Bond Financing

What is bond financing?

Bond financing plays a crucial role in funding real estate projects in Florida. Essentially, bond financing involves the issuance of debt securities, called bonds, to raise capital for various purposes, including real estate transactions. These help to finance the acquisition, construction, or renovation of properties, and to refinance existing debt. For example, a municipality may issue tax-exempt bonds to finance the construction of affordable housing or infrastructure improvements. The investors who purchase these bonds receive interest payments and, eventually, the return of their principal investment.

A real-life example of bond financing in Florida real estate is the Miami Worldcenter, a mixed-use development in downtown Miami. The project used tax-exempt bonds to fund infrastructure improvements and public amenities, leveraging the support of public financing to create a vibrant urban destination.

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Which Florida laws, rules, and regulations apply to bond financings?

Several Florida and federal laws, rules, and regulations govern bond financing in real estate transactions. At the state level, the Florida Statutes Chapter 159 provides the legal framework for issuing bonds in Florida, including provisions related to the establishment of housing finance authorities and the issuance of bonds for affordable housing projects.

At the federal level, the Internal Revenue Code contains provisions that apply to tax-exempt bonds, such as Section 103, which exempts the interest on certain state and local bonds from federal income taxation, and Section 141, which sets forth requirements for bonds to qualify as tax-exempt.

In addition to statutory requirements, bond financing must also comply with the rules and regulations of the Securities and Exchange Commission (SEC), which governs the disclosure, registration, and reporting requirements for municipal securities.

What are common issues associated with bond financing that lead to litigation?

The following issues tend to escalate transactional disputes to litigation:

Disclosure violations: Inadequate or misleading disclosure of material information during bond offerings may lead to litigation under the Securities and Exchange Commission (SEC) regulations.
Tax-exempt status disputes: Disagreements over whether bond financing meets the requirements for tax-exempt status under Section 103 and Section 141 of the Internal Revenue Code can lead to legal disputes.
Breach of fiduciary duty: Conflicts may arise when bond issuers or trustees fail to fulfill their fiduciary duties, as established by Florida Statutes Chapter 159 or applicable federal laws.
Bondholder rights enforcement: Disputes may occur when bondholders seek to enforce their rights under bond agreements or indentures, leading to litigation.
Construction disputes: When bond-financed real estate projects encounter construction issues, such as delays or cost overruns, litigation may ensue between the parties involved.

When a set of facts is appropriate for legal advocacy or intervention, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation or another form of specialized advocacy, please contact our office to set up your initial consultation.

What measures should counsel take to resolve issues and avoid litigation over bond financing?

Ensure proper disclosure: Thoroughly review offering documents to confirm that all material information is accurately disclosed, in compliance with SEC regulations and other applicable laws.
Verify tax-exempt status: Confirm that the bond financing meets the requirements for tax-exempt status under the Internal Revenue Code, working closely with tax advisors and bond counsel.
Fulfill fiduciary duties: Advise bond issuers and trustees on their fiduciary duties under Florida and federal laws and provide guidance on best practices to fulfill these obligations.
Protect bondholder rights: Review bond agreements and indentures to ensure that bondholder rights are adequately protected and develop strategies to address potential disputes before they escalate into litigation.
Monitor construction progress: Closely monitor bond-financed real estate projects, addressing any construction issues promptly and working with project managers to mitigate potential disputes.

Please contact our office to set up your initial consultation to see what forms of legal advocacy or intervention may be available for your unique situation.

Frequently Asked Questions

What are the benefits of using bond financing in Florida real estate transactions?

Bond financing offers multiple advantages, such as providing a low-cost source of funds for development, allowing tax-exempt income for investors, and spreading the financial burden of real estate projects across various stakeholders. These benefits can make bond-financed projects more attractive to developers, investors, and local governments.

Can private entities use bond financing for real estate projects in Florida?

Yes, private entities can access bond financing for real estate projects through conduit issuers, like Community Development Districts (CDDs) or Industrial Development Authorities. These entities issue bonds on behalf of private developers, allowing them to leverage the tax-exempt benefits and low-interest rates typically associated with municipal bonds.

How does the underwriting process work for bond financing in Florida real estate transactions?

During the underwriting process, an investment bank or financial institution assesses the creditworthiness of a bond issuer and structures the bond offering. The underwriter conducts due diligence, prepares offering documents, and markets the bonds to potential investors. The underwriting process helps to ensure that bond financings are structured to meet the needs of both the issuer and investors.

Have more questions about real estate transactions and disputes?

Crucially, this overview of bond financings does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.