The best strategy for TIF bond monetization

While TIF has been around for decades, monetizing a developer backed TIF bond is a relatively new concept in commercial real estate financing. However, the methods to best monetize your bonds have historically been limited. Some developers may choose to loan against the bond through their construction loan, but would be subject to the same interest and advance rates, which limit net proceeds. Some also hold the bond as income to the real estate, but this can significantly limit returns, and can also hinder project disposition.

Turning TIF into capital

A brand new approach for real estate developers

Hageman Capital takes a new approach to TIF and can make a project financially viable. By selling your TIF bond, you can convert it into immediate capital, enhancing your project’s returns while reducing contributed equity. Utilize our free online tool to estimate your TIF’s value based on your development specifications today.

See how much your TIF is worth now

Cover project costs and reduce contributed equity

To even purchase land and begin construction, you need to know if your planned development will generate ideal returns. That becomes difficult in an environment with higher construction costs, land costs, interest rates and municipal regulations. Access to tax increment financing adds a much needed capital infusion to make projects feasible, but why monetize your incentives for a lower value?

Selling your TIF with Hageman Capital generates the most value for your given incentive. We estimate bond values based on the full term of your incentive, and evaluate the purchase price based on real time treasury rates. We partner with you to create the an optimal bond structure based on your incentive, ensuring maximum TIF proceeds. Our process produces millions in direct capital at loan closing.

Turn TIF into up-front cash

Alternative TIF monetization methods may result in lower upfront proceeds

At Hageman Capital, we help communities succeed through new developments. And new developments are only viable when the financial metrics make sense for project stakeholders. Our process ensures developers get the most value for TIF to help bridge the gap of planned projects. Other monetization methods can source capital from your TIF but nowhere near the proceeds from selling.

Holding your TIF bonds mean proceeds over time

Historically, developers have held onto their bonds, which results in semi-annual cash flows paid for by the taxes of the project. However, this strategy often negates the significant financial impact monetizing a bond up-front can have on project returns.

Based on the project’s financial needs, recurring capital is not nearly as impactful as proceeds upfront.

Combining TIF into your construction loans means a drag in return

Most commercial real estate projects obtain a construction loan to cover a large chunk of cost associated with your project. In certain instances, you can include cash flows of the TIF to the project and increase the construction loan. However, this strategy isn’t ideal for developers, as it severely limits the amount of proceeds from the TIF and requires additional contributed equity from the developer.

Additionally, including the TIF cash flows into the project causes a drag on real estate returns, as the returns on the bonds should be lower than the returns of a real estate project.

Learn More – Hageman Capital vs. loans

Originating new loans for your TIF bond

New loan origination will open another line of credit for your project financing. Like working with your bank and construction loan provider, this option enables developers to access a portion of your TIF’s value for interest payments. This tactic comes with additional fees for loan origination, servicing and underwriting among other nuances. Doing so requires additional up-front equity and increases interest payments for your project.

Up front TIF bond monetization is rare

Allowing a developer to capture incremental taxes is a risk that municipalities balance with the value a community can receive with a new project. Normally these taxes goes toward other municipal uses and improvements, thus the proposed development must generate additional value and future taxes for the community, above and beyond the initial value of the TIF incentives. To reduce exposure to a municipality’s credit, most TIF bonds are issued as developer backed, and pay-as-you-go.

Optimize TIF structures for more capital at construction loan closing

Selling your TIF is the best solution for making a project feasible, and improving returns. Being able to monetize TIF upfront means less debt and lower contributed equity. To get the most value out of your incentive, you’ll need structuring expertise. Hageman Capital is your partner to navigate a variety of TIF issues, contact us today and get started.

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