The Rio Nuevo Multipurpose Facilities District will sell $11.8 million of certificates of participation in a negotiated sale this week to finance site work and design and development efforts for a downtown hotel as part of the Tucson Convention Center expansion project.
The COPs are rated A-plus by Fitch Ratings and Standard & Poor’s, and A1 by Moody’s Investors Service. Piper Jaffray & Co. will be the lead underwriter on the deal, with RBC Capital Markets serving as financial adviser to the facilities district.
Rio Nuevo was formed as a tax-levying public improvement district by the cities of Tucson and South Tucson in 1999 in order to redevelop some 660 acres in downtown Tucson where two large shopping malls are located.
The district’s master plan includes cultural, residential, commercial, office, and mixed-use developments.
The debt is supported by annual lease payments by the city to the district, and also by a pledge of Tucson’s general revenues.
The 700-room hotel is expected to cost about $130 million, and will be financed with revenue bonds. It will be owned by the city but operated by a private firm.
The city expects the hotel to generate $9 million per year profit, more than sufficient to meet debt service on the proposed hotel bonds.
The COPs represent proportionate interests in an amended and restated lease agreement between the district and Wells Fargo Bank NA.
The district is leasing various properties from the bank, with the lease payments made through annual appropriations by the Tucson City Council.