Nuveen PM: Market is ‘starting to understand’ Florida’s Brightline

With a $2.5 billion bet on the line, Nuveen is touting its upbeat outlook on a Florida-based Brightline passenger train that other investors view skeptically.

Nuveen has “been involved with this credit since 2015,” said Ryan Rosberg, managing director and senior research analyst at Nuveen, and “we think it’s going to be a complete success.”

Rosberg made the comments Tuesday during an “Innovations in Infrastructure” conference hosted by the University of Chicago and Bond Dealers of America. Rosberg appeared on a transit panel during which he promoted the privately owned train as passionately as if the investment giant were the owner.

Rosberg touted Brightline’s “incredible brand” and “guest experience” as well as recent ridership increases and an upcoming extension from Miami to Orlando. He asked if any of the audience had taken the train — no one appeared to raise their hands — and urged them to do so next time they visit south Florida.

“Part of the challenge is getting people to at least try Brightline,” Rosberg said, adding that once they do, they tend to become regular riders.

An All Aboard Florida representative looks out of a train door during a media tour in West Palm Beach, Florida on Jan. 11, 2017.

Bloomberg News

Brightline, which is owned by Fortress Investment Group, began operations in 2018 between Miami and West Palm Beach. An extension set to open this year promises a speedy 235-mile ride between downtown Miami and tourist-laden Orlando airport. Tickets are on sale.

The speculative-rated project has roughly $3.7 billion of private activity bonds outstanding. Nuveen owns 75% of the debt. The debt, which matures in 2049, accounts for five of the top 10 positions in Nuveen’s High Yield Municipal Bond Fund.

“I’ve been in the muni bond world for 20 years and I’ve never been around a bond that has as different viewpoints as this one,” Rosberg said. “Some mutual funds say ‘We think it’s going to be a complete failure,’ and others a complete success.”

A chunk of the bonds earlier this year were priced at 89 and have since moved up to 96, Rosberg told the audience. “That’s a 15% return in the first five months,” he said. “The market is starting to understand this is all about the guest experience.”

On May 4, a customer bought $43 million of Florida Development Finance Corporation Surface Transportation Facility Revenue Bonds, Series 2019A due in 2049 with a 6.375% coupon for 94.75, according to EMMA. The bonds traded at 89 in October, 2022, which was down from 102 in October 2021.  

A $1 million chunk of Florida Development Finance Corporation Surface Transportation Facility Revenue bonds 2019A with a 6.5% coupon due in 2049 traded at 94 on April 19, up from 92 in February.  

Part of Nuveen’s investment thesis is that to break even, Brightline needs to capture only about 6% of the roughly 40 million trips between Miami to Orlando a year, Rosberg said.

“We ask ourselves, if you put 100 people in a room, will seven choose to take Brightline? We think over time it’s totally going to be true,” he said. With “all the momentum and activity going on in Florida … we think it will be successful over time. I guess time will tell, but that’s what we’re hanging our hats on.”

Though technically not high speed, the Brightline is one of a handful of fledging intercity passenger trains planned around the nation.

California’s publicly owned high-speed rail project has so far been “a complete boondoggle,” Rosberg said. Since first launched in 2008 with a price tag of $30 billion, the price has spiked to nearly $130 billion, the timeline has been pushed back by years and the near-term route whittled down to an initial Central Valley line.

A Brightline West project that aims to build a 218-mile line between Los Angeles and Las Vegas has applied for $3.75 billion of federal rail funds from the Infrastructure Investment and Jobs Act. The Brightline West project carries a total price tag of $12 billion with a projected opening in 2028.

“Part of Brightline’s mission is to change the attitude toward high-speed rail, and what they’ve done in Florida has laid the blueprint for the rest of the country,” Rosberg said. “Going forward, if high-speed rail in other corridors does gain traction, it’s going to be controlled by private businesses versus the government, which I think is a great thing for big infrastructure like this.”

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