter credit spread).
|Subject||RE: some initial questions|
|Entry||05/21/2011 10:24 PM|
Sounds like I should have quoted where on average the average 30 year bond is trading.
(The BofA bonds are actually 33 year bonds but close enough. Also, the BofA Class 1 bonds are actually rated AA -- close to AAA).
A 30-year AAA-rated bond, for instance, currently trades with a yield 100% of an equivalent Treasury, up from a historical average of 97.9%.
The Class 1 2044 bonds at ~98 are yielding 121% of the comparable treasury.
Were the bonds to trade at parity with the equivalent treasury the implied price would be 114 or 4.32% or an a tax adjusted basis for NYC residents ~8.64%.
In short, I believe that the bonds should trade at a substantially higher price than they do today.
|Subject||RE: RE: some initial questions|
|Entry||05/22/2011 11:27 AM|
I agree with your analysis and also like this credit. The JPM muni desk regularly trades this issue.
|Subject||RE: response to nha855|
|Entry||05/22/2011 12:38 PM|
Do you have an opinion on why this is priced (or mispriced) where it is? Do you think it's just the general inefficiency of the muni marketplace? Where do you think this can trade?
If you like my idea I would greatly appreciate it if you would rate this idea so my membership can be reactivated. I have a couple other special situation and/or credit related ideas I will share with you and the larger VIC membership base.
|Subject||RE: response to opco|
|Entry||05/22/2011 12:39 PM|
If you like my idea I would greatly appreciate it if you would rate this idea and vote to reactivate my membership. I have a couple other special situation and/or credit related ideas I will share with you and the larger VIC membership base.
|Subject||RE: RE: RE: response to opco|
|Entry||05/22/2011 02:25 PM|
Thanks for the rating opco. I welcome any further feedback you have on the idea and why you think it trades where it does and if you think there are any catalysts towards a re-rating of the current price. Thanks.
|Subject||RE: RE: response to nha855|
|Entry||05/22/2011 09:53 PM|
I think the muni market is generally mispriced these days. I posted something here a while back on a phoenix hotel. Not as good of a credit as this but much cheaper.
|Subject||RE: RE: RE: response to nha855|
|Entry||05/22/2011 10:33 PM|
You talking about the Denver convention center hotel idea (you said Phoenix in your reply to me)? Where do you think those bonds can trade to in the next 12 months?
|Subject||RE: RE: RE: RE: response to nha855|
|Entry||05/23/2011 09:23 AM|
Right - Denver - I own some Phoenix as well! - I see no reason they can't be par bonds.
|Subject||RE: RE: RE: RE: RE: response to nha855|
|Entry||05/23/2011 09:37 AM|
What is the cusip for the Phoenix hotel bonds? Thanks. I will take a look.
|Subject||RE: RE: RE: RE: RE: RE: response to nha855|
|Entry||05/23/2011 11:44 AM|
|Subject||RE: RE: RE: RE: RE: RE: RE: response to nha855|
|Entry||05/23/2011 12:18 PM|
Where do you think the Sheraton Phoenix bonds should trade on a dollar price and yield basis? How are you looking at loan/value here or how much you're "covered." Thanks.