Tag Archive for government development

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.

EB-5 Money – Commercial Real Estate Funding Solution

Garfield Traub Development is pleased to call your attention to a very informative article authored by Bob Voelker of the Dallas based law firm, Munsch Hardt Kopf & Harr, P.C.  Bob is one of the most respected real estate attorneys in the country, and well versed in development financing methodologies including EB-5 and New Markets Tax Credits among many others.  This article on EB-5 essentials is very timely.  Accessing cost efficient international funds as part of an overall capital structure for essential facilities for the public sector enables projects to not only proceed but to succeed.  Indeed, we at Garfield Traub are using these funds to complete funding on target developments across the nation, especially hotels and conference centers in key cities.  As accessing these funds in China and in other nations is becoming more and more active and a number of new developments are in the international marketplace simultaneously, we only consider using this funding for developments in first or second tier communities, where those communities are also investing in these P3 or Public/Private ventures, and where other “quality” elements exist to establish a strong story to enable strong acceptance.

Please enjoy this article.

Bob Voelker: Foreigner Investors Filling Real Estate Funding Gap

Several local real estate projects are securing gap financing by luring foreign investors to create American jobs in exchange for U.S. visas. Most of this money is coming from China under a U.S. Customs and Immigration Service (USCIS) program known as EB-5. As this is a financing tool relatively new to North Texas, I have laid out the basics of EB-5 below.

Q. What is an EB-5 Visa?

A. EB-5 is an immigrant investor visa category created for foreign nationals who invest in a U.S. business that creates at least 10 full-time jobs. An EB-5 applicant will receive a visa for himself or herself, his or her spouse, and all of their children under the age of 21. The USCIS will issue a conditional visa within five-eight months of application by an EB-5 investor, as long as the investor and the project are qualified. If the investment project fulfills the job creation criteria after two years, the investor can obtain permanent resident status, and can apply for U.S. citizenship in five years.

Q. What is the criteria  for an EB-5 Visa?

A. In order to qualify for an EB-5 Visa, an investor must invest at least $500,000 in a “targeted employment area” (as discussed below) in an enterprise that will create at least 10 new full-time jobs for U.S. citizens and legal residents per $500,000 investment. Foreign investors usually purchase limited partnership interests in a limited partnership made up of multiple investors seeking EB-5 visas, with the partnership being controlled by the EB-5 Regional Center (which in essence acts as the “syndicator”). This limited partnership then invests in the entity that controls the project.

Q. What is a Regional Center?

A. A Regional Center is an entity created to sponsor projects for EB-5 investors and approved by the USCIS. There are currently more than 175 Regional Centers.

Q. How are EB-5 investors secured?

A. The EB-5 Regional Centers have well developed networks of foreign brokers and licensed emigration agents who raise financing for EB-5 projects, usually through seminars attended by foreign investors.

Q. What are EB-5 investors looking for in an EB-5 investment?

A. EB-5 investors are looking to obtain two primary objectives: 1) their visas, which are obtained through the project creating the number of jobs promised in the business plan, and 2) a reasonable likelihood of the return of their investment in five or six years. Secondarily, EB-5 investors and the Regional Centers are looking for a small rate of return on their investment—frequently from 1-5 percent plus, depending on the structure, a small back-end interest in the project (which can be subordinated to debt repayment and returns to other equity partners).

Q. What is a Targeted Employment Area?

A. A targeted employment area is any city, county, census tract or other geographical area or political subdivision accepted by the USCIS that has an unemployment rate that’s more than 150 percent of the national average rate, or a “rural area.” A rural area is an area outside a metropolitan statistical area or outer boundary of any city or town having a population of 20,000 or more. Although at first blush this would seem to allow the use of EB-5 financing only for rural projects and urban projects in impoverished areas, we have found after evaluating a large number of proposed project sites that a large percent of urban areas qualify.

Q. What is the process?

A. The process of qualifying a project for EB-5 investment is as follows. It typically takes about nine to 12 months to complete:

• Determine if the site qualifies as a targeted employment area.

• Provide project information including description and proformas to the Regional Center.

• Negotiate a term sheet with the Regional Center outlining the amount and terms of the investment. The Regional Center hires an economist who determines the number of jobs that will be directly or indirectly created by the project (and thus sizing the total EB-5 capital limit).

• Work with other debt and equity financing sources to make certain the EB-5 terms and conditions coordinate with other financing terms.

• The project sponsor and the Regional Center negotiate the investment documents.

• The Regional Center (working together with the project sponsor) prepares the investment partnership documentation and an offering memorandum and business plan outlining the investment and submits same to the USCIS for approval.

• The documents are translated into the foreign language and the Regional Center markets the investment overseas through foreign brokers.

• The foreign investors make application to the USCIS for their visas and place deposits in escrow with the Regional Center.

• The USCIS processes the visa applications.

• The USCIS approves the visa applications.

• The approved foreign investors close their investment in the investment partnership, which in turn invests in the project partnership. These investments are sometimes made while the visa applications are being processed, but are returnable if visa approval is denied by the USCIS.

Securing these funds overseas is a complex and time-consuming process, but for real estate projects that will be in development for a lengthy period, and where the EB-5 raise will be in excess of $5 million, the process may be worthwhile given EB-5’s low cost of capital (versus traditional real estate mezzanine debt/equity).

