As it turns out, putting up New York Law School in Manhattan's Tribeca neighborhood is a good move - the location might just help strengthen the school's future finances.
The New York Law School bonds were supposedly believed to be junk. But thanks to a mortgage pledge on one building, the institution's finances were somewhat salvaged. Bloomberg reports:
"The private school, founded in 1891, sold $139 million of tax-exempt debt through the Build NYC Resource Corp. on Tuesday at lower than initial yield levels, with investor demand more than four times the amount of securities sold. Moody's Investors Service rated the bonds Baa3, the lowest investment grade. The prior obligations that'll be retired with the proceeds were deemed junk. The higher rank for the deal stems from a mortgage pledge on one of its buildings, which is worth an estimated $170 million."
Aside from its high-valued real estate, the law school's finances have been under a lot of stress, just like similar institutions across the country.
Apparently, this is partially attributed to law school applications, which have fallen to 15-year lows; not to mention the idle job market for lawyers. In fact, New York Law School had to scale back 10 percent of its investments to cover an operations shortcoming in 2015.
Full-time enrollment also decreased to 578 from 1,365 just four years prior. This resulted in a 50 percent decrease in tuition revenue over the same period, to $36 million.
"There's no way without that mortgage pledge that they would be investment grade based on their trends," head of municipal research in New York at Evercore Wealth Management Howard Cure said. "They're bleeding money right now."
The institution's longest-maturing debt, which comes with a July 2045 due date, was valued to produce 4.05 percent, a decline from its initial yield of 4.12 percent.
However, the recent deal was able to obtain over $600 million in investor orders.