Lincoln Center for the Performing Arts is embarking on a bond-funded expansion of its campus, but the deal to fund the expansion shifts its balance sheet enough that it prompted a negative outlook from Moody's Ratings and a downgrade from S&P Global Ratings.
The project is also a sign of Lincoln Center's fundraising strength, the rating analysts said, and the expansion could lead to long-term growth.
Lincoln Center isn't alone among cultural institutions — although COVID-19 and shifting consumer sentiment damaged their balance sheets, many arts organizations are expanding and taking on new initiatives.
"These investments are supported by committed philanthropic funding and are designed to strengthen Lincoln Center's future for decades to come," the center wrote in a statement. "Lincoln Center for the Performing Arts remains in a strong financial position, with a good ratings track record and a clear, long-term plan for investment in our campus"
The $235 million deal sold through the Trust for Cultural Resources of the City of New York at an average yield of 3.158%. There was significant demand for the bonds, which were "significantly oversubscribed, reflecting strong market confidence," the center told The Bond Buyer.
Before the sale, S&P lowered the rating on Lincoln Center's debt to A-minus from A. Moody's maintained Lincoln Center's A3 rating but lowered the outlook to negative from stable.
Although the institution has fundraising for the project lined up, according to S&P — $335 million in cash and pledges through 2032 — the debt will strain its operating margins in the near term.
Before this sale, Lincoln Center had $322 million of debt outstanding, $283 million of which was bonds.
"The other issue is their operating performance has been a bit uneven from year to year," Moody's analyst Debra Roane said. "Particularly in 2025 they had quite a weak year. And we do expect that will improve, but they're sort of taking on this debt in a moment of weakness."
Fundraising isn't the problem for Lincoln Center, S&P's Stefan Turcic said. The problem is the center's strong fundraising has been devoted to specific capital projects.
Lincoln Center recently renovated the David Geffen Hall, where the New York Philharmonic plays. That construction was financed with a bridge loan, $44 million of which is still outstanding.
Capital work and other initiatives led the center to a negative earnings before interest, taxes, depreciation and amortization (EBITDA) margin in 2025, according to Moody's, which projects the increased debt will lead to EBITDA margins around 5-6% in the next few years, which is narrow for an A3 issuer, Roane said.
In addition to funding the expansion, the bonds refinanced the outstanding debt for the David Geffen Hall.
Roane pointed to Lincoln Center's unusual structure.
Ten different organizations reside on Lincoln Center's campus, including the Metropolitan Opera, the Juilliard School, the New York Philharmonic Orchestra and the New York Ballet.
The structure creates stability for Lincoln Center, Moody's analyst Susan Shaffer said.
"The Metropolitan Opera can be having deep operating challenges," Shaffer said, "But another [organization], Julliard across the street, is in a very different financial position. But they're all on the same campus."
Debt burden aside, the center is in a strong position, Turcic said.
"The center has ample liquidity with $90.7 million of financial resources available for general expenditure within one year, and an additional $128.3 million of unrestricted board-designated endowment funds that can be made available with board approval," S&P analysts wrote in the rating report.
The analysts also expect the expansion, once completed, to help Lincoln Center's operations. Roane compared it to the Museum of Natural History's recent renovation, which added an entrance, which Moody's expects will improve attendance and revenue.
Lincoln Center's fundraising strength is similar to many cultural institutions, Turcic said.
"When you're looking at cultural institutions, since COVID, we are seeing demand pick up, I think pick up pretty steadily," Turcic said. "A lot of cultural institutions are focusing on maybe digital or new and innovative ways to get people in to create increased demand. I think Lincoln Center is doing that as well."
