Since 1991, the GMA Bricks and Mortar Financing Program has provided a cost-effective way for Georgia’s cities to finance real estate projects. The city of Centerville was one of the most recent beneficiaries of this service. The city had long considered the construction of a new fire station to serve its residents. After careful consideration, the city decided to move forward in the summer of 2020 to finance the project through GMA’s Bricks & Mortar Financing Program.
After an initial conference call, GMA engaged legal counsel to work with the city to set a transaction calendar and obtain all related council resolutions. Within four weeks of the expected close date, GMA issued the project request for proposal to 11 institutions and received strong feedback.
As the COVID-19 pandemic disrupted financial markets in the spring of 2020, it was critical to issue the request to a wide group of banks to ensure the best possible execution. After reviewing proposals, the city selected a strong regional institution that maintains a local presence. And as the proposed interest rate was materially lower than what was originally projected, the city was able to shorten the term of the transaction resulting in material interest expense savings. All parties then worked to finalize the documentation and successfully close the transaction.
“Working with GMA’s Bricks & Mortar program allowed the city of Centerville to secure long-term financing at an attractive interest rate. The process was efficient, and we are very pleased with the outcome for our residents,” said Centerville Accountant Carol Harrison.
The Bricks & Mortar Program allows cities in Georgia to finance 100 percent of eligible real estate project costs at competitive interest rates. Transactions are structured as a sale leaseback with the property titled to GMA and then leased back to the city. Once the lease is fully repaid, property ownership is transferred back to the city. This structure allows cities to finance the project without a public referendum requirement or reporting the lease as General Obligation debt.
GMA issues a financing Request for Proposal to 10 to 15 banks throughout the state, ensuring the city obtains competitive interest rates and flexible financing structures. Most transactions are structured with terms of 10-15 years and can be pre-paid without penalty. Interest rates are determined by the city’s underlying credit quality and current market conditions. Local institutions can also be included in the RFP process if the city wishes to accommodate existing banking relationships.