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MassDevelopment Alliances Yield Financing Fixes

Strength In Numbers – Agency Partnerships Promote Economic Growth

August 29, 2011 : Banker & Tradesman, by Marty Jones

Special To Banker & Tradesman

As the state’s finance and development authority, MassDevelopment works constantly with numbers – interest rates, collateral values, cash flows, and the many other details of finance.

The agency has a wide range of financing options, and clients include nonprofit institutions, manufacturers, real estate developers, venture-backed companies, and small farms. But one of the most important aspects of our work is our relationships, namely, our collaborations with banks and communities around Massachusetts that allow us to leverage our collective resources to help businesses, developers, and nonprofits.

Take, for instance, one of the agency’s most popular options, tax-exempt bond financing. These bonds usually provide the lowest interest rate option for a wide range of real estate projects, including the construction or renovation of affordable and mixed-income housing, college and university labs, dorms and offices, community health centers and manufacturing facilities. They also help finance the purchase of new equipment for biotech companies, manufacturers, farms, and others.

Some of these are publicly issued bonds, but many borrowers may have the convenience of working with their existing lenders since so many of our local banks directly purchase tax-exempt bonds. MassDevelopment staff has teamed with banks around the Commonwealth to provide access to this financing for organizations such as the Edward M. Kennedy Community Health Center in Worcester; Eastern States Exposition – home of the Big E – in West Springfield; and KIPP Academy Lynn Charter School. Tax-exempt bond deals result in a win-win situation for banks and borrowers: preserving relationships while delivering savings.

Loan Participation

MassDevelopment also works with banks through loan participations. Earlier this year, MassDevelopment purchased a $2 million interest in a $9 million Boston Private Bank & Trust Company loan to the Whittier Street Health Center in Roxbury. Whittier Street used loan proceeds and New Markets Tax Credits to help fund construction of its 79,000-square-foot health center on a long-vacant parcel near Boston Police headquarters and expects the project to create 50 permanent positions. This three-way partnership – Property & Casualty Initiative also purchased an interest – showed strength in numbers to expand access to health care, redevelop a long-vacant parcel, and create jobs.

Finally, MassDevelopment can provide guarantees on a portion of a bank real estate loan or a tax-exempt bond. The guarantee increases the amount of financing available to businesses by closing the gap between the bank's maximum allowable loan advance and up to 90 percent of the property value.

Help In Tough Times

We also have other special guarantee programs for charter schools and companies that export products. For example, a $1 million bond issued on behalf of Old Colony Montessori School in Hingham was enhanced by a $109,000 mortgage insurance guarantee, helping the school add space for existing classes, and expand multi-purpose space for enrichment programs like art, music, and foreign language instruction.

MassDevelopment has also recently become a lender under the U.S. Department of Agriculture Rural Development's Business & Industry Loan Guarantee Program. This program allows us to support rural businesses, job creation, and retention while seeking to improve the economic and environmental climate in roughly 130 eligible communities.

MassDevelopment knows numbers, and knows that the best results come from pairing that expertise with the resources available from other financial institutions in Massachusetts to help promote economic growth. Even in difficult economic times, like fiscal year 2010, MassDevelopment financed or managed 238 projects in 104 communities across the state, generating nearly $1.4 billion in investment. But few of these totals mean as much as 351 – the cities and towns of Massachusetts, the number of communities we hope to help annually.

Marty Jones is president and CEO of MassDevelopment.

© Copyright 2011 Banker & Tradesman.