To find out more about how EB-5 money can help you fund your commercial real estate developments, contact Garfield Traub, 972-716-3838.

Garfield Traub Public Private Development Group Growing Fast

The term Public Private Development is quickly rising in popularity due to the success of those using Public Private Partnerships to obtain much needed funds to renew government infrastructure, improve transportation, and construct new projects that state, local and Federal governments could not afford before due to budget constraints.

Due to the importance and rapid growth of using Public Private Partnerships in today’s developments, Garfield Traub Development decided to create a Public Private Development group within LinkedIn, the world’s largest professional network. The group specializes in helping public/private sector decision makers involved in building developments to network with others in both the decision making and facilitation process of their developments.

“I am extremely happy with what our Public Private Development LinkedIn group has accomplished thus far. The quality of material that has been posted by members has exceeded my expectations,” said Mr. Garfield. “This has turned into such an impactful tool for those like me who are involved in the development process and for those looking for others to assist them in their developments.”

The group was started by Garfield Traub six months ago and already has more than 550 members comprised of public and private sector decision makers specializing in site identification and acquisition, zoning and entitlement, financing, investment, design and construction, leasing, management and asset management, as well as professionals such as general contractors, architects, engineers, specialty consultants, investment bankers, mortgage brokers, lenders and investors.

“Our goals are for professionals to get answers to their questions and for them to have the ability to give answers and suggest resources to help each other to succeed. This is especially important in this economic environment where constrained government budgets have made financing and development of essential facilities quite difficult,” said Mr. Garfield. “It is more important than ever for us to find ways to come together as we emerge from this recession and help each other and our clients succeed.

If you or anyone you know are involved in any part of the commercial real estate development process and would like to contribute or ask questions involving public private partnerships, you too can join Garfield Traub’s Public Private Development group on LinkedIn today for free. For more information on how you can get your public developments financed and completed, please visit the Garfield Traub website.

Lenwood A. Jackson, Sr. Justice Center – References

City Court of Atlanta

Lenwood A. Jackson, Sr. Justice Center

Judge for the City of Atlanta Lenwood A. Jackson

To Whom It May Concern:

I serve as Judge of the City Court of Atlanta, Georgia and Coordinator of Facility Development. I recently had the pleasure of working with Garfield Traub Development on the development of the new City Court of Atlanta, which had been a goal of the City for over five years. I was deeply impressed with Garfield Traub’s dedication and display of expertise that they and their team showed in helping the City accomplish its goal.

As the leader of the City’s development team, Garfield Traub directed the development with skill and professionalism, including the assembly and acquisition of the development site, which was held by five different private owners. Garfield Traub’s knowledge and leadership of “friendly condemnation” facilitated the timely and efficient control of the site by the City.

Garfield Traub also coordinated the efforts of the investment bankers, bond counsel and legal counsel in structuring the project financing, ensuring the best execution and lowest cost of occupancy for the City. The Court was delivered within schedule and substantially under budget in November 2003.

This was a very complicated transaction fraught with difficulties, including political challenges, all of which Garfield Traub and its team worked through successfully. The City of Atlanta is very pleased with the outcome. I have no hesitation in recommending Garfield Traub Development to you for the development of your essential facilities.

Respectfully,
Judge Lenwood A. Jackson
City Court of Atlanta

 

President of Jackson Securities W. Bruce Gow

May 10, 2011

To Whom it May Concern:

I am President of Jackson Securities, a full service investment bank that provides a broad spectrum of investment banking and brokerage services to institutional and retail clients throughout the United States. I had the pleasure of working with Ray Garfield and his firm Garfield Corporation, now Garfield Traub Development LLC in its role as Development Manager for Atlanta and its City of Atlanta Municipal Court, now known as the Lenwood A. Jackson, Sr. Justice Center.

At the time of Garfield Traub’s introduction to the City, the Judges were housed in an old and unsafe facility with little hope of moving to a new and secure court because of City priorities placing a new facility on a bond referendum 5 years in the future. Garfield Traub engaged Jackson Securities to help craft a creative financial solution that significantly shortened the time it would take to enable the safety and security of our Judges and the citizens of Atlanta. Together, we identified an existing and reliable source of City revenue separate and apart from the traditional tax revenues entering the General Fund. The City’s historical $25 million in annual Fines and Forfeiture revenue were used to secure an Annual Appropriation Lease, and allowed the City to transact the business of paying for the design and construction of the new Courthouse; thereby avoiding the wait, or indeed the risk of a referendum to approve the sale of General Obligation Bonds. In 2001, when the City engaged Garfield Traub as its Developer, to my knowledge there were very few if any private sector firms thinking in these creative terms, much less actually transacting what is today known as Public Private Partnerships.

Continuing our collaboration, Jackson Securities and our underwriter’s counsel worked with the City and their Bond Counsel in structuring an Agreement with the Georgia Municipal Association, Inc. to issue over $55 million in Installment Sale Program Certificates of Participation, which were rated AAA.

Very importantly, the project was completed ahead of schedule and below budget.

In my opinion and in the opinion of our firm, the leadership, creativity and integrity of the Garfield Traub organization was critical to the success of this facility, a facility that helped greatly improve an older part of downtown and that sets a standard in both design and safety for our City.

I highly recommend Garfield Traub to any community in need of essential public facilities and would work with them again whenever the opportunity arises.

Respectfully,

W. Bruce Gow

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