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A
private activity bond financing (also referred to as a "PAB") typically
takes the form of a tax-exempt construction and permanent financing wherein an authorized issuer
(within the state where a commercial real estate development project is
located) provides the necessary access for the developer/sponsor for
construction phase and permanent mortgage financing. All private activity bonds are
authorized via a change in the IRS Code enacted by Congress as an
exception to taxation. In
general, PABs are a federal entitlement where (in most cases) the amount
of PAB authority granted to each state is based on a per capita formula
for the purposes of making the entitlement fair and reasonable.
Once the PAB has been authorized, the corresponding state bond
commissions adopt rules pertaining to the application and approval of
projects and issuers. Once the rules are promulgated, you may seek
out an authorized issuer. The authorized issuer is the entity that
actual issues the bonds and receives the net financing proceeds that, in
turn, the issuer then lends to the developer/sponsor's project via a
loan agreement that is part of the bond indenture. In
many cases, the provision of additional PAB authority is attached to a
specific area that is blighted or has suffered a major disaster.
In recent years, these additional PAB financing have been made available
for disaster relief for areas impacted by the 9/11 attacks (the
"Liberty Zone"), Hurricane Katrina, Hurricane Wilma and
Hurricane Rita disaster areas (collectively, the "GO
Zone"). Congress now uses the "GO Zone"
nomenclature to describe any area requiring federal assistance to
recover from a given natural or man-made calamity. Examples of
qualified project types that have been authorized in the past include:
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Senior
housing development projects.
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Hotel
and motel development projects.
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Healthcare
development projects.
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Mixed-use
development projects.
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Retail
development projects.
All
that remains is to find out if your project represents a qualified use
of any particular PAB authority your state may have. What you are entitled to
potentially use is where Rainmaker comes into play. It's time to find out. An
entitlement review by RMC costs only $2,500 and the results could be
truly earth-shattering for your bottom line. Your capital funding
plan proposal should take advantage of every possible alternative to the
dreaded equity dilution hit that awaits the uninitiated.
Rainmaker
also provides access to equity syndications via the fractional
real estate ownership interest tenants-in-common approach. The
syndication platform provides access to at-risk equity financing as
early as the pre-construction phase and is designed for commercial real
estate development and acquisition financings of $2.5 million or
more. The platform's design is such that the sponsor (or developer
as the case may be) can dramatically increase their financial investment
leverage while reducing the proposed project's bankruptcy and
foreclosure risk profile. Time to find out more, isn't it?
Get
some answers to all the burning questions from a consulting firm that is
focused on development transaction fundings. Rainmaker Marketing
Corporation is here to help.
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