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63-20 Bond Program


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Revive communities by using this program to acquire and develop needed projects with favorable terms. Non-recourse and automatically allocated, these non-rated tax exempt bonds act more like mortgages than bonds. Wide variety of applications and uses.

Published in: Economy & Finance, Business
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63-20 Bond Program

  1. 1. Development Partners
  2. 2. “63-20” Project Finance j“63-20” Non-Profit Corporations(alter egos of a municipal entit or a thorit ) m nicipal entity authority)have automatic access to municipal bond financing((without volume cap allocation restrictions) p )for project finance via a public/private partnership
  3. 3. What is the “63-20” Program? Since 1963, so-called “63-20” corporations have been authorized by the IRS and formed under general state non-profit corporation law. A “63-20” corporation has the power to issue municipal bonds which are treated as debt obligations funded on behalf of a political subdivision for public purposes. This allows municipalities to create an alter-ego entity that could act in concert with the local government, but which would hold separate ownership of the project. This allows the municipality to own assets in the entity that are not direct obligations of the municipality.
  4. 4. Example A private developer (or the municipality) owns a particular property (i.e., land), which has a cost basis lower than the current appraisal. The landowner has designed a project for consideration, and the municipality has a favorable opinion towards the project. To move the project forward, the municipality forms a state organized not for profit (a “63-20” Corporation). not-for-profit 63 20 The land will be contributed (as equity) to the new not-for-profit. The landowner may agree to carry back a portion of the value as “subordinate debt”, but may also receive cash at closing. The “63-20” Th “63 20” would then obtain municipal bond financing and the ld th bt i i i l b d fi i d th developer would proceed to complete the project. The municipal bond financing would not be an obligation of the municipality, and the debt would be repaid from project revenues. The municipality provides a Moral Obligation for the debt. Financing is typically 30-year amortization with level debt service Ownership of the project reverts to the “63-20” upon debt repayment
  5. 5. “63-20” corporations must meet each of the following tests p g in order to achieve “on behalf of” issuer status: The corporation must engage in activities which are essentially public in nature; The corporation must be one which is not organized for profit; The corporate income must not inure to any private person; The corporation must have been approved by the state or a p pp y political subdivision thereof, either of which must also have approved the specific obligation issued by the corporation The state or a political subdivision thereof must have a beneficial interest in the “63 20” corporation while the indebtedness remains “63-20” outstanding; The sponsoring municipality (state or political subdivision) must have rights to obtain full title to the property of the “63-20” g p p y corporation, which was acquired by the indebtedness, at the retirement of aforementioned borrowing.
  6. 6. The Financing Structure The new “63-20” is the qualifying party for the financing There are rules and guidelines for who can be members and managers in the new not-for-profit corporation as well not for profit corporation, as who can be on the Board of Directors Proceeds of such a funding may be used for planning, construction, and permanent financing p g First Mortgage Revenue Bonds Non-Recourse to the Borrower 30-Year Amortization with Level Debt Service Capitalized Interest / Debt Service Reserve Funds are funded Can fund up to 100% of the acquisition and development Soft Costs and Entitlement Costs are reimbursed at closing Construction and Permanent Financing via one structure Project ownership reverts to the municipality after debt repayment
  7. 7. Program Details Pricing is marked to market for the interest rate Costs and fees associated with the financing are relative to the type, size and strength of the transaction Financing is available at $2 million minimum with no maximum In general, the time required to complete the financing is 90-120 days from receipt of complete submission package Our Banking Partner would act as Municipal Bond Underwriter and Placement Agent, and the funds are provided by institutional and accredited investors Most upfront costs associated with the financing (Appraisal, Phase I Environmental, Engineering, Survey, Etc.) can be reimbursed at closing Financing is available in all 50 states Fi i i il bl i ll t t
  8. 8. OUR SERVICES Redbridge Development Partners acts as the real estate advisor and coordinates the transaction with our Banking Partner on behalf of the client. We work with the relative agencies to complete the submission g package, obtain approvals and complete the funding through our banking partner. We coordinate the documentation requirements from third parties. The client is aided and assisted by experts in this field throughout y p g the entire course of the transaction.
  9. 9. What is Required? An Executive Summary of the planned project including property and development information, site data, and property valuations; Developer Information including bios and resumes, preliminary Development Plans and Estimated Costs; and Proforma Financials The project must conform to the guidelines for acceptable uses p j g p (i.e. must have a municipal benefit component) Typical projects include but are not limited to: Real Estate / Housing (Affordable, Workforce, Professional Moderate Income, and Low Income Multi-family Housing; Senior Housing (Nursing Homes, Assisted Living Facilities); Student Housing & Dormitories; Hotels and Conference Centers; Industrial Parks and Business Parks; Commercial Not-for-Profit Facilities (Office Buildings); Public Parking Garages and Public facilities (Jails, Prisons & Detention Centers).
  10. 10. Contact information: Development Partners  William Beal, Managing Director Beal Direct: 818-800-1714 Fax: 866-816-1891 Email: LinkedIn: