SWS served as Bookrunning Senior Manager on TBTA’s inaugural Real Estate Transfer Tax credit transaction.

The Bonds are secured by two real estate transfer taxes imposed within New York City: the Additional Base Real Estate Transfer Tax and the Supplemental Real Estate Transfer Tax (collectively, the “RETT”).

Because the Bonds are secured by a revenue stream that has exhibited historical variability, SWS worked with TBTA and its financing team to create a bond structure to help maximize bondholder protection and provide for strong credit ratings and a favorable cost of capital. The RETT credit benefits from several key features including but not limited to: an annual debt service limit of $150 million to effectively provide for a “closed lien” once that annual debt service limit is reached, a lockbox mechanism in which a statutory lien attaches when the revenues are deposited into the Central Business District (“CBD”) Tolling Capital Lockbox Fund, debt service fund filled up with first dollars in; and DSRF equal to maximum annual debt service.

By including these key credit features, the credit was able to achieve strong ratings of A1 by Moody’s, A+ by S&P, and AA by KBRA, all of which proved to be valuable in the marketing of the Bonds to investors.

SWS played an integral part in the rating process for the inaugural credit and was responsible for “holding the pen” on the rating presentation and helping TBTA, its FAs and Bond Counsel explain the credit to the rating agencies. Given the limited history of the revenue stream, SWS sought out and engaged Miller Samuel Inc., a real estate appraisal firm, to calculate estimated pro forma historical RETT receipts in order to observe and identify real estate trends within NYC from 2003 to October 2024.

SWS worked closely with TBTA to structure the inaugural transaction so the structure both optimized bond proceeds and allowed for future optionality while also taking into consideration a second contemplated transaction to be issued under the RETT credit. The Bonds were ultimately issued as a single series of tax-exempt fixed-rate bonds amortizing over 35 years as opposed to 30 years to provide for an increased amount of proceeds for MTA capital programs.

SWS advised TBTA to utilize a long and flexible marketing time period for the benefit of investors by posting the POS before the holidays on December 20th, posting the internet roadshow on January 6th, and providing answers to investor questions on January 10th in advance of pricing January 15th and 16th.

SWS both spearheaded the development of the investor presentation and coordinated with Imagemaster to help facilitate the recording process. Additionally, SWS worked with TBTA create a written script to ensure all credit points were discussed thoroughly and credit strengths were properly communicated.

The POS was downloaded by 183 unique investors and the internet roadshow presentation was viewed by 134 unique investors which signaled heavy interest.

On the morning of institutional pricing, the markets opened flat with a better than anticipated Retail Sales Trade Report data and the first MMD Read was steady across the entire yield curve. Given the morning’s stable environment and the strong demand during the retail order period, SWS proposed to enter the market with an aggressive scale, decreasing spreads for almost every maturity offered at a range of 2 to 6 bps with the exception of the 2046, 2047 and 2048 maturities.

Demand for the Bonds was ultimately very strong. At the end of the institutional order period, the transaction had generated a total of ~$9.7 billion institutional orders from 111 different institutional investors.

All maturities were oversubscribed, with subscription levels ranging from 2.28x to 12.50x, or an average 8.33x oversubscribed across all maturities. Maturities that generated the most demand included 2029, 2033, 2034, 2035, and 2043, all of which were over 10x oversubscribed.

Following the successful institutional order period, the TBTA sought to take advantage of the strong investor demand in addition to the rally in municipal market during the day and decreased spreads by 1-12 bps across all maturities. The favorable market conditions and investor reception also allowed TBTA to have the opportunity to increase the transaction size by an additional $300 million for a total transaction par of $1.6 billion.

The increase in par amount was across all maturities, which allowed TBTA to maintain the preferred level debt service structure for the Bonds. The transaction generated a total of ~$10.8 billion of orders (inclusive of both retail and institutional orders), or oversubscribed by 8.33x, from 125 total unique institutional and professional retail investors.

After yield adjustments, at the close of business, the financing was 6.3x oversubscribed, with subscription levels ranging between 1.72x-9.67x across all maturities.