Howard Commons debt refinancing approved
By Kevin Boneske
HOWARD – The Village Board approved a resolution Nov. 8 to refinance notes used for the construction of the Howard Commons apartment complex.
The resolution authorizes Village Administrator Paul Evert and Director of Municipal Services Chris Haltom to sign off on locking in an interest rate for the sale of up to $26.25 million in general obligation promissory notes to minimize the village’s cost of refinancing the debt.
Board members received the refinancing details from Justin Fischer of Baird.
Baird has consulted with the village on bonding for the project with three luxury apartment buildings.
Fischer said the general obligation bonds will refinance two note anticipation notes the village currently pays only interest on and were originally used to finance the construction.
He said the sale of the tax-exempt general obligation promissory notes, with the finalized terms and interest rates, could take place in the middle of December.
Fischer said a subsequent Jan. 12 closing of the note anticipation notes from 2018 and 2019 will refund $25,345,000 for the Howard Commons portion and $695,000 for the Tax Incremental District No. 8 portion.
Because interest rates are now more favorable and revenues are better than expected when the project started, Fischer said financial projections based on the assumptions provided by Alliance Management, which manages Howard Commons on behalf of the village, indicated the debt could be paid off in 2041, two years sooner than previously anticipated.
“Based on the revenue projections from Alliance Management… that was the guiding factor in how much debt we can pay off on a yearly basis,” he said.
Fischer said Baird’s financial analysis indicated the debt could be paid off in 2041 based on a roughly $300,000 annual surplus of revenues over total debt service.
Baird estimated the village could lock in an interest rate of 2.13%.
Fischer said the notes will have an initial 10-year structure and could mature from Dec. 1, 2022 to 2031, with the first interest Dec. 1, 2022, and a preliminary call date of Dec. 1, 2027, or any date thereafter.
He said 2027 would be the next point the village could consider either a sale of the complex, paying the debt as scheduled, or restructure the debt based on what the revenues of the apartment complex are.
Fischer said revenues may be “very different than what the projections look like right now.”
Haltom said the village had another bond issue of around $9 million to finance the Howard Commons.
He said the village has invested a total of around $35 million in the project.
Haltom said the apartment complex, which was designed with 84 units in Building A, 39 in Building B and 45 in Building C, is currently valued at around $30-32 million.