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| | TIF Plans, TIC
Plans, PILOT Plans - Which Is For Which?
Public or private, Rainmaker is the firm to turn to when it comes to
preparing Tax Incremental Finance
(TIF) Plans, Tenants-In-Common (TIC)
Syndication Plans, Payment-In-Lieu-Of-Taxes (PILOT) Finance Plans or
Community
Development District (CDD) Finance Plans.
Which is the one for you and how would you know? Following along and
decide which fits your business case:
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Tax Incremental Finance Plans. A TIF plan is a way to provide
construction financing for retail and mixed-use  projects by pledging a share
of the future property tax revenues the resulting business deal is likely to generate
and using these pledged funds as a guarantee the financing will be paid
off. This is not a freebie and the financing will be subject to
current commercial mortgage underwriting requirements because the resulting
bonds are sold to the investing public. |
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Tenants-In-Common Syndication Plans. A TIC plan is used to
raise capital for a commercial real estate development transaction.
TIC plan transactions have a lot of built-in flexibility and do not
necessarily require the sponsor to accept a huge dilution of their equity
(as would be the case with a private placement offering of equity
securities). There are all kinds of rules and issues here, but TIC
plans are very flexible and can be the developer's best friend. |
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Payment-In-Lieu-Of-Taxes Finance Plans. PILOT plans are used
to generate additional funding (bond) for a real estate development project
in a manner that is similar to that of the TIF plan. PILOT plans
are typically "back-end" loaded take-out financing so they are not
particularly helpful to the developer seeking construction funding, per se. |
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Community Development District Plans. CDD plans are used to
have the public pay for public improvements to real property including
roads, utilities, sidewalks and the like. CDD Plans fund on the
backside of the development stream once the improvements are complete and
usable; this means CDD plans are used to add additional profit to the
developer's pocket but not as development financing, per se. |
Think of TIC plans as your way of raising additional
cash for the enterprise on a basis that guarantees your TIF plan or PILOT plan
outcome because at the end of the rainbow, the financing is sold to
institutional buyers and not fools. The project will have to go
through underwriting somewhere along the line and today's turbulent financial
conditions means higher debt service coverage ratios and lower mortgage
financing loan-to-value ratios are going to be the key issues.
Underwriters are going to want to have a "fortress balance sheet" to
work with and that means more working capital being applied to reserves and
working capital is not something that bond underwriters like to pay for so the
advent of commercial real estate syndications provides another well the
developer can include in the process along with tax credits and CDD plans to
provide even more strength for the benefit of the prime mortgagee.
Still unsure? Talk to a Rainmaker consultant and we'll be happy to
explain all of the issues and the opportunity that may best describe your
situation. | |
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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