Bond financing is usually appropriate for developers who  want  to develop Master Plan communities or similar types of developments.  Most deals encompass residential housing.  However, commercial developments can be accommodated (i.e. stadiums, manufacturing plants, shopping centers).  In addition, bond financing is available only for horizontal financing.

Horizontal -   Infrastructure/offsite costs.  
Vertical -  Construction/onsite costs.  

Two Types of Bonds

A tax-exempt bond is issued strictly to borrowers who have already acquired the land to be developed.  
A taxable bond is issued to developers who must acquire land for a project.    
Issuer A municipality, i.e. city or county.
Advisor   Portfolio Services will advise the issuance of bonds by a municipality.
Borrower Developers or owners of undeveloped land.
Bond vs. Conventional


20-40 years 2-5 years (avg)
RATE Aggressive Rates and Terms - Based on current market conditions Market
LOAN AMOUNT 85-100% 80-85% max.
EXPENSES Reimbursable Non-reimbursable
DEBT Assumable Non-assumable
FEES 2-4% 1-3% due at finding
SIZE Min. of $20 million Min. of $20 million



Lower interest rate - the interest rate is lower on these bonds (due to their tax-exempt status) that developers can save substantially over traditional financing. For instance, if you issued $5 million in bonds at 6% rather than a traditional loan of 7 1/2%, you would save $75,000 in interest in the first year alone!

Lower upfront costs - a developer may have to advance funds for appraisals, engineering reports, etc., but all costs will be reimbursed when the bonds are issued. There are no fees or points as is typical of traditional financing.

All issuance costs are included - all costs related to issuing the bonds are included in the bonds' proceeds, including bond counsel fees, underwriter's discount, etc.

Bonds are assumable - the bonds are repaid by payments made from assessments against the property to be developed. The assessment is attached to the property, not the property owner.  Thus, if the developer sells the project to a builder/consumer/operator, the buyer will be able to take advantage of the cheaper financing as well.

Simplicity in obtaining bonds - bonds are essentially a take-out for the construction. Thus, a developer can go to a lender with a take-out source already in place! In addition, the bond proceeds are payable in increments, meaning that when each stage of construction is complete (i.e. finished grading, completed a road) that portion of the funds is paid. These incremental payments can be used to payoff the construction loan. This lowers the amount of construction loan required by the developer, and reduces the total interest paid on a construction loan.

Capitalized interest - up to 2 years of interest payments can be deferred so the developer will not have to make payments during the construction and lease-up/sales period.


The following items are required for us to review an infrastructure bond deal:

    1. Tentative map (recorded or ready to record)
    2. Detailed cost breakdown
    3. Cost basis of land (when and for how much was land purchased) or ability to purchase land (if applicable)
    4. Developer's financials and background (including list of completed projects)
    5. Any 3rd party reports completed to date (appraisal, feasibility, environmental, engineering, title, etc.)
    6. $25,000 retainer fee for sight inspection and other related costs (reimbursable when bonds are issued)
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