“How Berkeley, Calif., Capitalized on a Seller’s Market”, by Keeley Webster, The Bond Buyer.
For Michael Ginestro, head of municipal credit research at Bel Air Investment Advisors, the bonds didn’t provide enough upside. But Bel Air doesn’t typically buy bonds rated A-minus or higher.
Bel Air targets bonds aimed at more sophisticated investors that have greater upside, but require more risk analysis.
It does have parking bonds in its portfolio, but evaluates each one on a deal-by-deal basis, Ginestro said.
Among the considerations for Bel Air is essentiality. The likelihood of the bond payments being made is greater if the parking garage serves city hall, for instance.
The three parking bonds that priced this year that Bel Air looked hard at were general-fund backed which means that essentiality comes into play, he said.
Those were general obligation bonds issued for the St. Louis, Missouri Parking Division, Disney Hall parking backed by Los Angeles County and Stockton, Calif. parking bonds.
Like Schuette, Ginestro said current market conditions favor sellers.
“Everyone is getting cheap financing. It is just insane how low rates are,” Ginestro said.
“Net supply is negative and there is a ton of cash sitting on the sidelines looking to reinvest,” Ginestro said.
Demand remains high, because municipal bonds are still better than other options.
“Munis seem to be – as Bill Gross would say of U.S. government bonds — the least dirty shirt,” Ginestro said.
U.S. interest rates are low, but they are higher than anyone else, Ginestro said.
“It is ridiculous,” he said. “Below investment grade charter schools are getting low 3s and high 2s. It is a very expensive market.”
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