$15,380,000 Lease Revenue Bond Financing (Financing & Development of Fire Station – P3 Project Delivery), 2014

The City of Oxnard needed a new fire station to serve the additional urban growth that occurred in the previous decade but did not want to assume the financing or construction risks associated with the development of the project. Furthermore, the City’s staff was overburdened, and the administration was seeking a way to lease a “build to suit” facility. The City was willing to sign a long-term lease, which meant that the costs and terms had to be determined prior to even commencing construction.

The City opted to utilize P3 and Design-Build-Finance (DBF) delivery models whereby the City would not have to develop, bid-out each component, assume any financing or construction risk, nor make any lease payments until the completion of construction and ultimate delivery of the project to the City. A third party, a non-profit LLC, designed, built, and financed the construction. The City utilized a real estate asset it owns and leased the property to the non-profit LLC which oversaw the development and construction of the project. In order to fund the construction costs and be able to determine what the ultimate lease payments would be, it was necessary for the non-profit LLC to obtain long term financing prior to construction. Kosmont acted as Financial Advisor to the non-profit LLC and was integral in building the credit for this structure. There are many “moving parts” insofar as there was a conduit bond issuer, the non-profit LLC which borrowed the bond proceeds from the bond issuer, and the City which makes lease payments to the borrower. The lease payments are pledged by the non-profit LLC to the bond issuer for the repayment of the loan, while the loan payments (made by the non-profit LLC to the bond issuer) are pledged to the bondholders for the repayment of the bonds.

Kosmont orchestrated the development of the entire credit package, which included a payment and performance bond, a builder’s risk policy and liquidated damages in the construction agreements, as well as funded interest that covered the construction period. The end result was a successful bond issue that achieved a rating of “A+” from Standard and Poor’s. The project was ultimately delivered ahead of schedule and under budget.