-- High-end real estate developments are tapping the municipal-bond market, leading to a slew of so-called luxury dirt deals and fueling returns for investors willing to take on the risk.This year, state and local debt buyers have helped finance a vacation-home golf enclave in Florida, a resort near Zion National Park and a $4.2 billion redevelopment in Atlanta’s downtown.
The bonds are often sold to finance the initial infrastructure for a development like water systems, street lights or roads. They’re backed by future revenue that will be generated after completion. That adds risk as there’s no guarantee the project delivers what was forecast.“You just need to do your homework on these deals,” said Craig Brandon, co-head of municipals at Morgan Stanley Investment Management.
“Dirt deal supply overall is fairly strong,” he said, noting the “unusual” pace of transactions with a size of more than $100 million. “There is a constant flow.”In February, a local district in Florida issued a $40 million deal to raise funds for a luxury resort community, as developers and investors bet on a resurgence in golf.
In May, Black Desert Resort, a 600-acre luxury center in Utah, tested that demand when it borrowed $180 million of munis. The development includes a golf course designed by the late champion Tom Weiskopf, more than 700 single-family homes and a boardwalk. That sale was more than 15 times oversubscribed, according to a person familiar with the matter who asked not to be named because they weren’t authorized to speak on the deal.
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