A Yeshiva in Brooklyn, New York

Project Summary

A non-profit private school in Brooklyn required construction and permanent financing for expansion of its classroom and other facilities.

Issues:

  • The School, as a 501©(3) would have qualified for the tax exempt bond financing, but legislative roadblocks that prevented the issuance of tax exempt bonds for not-for-profits forced the school to look beyond the capital markets for financing.
  • The project involved new construction to be partially funded by capital campaign pledges.
  • The School was denied financing by their own bank, and other large relationship banks were demanding personal guarantees from School Board Members in addition to campaign contributions, to facilitate financing.

Solution:

  • We harnessed our vast lending network and arranged a traditional construction to permanent loan with a small community bank with the option to convert into tax-exempt bonds, subject to reauthorization of the aforementioned legislation.
  • To minimize conversion costs, we arranged the financing with a bank that would purchase the bonds upon conversion to bond financing, thereby eliminating the need to find a new investor and restart the funding process yet again.

Benefit:

  • Our financing structure did not require personal guarantees of the Board and was structured as a single loan for both the construction and permanent portions of the transaction.
  • The financing was accomplished on time thereby enabling the School to complete the construction on time and under budget.
  • Upon re-instatement of legislation authorizing the NYC IDA to issue tax-exempt bonds, the client has the option to refinance its taxable debt into tax-exempt bonds at a pre-set rate, 2% below the conventional rate.
  • The client will not need to secure a third party lender for refinancing as the current lender has the capacity to purchase the tax-exempt bonds after conversion.
  • We will continue to assist the client through the conversion process including preparation of applications and other requirements of tax-exempt IDA financing.