Connecticut is tapping new bond programs to set the stage for a large-scale waterfront development in Stamford.
The Harbor Point Infrastructure Improvement District plans to market $145 million of bonds backed by tax increment revenue and special assessments to finance infrastructure where new housing and office towers already are rising.
“Harbor Point is one of the most important transit-oriented development projects in the state, and I am thrilled that it is the first to be taking advantage of this new financing program,” Gov. M. Jodi Rell said in a press release.
“This mixed-use project will bring jobs, housing opportunities and many other benefits to the community and the region, and its proximity to mass transit make it a great example of responsible growth.”
The deal, which is set to price on Jan. 21 to institutional investors, uses a mix of taxable recovery zone economic development bonds, taxable Build America Bonds and tax-exempt bonds.
The federal government provides a 35% interest subsidy to BAB issuers and 45% subsidy to RZEDB issuers under the programs that were created by the American Recovery and Reinvestment Act of 2009.
The final structure of the deal could change, namely the exact mix of tax-exempt and BABs, but the RZEDB allocation is set at $16 million.
According to a preliminary limited offering memorandum, the mix of tax-exempt bonds and BABs is even at $64.5 million each.
The project is the first approved by Connecticut’s to use the recovery zone bonds.
Stone & Youngberg LLC is underwriter and Pullman & Comley LLP is bond counsel.
The master developer, Harbor Point Holding Co. — whose capital members include the real estate equity firms Lubert-Adler and Building and Land Technology — has already begun building a mixed-use project that will include office and retail space, residential property and public parks.
The district is made up of 80 acres of former industrial sites on a 323-acre peninsula adjacent to an MTA Metro North and Amtrak train station.
The bond proceeds will be used for infrastructure costs, including the reimbursement to the developer of $40 million already spent. The current market value of the property has been appraised at $277 million, according to the offering document.
The estimated value of the property after an 11-year build-out of five million square feet of residential space, 400,000 square feet of retail space, 300,000 square feet of office space, and 200,000 square feet of hotel space will be $1.77 billion, according to the offering document.
Bonds are backed primarily by the tax increment on the increased property values, but as a backstop, the debt is are also backed by a special assessment that can be levied on properties in the district if the tax increment alone is insufficient. The bonds will be fixed rate and carry maturities of up to 30 years.
The bonds are being offered to institutional investors with a minimal principal investment of $100,000. They will not be rated but if they achieve an investment-grade rating in the future they can be resold on the secondary market in denominations of $5,000, according to the offering document.
“The expectation is [that] as tax increment revenues start get to higher and higher amounts, this would then meet investment-grade criteria at the rating agencies,” said Stone & Youngberg managing director Ramiro Albarran. “We can’t tell investors when that will be but there’s a reasonable expectation from an investor’s standpoint that these one day will be” investment grade.
Mike Freimuth, director of Stamford’s office of economic development, said the project offered the area one its few opportunities for growth in its “grand list” of taxable properties because most other nearby communities don’t want more growth.
“For the city’s long-term grand list growth, this is where it more or less has to happen,” Freimuth said.