Construction/Perm

Combined Construction and Permanent Bond:

  • Bond investor takes construction risk and charges a construction fee for the added risk and complexity
  • Borrower assigns a GMP contract and a surety bond for performance and payment to the bond investor
  • Interest-only payments are made during construction
  • May be structured either as a single upfront funding or as a staged funding
  • An approved construction monitoring firm oversees the draw request process and reviews the third party engineering inspection reports monthly
  • The interest rate is locked at CTL funding, thereby allowing borrower to avoid interest rate risk during construction

“Date Certain” Rent Commencement Date:

  • Lease states that rent will commence on a predetermined date regardless of whether a Certificate of Occupancy has been issued or tenant has accepted the premises
  • Interest-only payments are made during construction
  • May be structured either as a single upfront funding or as a staged funding
  • An approved construction monitoring firm oversees the draw request process and reviews the third party engineering inspection reports monthly
  • The interest rate is locked at CTL funding, thereby allowing borrower to avoid interest rate risk during construction

Letter of Credit-Backed Credit Enhancement:

  • Borrower provides to the bond investor a Letter of Credit (LOC) from an approved issuer  
  • Proceeds from the CTL financing are funded to the bank providing the LOC
  • LOC issuer has a first lien on the property until construction is complete, tenant has accepted the premises, taken occupancy and final due diligence is completed
  • The LOC bank administers the construction draws
  • After rent commencement and upon receipt of all due diligence, the LOC is released and the first lien on the property is assigned to the CTL bond investor
  • Interest-only payments are made during construction
  • The interest rate is locked at CTL funding, thereby allowing borrower to avoid interest rate risk during construction

Forward Commitment to Fund:

  • Bond investor commits to fund the bonds at a future date
  • The interest rate, which is locked upfront, includes a premium in the spread depending upon how far forward the transaction will be funded
  • Borrower constructs the project with its own capital sources or procures a construction loan

dow-corning
Bay City, MI

$29,481,000

Construction-to-permanent without Credit Enhancement CTL Private Placement Bond financing.