Press Release|Public Finance
KBRA Affirms BBB Rating for the New York State Urban Development Corporation’s Moynihan Train Hall Project TIFIA Loan; Outlook is Stable
27 Sep 2024 | New York
KBRA affirms the long-term rating of BBB for the New York State Urban Development Corporation’s Moynihan Train Hall Project TIFIA Loan. The Outlook is Stable. The rating reflects the adequate security supported by project completion and the 2020 leasing of all office space to Meta Platforms, Inc. (“Meta”, f.k.a. “Facebook”).
A surveillance report will follow.
Key Credit Considerations
The long-term rating was affirmed because of the following key credit considerations:
Credit Positives
- The project is substantially complete, and all office space has been leased to Meta for an initial term of 15 years, subject to extension. The Meta lease should provide support for AV levels in the periods beyond the fixed PILOT period.
- The release of MTA’s obligation to replenish the DSRA cannot legally occur until at least 2033 and release is subject to the satisfaction of performance conditions.
- PILOT payments are fixed at predetermined amounts for the initial thirteen years (through April 2030) of the project insulating PILOT payments from market valuation volatility.
- PILOT obligations have priority relative to other Tenant obligations, and ESD can terminate the underlying Lease in the event of a PILOT default.
Credit Challenges
- When the Fixed PILOT period ends in 2030, subsequent PILOT payments will be determined by a process that is equivalent to market determined taxable valuation of the Project. In the long run, PILOT payments are derived from a project area that is narrow by size and property type.
- The ultimate recovery of commuter and intercity train traffic and the midtown west submarket from the COVID-19 pandemic remains unclear, as in many cases temporary flexible work arrangements have become entrenched.
- In the event ESD must replace the Developer or Tenant, the terms of any subsequent development and lease agreement may differ from current agreements.
Rating Sensitivities
For Upgrade
- Demonstrated history of strong and consistent debt service coverage following stabilization of the project.
For Downgrade
- Deterioration in regional or national property values that impact rent and PILOT assumptions.
- Deterioration of credit quality or financial performance of the MTA.
To access rating and relevant documents, click here.