Financing Near for $5.5B Michigan-Backed Housing Project in Iraq
|May 21, 2012||Filled under Iraq Daily News|
A $5.5 billion housing development in Iraq to be built in part by Michigan companies is making progress on an important front: financing.
Agreement on a financing package is expected within the next two months, said Patrick McRae, director of international programs for the Prima Civitas Foundation. The foundation, based in East Lansing, develops business opportunities for Michigan companies.
“We have been around the world, literally, in exotic realms of project finance. The risk parameters on a project like this exceeded the risk tolerance of U.S. banks right now. We ended up with an entity in London,” McRae said, declining to disclose its identity.
“We’re optimistic. We’re submitting background documents this week to London and hope within 30 to 60 days we’ll have some kind of final approval of finance. We have many hoops to jump through still.”
Iraq has a severe housing shortage. The proposed project includes 100,000 housing units and other elements to support city life, from schools and commercial space to recreation. It will take six or seven years to complete and cover 15 to 20 square miles. The financing will be implemented in stages.
Prima Civitas formed the Michigan Iraq Consortium for Housing Development (MICH Development) to manage the proposal. Its financial strategy is based on heavy use of letters of credit and stand-by letters of credit, McRae said.
Stand-by letters of credit act as insurance policies on the letters of credit, which assure payment in international transactions.
“It’s very complicated. Fortunately, we have highly competent finance people on the team,” McRae said. “All eyes are on the finance right now. If it goes, we’ll begin recruiting a wide range of suppliers and contractors.”
MICH Development has set up a website, www.michdevelopment.us , where companies can register.
“We have received more than 80 registrations from the state of Michigan alone,” McRae said.
McRae said architecture and engineering services, as well as high-energy-efficient materials, are the service sectors most likely to attract Michigan companies.
MICH Development’s involvement in the project has attracted requests that it participate in other projects in Iraq outside the scope of this project, including a new stadium and other proposals, McRae said. The organization also is pursuing work in Turkey.
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