Tax-Exempt Bond Financing - Commercial Real Estate Development Projects & Programs

Tax-exempt bond financing typically provides higher investment leverage than a typical commercial bank financing or institutional placement because the bond financing is based upon the demonstrated debt service coverage the investment provides.  That's right.  The bond financing is based upon a stated debt service coverage ratio (e.g.: 1.25:1.00 for a multifamily housing transaction) being applied to current capital market rates for similar projects.  The lower the interest rate in fact is, the higher the borrowing leverage.  

Most floats take a minimum of 90 days to close because:

• Initial hearing.  An initial hearing of a bond inducement resolution must be conducted by the regulatory entity (usually the state's bond commission); then

• First Approval Hearing.  The financing plan is reviewed and an initial vote is made.  If approved, the next step is the final hearing.  This step requires at least 30 days from the date of the initial hearing.

• Final Hearing.  The financing plan is submitted and a final vote is taken.  If approved, the investment bankers can then syndicate the bond offering (sell into the capital markets).  This meeting is scheduled at least 30 days after the first approval meeting and then requires another 15 to 30 days to complete.

To learn more about the efficacy of this type of financing being applied to your business, please contact RMC.