LOS ANGELES – San Francisco is preparing for its largest-ever sale of certificates of participation to help finance an expansion of its convention center.
San Francisco’s $397 million competitive pricing, planned for Thursday, will finance the first expansion of the Moscone Convention Center in more than a decade. The tax-exempt securities are rated AA by both Fitch Ratings and S&P Global Ratings, and Aa2 by Moody’s Investors Service. The COPs will be secured by the city’s general fund through payments under a lease agreement. The COPs have a 25 year term.
The George R. Moscone Convention Center opened in 1981, and has been expanded multiple times. The Moscone Center is situated on two adjacent 11-acre blocks bounded by Mission, Folsom, Third and Fourth Streets. Its most recent renovations were completed in May 2012, including restroom, lobby and kitchen renovations, digital and telecommunications upgrades, elevator and escalator improvements, and new carpeting, paining and lighting, at a cost of approximately $56 million.
Despite those upgrades, city leaders believe the convention center is lagging its peers.
“The existing Moscone Center is effectively filled to capacity and cannot accommodate many of the existing convention market needs,” according to San Francisco’s offering documents. “According to a study and report published in 2011 by Jones Lang LaSalle Hotels, prior to its expansion, Moscone Convention Center had less than 50% of exhibit space per square foot of meeting space compared to the top twelve most competitive convention centers in the country, resulting in fewer bookings and a direct spending loss of approximately $2.1 billion for years 2011 through 2020.”
Nadia Sesay, director of San Francisco’s Office of Public Finance, said that the expansion, which is already underway, will allow it to be more competitive with other facilities in the state. The project expands the center by nearly 266,000 square feet.
“It’s a lynchpin for the city’s economy,” Sesay said.
Sesay said that the method of the financing is more interesting than in some such projects because it leverages the investment of local hotels. San Francisco formed the Moscone Expansion District in 2012.
Assessments collected by the district finance some two-thirds of the expansion’s cost, Sesay said, leaving the city’s general fund responsible for far less than would otherwise be the case. The city and county’s revenues have grown substantially in recent years on the strength of strong property, business, and other local tax growth, rising to $4.35 billion in fiscal 2016 from $3.15 billion in fiscal 2012.
“On so many fronts, it’s one of our unique projects,” said Sesay.
Sesay said that the center is currently closed for intense renovation, but will reopen in September.
“The idea was for it not to go idle, because it’s in the heart of the city,” she said.
The COPs have an optional eight-year par call starting Oct. 1 2025. Closing is scheduled for July 6.
Co-financial advisors are Backstrom McCarley Berry & Co. and Montague DeRose and Associates. Orrick, Herrington & Sutcliffe provided the tax opinion.