Public & Non-Profit Finance

RealVest provides financial advisory and bond placement services for traditional and non-traditional public finance transactions. We have structured and financed major private and public development projects and composite taxable and tax-exempt programs, such as: private economic development loan pools, utility authority loan pools, governmental and non-profit projects, parking facilities and systems and waste disposal projects. While each transaction presented different challenges, the common thread of these assignments was the creative use of structured finance techniques to access the credit markets to provide optimal terms and rates.

One advantage over larger bond firms with separate groups for each function is that our organization flexibility and varied expertise enable us to apply techniques drawn from one financing sector to another. Examples might include the development of a tax-exempt synthetic lease product for certain types of educational and health care facilities clients to preserve direct, on-balance-sheet debt for properties and projects which are normally depreciable and are intended to be owned for indefinite periods. Another example involves using taxable securitization features to create bond pools and composite issues. Or, we might use a public, tax-exempt agency as a lessor of private facilities serving some public purpose (job creation) with subordinated credit support. Yet another concept invokes serialization drawn from the tax-exempt bond arena in structuring taxable corporate or real-estate backed bonds.

An important specialty is our proven ability to maneuver the narrow line of tax exemption for public-private projects. For instance, we were the first firm in New Jersey to obtain tax-exempt bond financing for educational and cultural facilities for religious-affiliated non-profit organizations without breaching the delicate barrier between church and state activities. Similar sensitivity was required to enable infrastructure and site preparation to be financed tax-exempt, even though the project would ultimately be commercial. Public-private partnerships for parking, sports or entertainment facilities also can use tax-exempt financing if properly structured.

As noted above, Realvest had structured and sold the first tax-exempt bonds for educational, social and cultural facilities for a temple in New Jersey. In the mid-1990's, we were retained by the New Jersey Association of Independent Schools to structure a tax-exempt bond pool for private secondary schools, but implementation was impaired by timing differences between the participants and management changes within the association. We believe that non-profit secondary schools have not historically availed themselves of tax-exempt financing as effectively or as often, and plan to target this market in 2005.

Remarketing & Indexing

Realvest, through its NASD-member Broker-Dealer affiliate, provides indexing and remarketing services, respectively. As Indexing Agent, Realvest surveys the market for each security and reports interest rates for each sector and credit level. As Remarketing Agent, our Broker-Dealer stands ready to arrange for a new institutional investor to purchase bonds or notes tendered by a holder who requires liquidity. These services are required for Tax-Exempt VRDB's, or variable-rate tender or demand bonds, a form of tax-exempt commercial paper, and for ARTSsm, described in our “Products” page, which is a form of credit-enhanced taxable Commercial Paper.

VRDB's and ARTS provide low money-market financing rates for tax-exempt and taxable borrowers, with periodic interest rate resets for daily, weekly or longer periods.

Real Estate Lease Financing

This business serves creditworthy corporations with direct or implied credit ratings at or near investment grade. Although we have achieved some success with direct marketing in past years, our primary target consists of the major commercial banks that have first call on these companies, and the few nationally-known real estate brokerage and service firms.

RealVest offers a number of proprietary lease-financing products, which are described below under "Proprietary Products". Our lease-financing services include providing an owner/lessor from among our network of major leasing companies and access to the credit markets to obtain low interest rates, using ARTS or other capital markets funding sources. In order to comply with new accounting rules with minimal equity, we have joint-ventured with several major bank leasing companies to serve as lessors for creditworthy lessees, and provide equity when necessary.

The credit markets afford more leverage and require less equity than the real estate markets, permitting lower rents and attractive renewal and purchase options. Generally, RealVest’s proprietary lease programs offer the lessee all the benefits of off-balance sheet lease financing, in combination with certain potential residual benefits.

Significantly, the unique benefits of a COLTS or TNSL Lease may enable Realvest and the leasing company to build a long-term residual interest in the leased property. For example, in order to ensure off-balance-sheet GAAP treatment, a lessee cannot be offered a “bargain purchase option” at the end of an initial lease term. In our $75 million COLTSsm financing for Carmike Cinemas, the company's likely exercise of its purchase option at the end of the initial 16-year lease term would have resulted in a profit of approximately $17.5 MM on a $2.25 MM investment by the special purpose entity formed by Realvest to own and lease the properties.

Although SPE's have, since Enron, fallen into disfavor, the new accounting rules (FIN 46) generally permit 5% equity for multi-asset lessors and 10% for single-entity lessors of strong properties. Thus, credit-leasing still offers substantial profits and leverage. As indicated, we can either provide qualified multi-asset lessors or form a separate lessor entity.

Securitization

The targeted market segment for this profit center embraces both corporate and municipal clients. RealVest has the ability to securitize virtually any group of assets that produce predictable cash flow, such as mortgages, commercial loans, revolving loan funds, tax liens and lease and other receivables. We have devised and executed several innovative structures for major governmental agencies and clients such as the first Composite Bond Pool for both private and non-profit borrowers, the first Title IX small business loan pool securitization approved by the U.S. Department of Commerce and the first governmental loan pool endorsed by the N. J. Conference of Mayors.

These and similar programs could be marketed to economic development agencies, as well as educational, healthcare and housing associations that provide cooperative services to a large membership.