Hudson Yards, a 45-square block district of office towers, luxury apartments and upscale shops on Manhattan’s far West Side, is paying down its tab with New York City’s taxpayers.
The Hudson Yards Infrastructure Corp., created by the city to finance the redevelopment, has transferred about $663 million in surplus property tax and other revenue to the city since 2017, 80% of which was in the last three years, according to an offering document for a bond sale this week.
The distribution is more than the $360 million the city spent to subsidize the interest payments on $2.7 billion of debt sold by the infrastructure corporation to finance the extension of the No. 7 subway line and a boulevard-lined park. It’s also more than enough to cover $230 million in cost overruns and future planned spending for the new neighborhood.
The city estimates existing and future development in Hudson Yards will generate $27.1 billion from the current fiscal year through 2047, six times more than debt service for the corporation’s bonds.
“Hudson Yards is a financial win for the city of New York,” said Mitch Schwartz, a spokesman for Mayor Bill de Blasio in an email.
Hudson Yards got off to a slow start because of the Great Recession, requiring the city to step in and cover some of the bond payments until building progressed. But in the last decade developers have built or renovated seven offices buildings with three more towers under construction. Ernst & Young LLP, KKR & Co and Tapestry Inc. have already moved into the neighborhood, while BlackRock Inc., Pfizer Inc., and Facebook Inc. have leased space in office towers under construction.
In addition, almost 10,000 rental and condominium units and 8,500 hotel rooms have been built, with more than 25 million square feet of a planned 53 million square feet of construction completed. The district encompasses Related Cos.’ branded Hudson Yards project as well as Brookfield Properties’ Manhattan West.
The development’s progress and reduced reliance on city taxpayers led Fitch Ratings, S&P Global Ratings and Moody’s Investors Service to upgrade the Hudson Yards Infrastructure Corp.’s bonds in advance of this week’s $452 million issue. The debt, backed mainly by property-tax revenue generated in the district, will refinance bonds issued in 2011. Fitch raised its rating on HYIC bonds one level to A+, the fifth-highest grade. S&P raised its rating to AA-, one notch higher. Moody’s raised its rating to Aa2, one level higher than S&P.
Transforming state-owned rail yards and a swath of warehouses and parking lots into a new business and residential district was one of former Mayor Michael Bloomberg’s top priorities. Hudson Yards was rezoned in 2005 and in December 2006 HYIC began selling debt to lay the groundwork for the development. Bloomberg is founder and majority owner of Bloomberg LP.
Developers including Related, Tishman Speyer and Brookfield also received at least $1.4 billion in property-tax breaks, according to researchers at the New School’s Schwartz Center for Economic Policy Analysis.