S&P is giving the city's $13.25 million tax increment revenue refunding and revenue bonds an 'A' rating, largely because of robust Downtown commercial real estate assets. The Series 2000 bonds are scheduled to go on sale Feb. 14. The bonds are for a 1,620-acre redevelopment project centered around the low-income Parramore district.
"The stable outlook (for Orlando) is underscored by the relatively strong debt service coverage offered and the ability of the (Downtown) district to withstand valuation fluctuation," the new S&P analysis finds.
That will be heady news for Orlando Mayor Glenda Hood and a stable of Downtown developers who have held off moving forward on several proposed ventures because of the recession.
"That's the best medicine the city could have received from any doctor," Dean Fritchen, senior associate, Arvida Realty Services Commercial Division, Winter Park, FL, tells GlobeSt.com.
The total assessed valuation of Downtown properties soared to $1.34 billion in 2002 from $923.8 million in 1997, a 44.8% jump, S&P says. Average annual growth was almost 8%.
"At the same time, the incremental value during this period showed annual increases, reaching $800.6 million and reflecting a 92.9% increase for the period," the report says.
"The rating reflects a large project area that has demonstrated relatively strong assessed valuation growth in recent years," S&P says. S&P analysts Howard Mischel and Diane P. Brosen compiled the findings.
But the valuations weren't always there. Between 1992 and 1997, for example, property values showed an overall 30% loss and declines occurred five out of the six years.
"These declines can be attributed to a substantial weakening in the commercial real estate market, following the last recession and (also) the discovery of groundwater contamination in the CRA Expansion Area in 1994," the S&P report says.
The Downtown District comprises two areas. The 596-acre CRA 1, primarily office space, was established in 1980. The 1,024-acre CRA Expansion Area, set up in 1990, comprises warehousing, small industrial and some residential uses.
The bonds are secured by tax increment revenues generated in the Downtown District by Orlando, Orange County and the Downtown Development Board.
Big corporate taxpayers such as Highwoods Properties Inc. of Raleigh, NC and Chicago-based ZML SunCenter Associates are driving the rising assessed valuations Downtown, the S&P analysis shows.
Besides the real estate factor, S&P notes "the essentially strong nature of the underlying (four-county) Orlando MSA economy" as a factor in the 'A' rating.
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