Author Topic: 531127AC2 - Liberty NY Dev Corprev Goldman HQ 05.25% 10/01/2035  (Read 581 times)

thepupil

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https://emma.msrb.org/Security/Details/?id=531127AC2#

If you live outside the US and are not a US taxpayer, do not read further.
If you don't make a lot of money and pay a high tax rate, do not read further.
If you think owning any bonds is a terrible idea, do not read further.

Like many an idea curated and implemented by yours truly, this one starts with a "hey I read an old VIC pitch on this, stored it in the memory bank, and occasionally check in on it"

https://valueinvestorsclub.com/idea/Liberty_Dev_Corp-_GS/4329033560

During the most recent turmoil in the municipal market this security has bounced around, it gotten as low as $100 / 5.15% and is now around $120 / 3.5%; I have been a buyer throughout, as I believe the security is attractive.

3.5% tax-free yield guaranteed by Goldman Sachs and backed by their global headquarters building works for part of the fixed income portfolio.

These are municipal bonds, triple tax free for NYC residents and federal tax free for folks who live elsewhere (my "clients" (aka parents) are florida residents). Importantly, a lot of very rich people live in NYC and I think that will continue to be the case, creating strong demand for tax advantaged paper, potentially even moreso if tax rates go up.

So what are these bonds?

After the September 11th attacks, there was a program to create a bunch of triple tax free bonds to help rebuild lower Manhattan. Partaking in this program was the storied US investment bank, henceforth known as Vampire Squid, Goldman Sachs. Vampire Squid was tired of sucking blood from its clients and society from a rather shitty 30 story building at 85 Broad. They needed a new shiny HQ from which to troll the ocean for prey.

So they borrowed $1.65 billion using the Liberty Bond program to build 200 West.
https://en.wikipedia.org/wiki/200_West_Street

In 2005, they issued 30 year bonds at $110.7 with a 5.25% coupon.

They are now 15 year bonds and rates are more than touch lower than in 2005, but the bonds are only a smidge higher in price (and even traded to par in mid-march!)

That's all...you make 3.5% for 15 years lending to Goldman Sachs the corporation and the $2 billion HQ building.

I think it offers excellent relative value, but do not size it up because you are

a) writing a depression put (even Goldman may fail in a depression). in 95% of scenarios I think Goldman survives, but the bond portion is for the tail, so it is a bit incongruous to lend to an investment bank for your tail protection/bond portfolio. But given that this yields far more than alternatives, I can buy this and hold more cash in the cash/fixed income bucket (barbell approach).

b) it is kind of related to NYC real estate (but not really) which I own a bit of 

I think they should trade at $150 / 2% or higher.






« Last Edit: April 29, 2020, 06:41:56 AM by thepupil »


krazeenyc

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Re: 531127AC2 - Liberty NY Dev Corprev Goldman HQ 05.25% 10/01/2035
« Reply #1 on: April 29, 2020, 06:43:14 AM »
https://emma.msrb.org/Security/Details/?id=531127AC2#

If you live outside the US and are not a US taxpayer, do not read further.
If you don't make a lot of money and pay a high tax rate, do not read further.
If you think owning any bonds is a terrible idea, do not read further.

Like many an idea curated and implemented by yours truly, this one starts with a "hey I read an old VIC pitch on this, stored it in the memory bank, and occasionally check in on it"

https://valueinvestorsclub.com/idea/Liberty_Dev_Corp-_GS/4329033560

During the most recent turmoil in the municipal market this security has bounced around, it gotten as low as $100 / 5.15% and is now around $120 / 3.5%; I have been a buyer throughout, as I believe the security is attractive.

3.5% tax-free yield guaranteed by Goldman Sachs and backed by their global headquarters building works for part of the fixed income portfolio.

These are municipal bonds, triple tax free for NYC residents and federal tax free for folks who live elsewhere (my "clients" (aka parents) are florida residents). Importantly, a lot of very rich people live in NYC and I think that will continue to be the case, creating strong demand for tax advantaged paper, potentially even moreso if tax rates go up.

So what are these bonds?

After the September 11th attacks, there was a program to create a bunch of triple tax free bonds to help rebuild lower Manhattan. Partaking in this program was the storied US investment bank, henceforth known as Vampire Squid, Goldman Sachs. Vampire Squid was tired of sucking blood from its clients and society from a rather shitty 30 story building at 85 Broad. They needed a new shiny HQ from which to troll the ocean for prey.

So they borrowed $1.65 billion using the Liberty Bond program to build 200 West.
https://en.wikipedia.org/wiki/200_West_Street

In 2005, they issued 30 year bonds at $110.7 with a 5.25% coupon.

They are now 15 year bonds and rates are more than touch lower than in 2005, but the bonds are only a smidge higher in price (and even traded to par in mid-march!)

That's all...you make 3.5% for 15 years lending to Goldman Sachs the corporation and the $2 billion HQ building.

I think it offers excellent relative value, but do not size it up because you are

a) writing a depression put (even Goldman may fail in a depression). in 95% of scenarios I think Goldman survives, but the bond portion is for the tail, so it is a bit incongruous to lend to an investment bank for your tail protection/bond portfolio. But given that this yields far more than alternatives, I can buy this and hold more cash in the cash/fixed income bucket (barbell approach).

b) it is kind of related to NYC real estate (but not really) which I own a bit of 

I think they should trade at $150 / 2% or higher.

very interesting idea for this nyc resident.