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MassDevelopment In The News
MassDevelopment Nearly Doubles Its Bonding from FY2006 Pace
February 8, 2007: The Bond Buyer, by Michelle Kaske
The push to build more affordable housing and an increase in borrowing for industrial development projects has driven the Massachusetts Development Finance Agency to nearly double its bonding pace through the first half of its fiscal year, agency officials said.
MassDevelopment sold about $877.8 million of debt during the first half of fiscal year 2007, which began July 1. That’s just shy of the $908.3 million volume figure the agency brought to market in all of fiscal year 2006, and nearly twice the $467 million of bond sales during the first half of that year. Similarly, the number of deals increased to 51 during the first six months of fiscal year 2007, up from 43 deals in the first half of fiscal 2006, according to MassDevelopment documents.
On the housing front, MassDevelopment has seen interest from developers in multi-family, rental housing. The agency’s total rental housing bonds for the first six months of fiscal 2007 escalated $165 million in six issues from only $28.7 million of volume in two sales during the same period the year before.
This increase is due to developers returning to rental projects as the for-sale housing market has softened while the state’s long-running Chapter 40B program allows developers to enter the tax-exempt bond market via certain conduit issuers like MassDevelopment or the Massachusetts Housing Finance Agency, if 25% of the new units are reserved for lower income households.
"Demand for new rental housing has remained strong for several years, even through the run up in for-sale housing prices," MassDevelopment president and chief executive Robert L. Culver said in an e-mail. "However, development of new rental housing was overlooked as condominium and single-family development became more profitable. The cycle has turned and developers are once again focused on rental development, and permitting mechanisms like Chapter 40B, which is conducive to MassDevelopment bond financing."
Also boosting the agency’s volume is an increase in industrial development bonds, with MassDevelopment selling $28.6 million of manufacturing bonds during the first half of fiscal 2007, more than double the $13 million total of sales for the same period in fiscal 2006.
Before Jan. 1, only companies with capital expenditures of less than $10 million could borrow funds using IDB financing. The federal government increased the capital expenditure cap to $20 million at the beginning of this year, allowing more companies to take advantage of the tax-exempt bonds. MassDevelopment anticipates selling an additional $100 million of IDBs within the next three to nine months, with eight manufacturers included in the IDB program that did not previously qualify.
Knowing the federal government would change the cap, the agency reached out to potential borrowers who could benefit with IDB financing.
"We anticipated the increase in the industrial development bond capital expenditure limit and stepped up our calls on manufacturers last summer," Culver said. "Because more manufacturers now qualify to participate, we expect to continue to see our pipeline grow."
MassDevelopment’s education volume also grew to $540.8 million of bond sales for the first half of fiscal 2007, up from $283 million sold during the first six months of fiscal 2006. The change reflects a $225.8 million Harvard University issue that priced in July, the school’s first sale with the agency in three years, MassDevelopment spokesman Adam Bickelman said.
In looking towards fiscal 2008, the agency hopes to use new state legislation that allows more flexible financing for public-private developments through special assessment bond programs, according to Bickelman.
MassDevelopment serves as a conduit issuer for private companies, non-profit organizations, real estate developers, and educational institutions throughout the state.
© Copyright 2007 The Bond Buyer.
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