Orlando to Issue $144 Million in Housing Revenue Bonds Amid Higher Demand for Student Housing
Orlando, Florida, is set to launch a major financial initiative on Thursday, issuing $144 million in *housing revenue bonds* aimed at supporting the local housing market amidst growing demand for student accommodation. The fundraising operation, led by the Florida’s Capital Projects Housing Authority, signals a proactive approach in a higher education sector currently grappling with economic challenges.
Who is Involved?
The borrower for this initiative is PRG – UnionWest Properties LLC, with the Provident Resources Group Inc. as its sole member. Established in 1999, Provident is recognized as a nonprofit organization that has successfully facilitated the development and financing of over 27,750 student housing beds across 13 states and the District of Columbia.
What is Being Funded?
The proceeds from these bonds will primarily finance the acquisition and renovation of a 15-floor mixed-use building named UnionWest, located in *downtown Orlando*. This facility will feature 10 floors dedicated to student housing, with the remainder offering academic and retail spaces, alongside an attached nine-level parking garage.
Why Now?
Despite the struggles facing the higher education sector, the demand for high-yield investments in student housing remains robust. The municipal high-yield sector has outperformed other market areas, showing returns of 8.31% year-to-date. John Mousseau, CEO of *Cumberland Advisors*, noted that investors are increasingly searching for new opportunities with appealing yields, driving competition in this space.
When Will It Be Launched?
The bonds will be priced on Thursday and are part of a larger structured bond offering. The issuance includes $108.4 million in *Series 2024A-1* senior tax-exempt bonds, $7.5 million in *Series 2024A-2* senior taxable bonds, and $28.6 million in *Series 2024B* subordinate tax-exempt bonds. These financial instruments will have varying maturities stretching from 2033 to 2062, enabling flexible repayment timelines.
Moody’s Rating and Project Viability
Moody’s has assigned a Ba1 rating to these senior bonds but also expresses concerns over potential economic fluctuations such as inflation, which could impact operating expenses. Despite the lack of a mandatory housing requirement, the project’s 95% occupancy rate indicates a strong demand for student housing. The *University of Central Florida* (UCF) and *Valencia College* have both committed to long-term leases in the facility, further supporting the project’s stability.
Projected Financial Outcomes
Financial projections for the project are optimistic. For 2023, the UnionWest building generated approximately $9.78 million in revenue and is expected to yield about $5.64 million in net operating income. Moody’s anticipates that the debt service coverage for the senior bonds will be satisfactory over the coming years, maintaining a minimum coverage level of 1.20 times.
Conclusion
The upcoming bond issuance reflects a strategic effort to bolster student housing in Orlando while navigating broader economic challenges in the higher education sector. As the dynamics of student accommodation grow more competitive, the UnionWest project may set a precedent for future developments in the municipal bond market.
