Anchorage Daily News

A few weeks ago I accompanied a developer who was visiting several local banks to discuss financing for construction of a commercial building. The numbers worked, prospective tenants were in hand, but we needed the financing to go forward.

Financing was a major concern. The worldwide financial crisis and difficult lending in the Lower 48 made us wonder if affordable financing here was possible. Each bank essentially said the same thing: Yes, financing for a solid project is available through AIDEA.

AIDEA is the Alaska Industrial Development and Export Authority, a state agency. It was created in 1967 to "provide financing for Alaskan businesses to expand the economy of the state and provide jobs for Alaska," according to AIDEA's Web site, www.aidea.org.

At these recent meetings, I could not help but remember the really bad days following our economic meltdown in the late '80s. Alaska was essentially red lined by outside lenders. They viewed Alaska as too risky and would not make loans for Alaska projects.

Our economy was hit hard by the overbuilding of houses, malls and offices followed by an oil-price crash, and it struggled to get back on its feet. To advance we had to have lending beyond what local banks could provide. If we had not had AIDEA to provide necessary financing, we would have had a much more difficult recovery. A large number of the transactions I, and other brokers, worked on then were only possible because AIDEA provided most of the money.

Now, here we go again. Currently outside lending for Alaska projects is very difficult to obtain, but AIDEA can provide financing. While the local banks can provide some financing without AIDEA, the terms of AIDEA financing are generally more favorable to the borrower.

For commercial real estate financing, the typical AIDEA loan is a deal in which a bank puts up as little as 10 percent of amount borrowed and the rest is AIDEA. The bank portion is at the bank interest rate and amortized over about 10 years; AIDEA's portion at its lower interest rate is amortized from 15 to 25 years. The blended rate and amortization results in more favorable loan terms than are otherwise available today.

AIDEA is a secondary lender, which means it lends through banks rather than directly with the borrower. Banks bring loans to AIDEA for their consideration. So if you are interested in an AIDEA loan, talk with your banker.

AIDEA provides much more than financing for commercial real estate projects. It has a variety of programs, including facilitating export financing through the Export-Import Bank, and conduit loan project financing. It has a loan portfolio of 268 loans with an outstanding principal balance of about $380 million. AIDEA has issued over $1.2 billion in conduit revenue bonds and more than $800 million in loans since its inception. Development projects it has financed include: Red Dog mine road and port, FedEx Maintenance Facility in Anchorage, Snettisham Hydroelectric Project, Ketchikan Shipyard, Skagway Ore Terminal and the Healy Clean Coal Project.

AIDEA provides an annual dividend to the state of 25 to 50 percent of its net income. Since the program began, AIDEA has made available more than $204 million in dividends to the state general fund.

We are very fortunate to have AIDEA to provide financing at times like these, when outside financing is difficult. What started out 40 years ago as a state program to help business get favorable financing has grown into a financial power house for Alaska projects and businesses.

Chris Stephens, CCIM, is a local associate broker specializing in commercial and investment real estate. His opinion column appears every fourth Friday.

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