Developers looking to use tax-exempt bonds to help finance their projects have many more options than just a few years ago when it comes to structuring their transactions and choosing which providers to use, said participants in a panel titled “Bond Financing: Finding the Right Structuring Options for Your Deal” at this year’s AHF Live conference in Chicago.
“There’s been a tremendous amount of change over the past three or four years in this field,” said Chris Tawa, a senior vice president at MMA Financial, who moderated the panel. Some of the changes: Major banks have begun offering long-term letters of credit on tax-exempt bonds, competing with the credit enhancement offered by agencies such as Freddie Mac and Fannie Mae; private-placement bond-purchase programs have proliferated; and a variety of derivatives contracts such as variable-to-fixed-rate swaps and total return swaps have emerged as options for borrowers.
Perhaps that’s one reason panelist Wade Norris warned that developers interested in using tax-exempt bonds may soon be competing for a scarce resource. As recently as the early 1990s, multifamily housing made up just 7 percent of the total tax-exempt bond volume cap available to states; now that figure is closer to 30 percent, he said. “This is a gathering storm,” Norris said, adding that the competition for tax-exempt bonds is likely to only get tougher over the next year.