Looking at Revenue bonds this morning and having a hard time understanding the difference between lease back rental bonds and Industrial revenue bonds.
what is the difference?
Hi, they’re very similar. The primary difference is corporations pay the lease for IRBs, whereas municipal units pay the lease for lease-back bonds.
Lease-back bonds, also known as lease rental bonds, involve the issuance of a bond to build or buy a building to be rented. Once the building is ready to rent, the lease payments from the renters are used to pay back the borrowed funds. These are very similar to IRBs, but lease-back bonds support developments that are rented to other municipal units. For example, a city builds a new facility for the police department, which then rents the facility from the city. The lease payments are used to pay back the borrowed funds.
Here’s the section on Lease-back bonds in our Series 7 course: