Public Private Partnerships Investment and Development Opportunities

Economic reports have shown a stagnant job market and a fairly broad-based contraction in public sector construction during the month of March. This contraction reflects cuts to infrastructure investment structures, now that state and local governments have tightened their belts and the activity of the 2009 Federal fiscal stimulus has played out.

The lack of job and economic growth will continue to impact development activity in most sectors, including public institutions. These institutions cannot (or do not want to) use their tax-exempt bonding capacity to finance real estate assets. Traditional real estate lenders are cautious, have strict underwriting requirements, and in some cases, are using floating rate debt to finance assets. And, the parameters for the CMBS market are still quite conservative.

In order to obtain financing, it may be time to explore non-traditional alternatives. The Credit Tenant Lease form of financing offers a solution through competitively priced, long-term fixed-rate debt
and a faster closing process.  CTL applies to municipal, state, and federal government real estate developments and assets, as well as universities, public schools, healthcare, office, retail and specialty real estate.

CTL loans are based on the investment-grade credit rating of the tenant. The real estate is collateral and secondary in the credit matrix. These loans give owners, developers, and clients with investment-grade credit tenants the opportunity to finance the development and hold the property for the long term. With proceeds up to 100% LTV, and long-term, non-recourse debt, CTL loans minimize equity requirements and limit liability.

The current capital market environment offers an excellent time to take advantage of the benefits offered through the CTL loan program. Each CTL loan is structured as a private placement bond. Investor demand for these bonds exceeds supply, driving down loan spreads. This, in combination with low Treasury rates, has pricing at or near historic lows.

CTL loans offer the following advantages:

•  Loan proceeds up to 100% LTV
•  Non-recourse debt
•  Very competitive rates
•  Long-term, fixed-rate debt
•  Assumable debt on sale or transfer
•  Ability to prepay loan (at make-whole)
•  Rate lock up to 60 days prior to closing
•  Construction/Perm loan opportunity

Mesirow Financial specializes in CTL financing, utilizing direct access to CTL debt sources through its 120-person institutional sales group covering 1,200 institutional accounts.  This coverage facilitates real-time, accurate, and competitive pricing with superior execution.  With these advantages, Mesirow strives to provide its clients with optimal pricing and the most favorable terms.

Garfield Traub has an abundant amount of experience in financing public developments despite the economic downturn throughout the U.S. If you would like to learn more about how your public agency can get your essential developments financed contact Garfield Traub and we will be happy to help.

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