Valuing Tax-Exempt Real Estate Bonds

Summer 2010, Vol. 35, No. 2 features

Abstract: In today’s constrained lending environment, tax-exempt real estate bonds are a viable apartment financing option because of their low “all-in” costs (interest rates), extended maturity terms and potential assumption features. These bonds are generally only assumable on properties originally developed with them in place, but in some cases, are available for existing properties undergoing substantial renovation. This specialized financing cannot be duplicated in the marketplace and provides financial and nonfinancial benefits to a variety of associated parties. In this article, the author gives an overview of estimating the value of these bonds for acquisition, appraisal or accounting purposes, and the need for an in-depth understanding of their characteristics.