Development Site 3 Case Study
Property Type:
Single Family Home and Townhome Development
Property Size:
673 Residential Lots on 157 Acres
OPPORTUNITY:
- Developer delinquent in the payment of real property and special taxes totaling $387,551; penalties and interest accruing.
- Developer requested that Bondholders allow usage of undisbursed bond proceeds for funding tax and bond payment delinquencies.
- Our client, the Bondholders, engaged TVM to advise of the advantages and risks involved with accepting the Developer's proposal, while considering:
- the property’s financial prospects;
- its position in the market; and
- the Developer's ability to complete the project successfully.
TVM’s CHALLENGE:
- Develop strategies to maximize the value of the property;
- Analyze Developer’s proposal and pro forma; and
- Determine any potential future need for bond proceeds to support the project.
TVM’s FINDINGS:
- TVM determined that:
- the proposed Capitalized Interest account would be insufficient to fund future differences between the scheduled bond payments and TIF revenues; and
- the projected absorption rates and realized values would adversely impact the viability of the proposal.
VALUE ADDED:
- Recommended acceptance of Developer's proposal and allocation of at least some of the remaining bond funds to Capitalized Interest account.
- Demonstrated how expanding existing government approvals would increase the Developer's flexibility in designating alternate product types on future lots tailored to the demands of the marketplace.
- Presented a method to increase potential sales pace and product value by constructing the pool and clubhouse complex (valuable market differentiators) as soon as financially possible.
- Recommended introducing another builder into the project, thereby increasing the range of product styles, looks, and absorption rates.