Wednesday, June 5, 2013

Investing in The Bass Pro Pyramid

Posted By on Wed, Jun 5, 2013 at 2:12 PM

Moved by mordant curiousity and a falling stock market, I called a local bond trader to see how those Bass Pro Pyramid bonds are doing now that the Bassmasters have admitted that this deal won't be done until late 2014, if ever.

Bass Pro founder Johnny Morris has changed his mind again. The new details are, why bother, check the daily and its puff piece. Something about an elevator. Or an inclinator. Or two of them. This is his baby. It will probably change a few more times. Remember the glass band all the way around when he came here for the big announcement and fish fry a couple years ago? Here's a less flattering piece from the national media.

All Memphis can do is wait and hope. And invest, if you're brave enough.

Thanks to Johnny Lessley at Duncan Williams for the bond info. You'll need a minimum of $5000 or more likely $100,000 to get in the game. These bonds are not widely traded. Mutual funds and insurance companies scooped up most of them in the initial offering. Some days they're available and some days they're not. It isn't like buying cheeseburgers at McDonald's except that a bad one can make you really sick.

There were three different bonds on this project, two of them taxable and one tax free, with different maturities as far out as 2030. A taxable 2030 will get you five percent interest if you can find one. A tax-free bond priced at $98.50 at issue, slightly below par, is $108 or $109 today. Not because Bass Pro's prospects or the future of downtown Memphis has changed, but because interest rates have fallen since 2011. The bonds are rated "A."

They're backed by Tourism Development Zone (TDZ) revenue. A TDZ is a legislative creation to build convention centers in Nashville and Memphis, since distorted for all kinds of purposes and places. The Bass Pro bonds are not revenue bonds or general obligation bonds, which would be backed by the taxing authority of the city of Memphis. The interest payments come from TDZ funds collected downtown. MLGW is a big contributor. Nothing says "tourism" like "utility company" does it?

Bass Pro doesn't start making payments until the super store opens. That will improve the debt service outlook because more state sales taxes will be rebated to the city.

Could Bass Pro Pyramid become another AutoZone Park, where the bond holders took what is called "a haircut" and didn't get the payments they expected? Possible, but those bonds were backed by luxury suite revenue projections which turned out to be way too optimistic. That said, Bass Pro was supposed to be open late this year, so we're talking about several million in lost sales taxes if this store is the retail monster it is touted to be. And Bass Pro, we have often been reminded, is just one part of the overall redevelopment of the Pinch District and Convention Center. Nothing is happening there, and nothing is likely to happen for at least another year in light of this week's announcement.

So show your love and buy yourself a bond or two. If you can put your treasure in the promises of Johnny Morris and Robert Lipscomb and the retailing future of downtown Memphis for the next 17 years you've got a stronger stomach than I do.

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