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6% NJ munis
Old 06-19-2005, 11:19 AM   #1
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6% NJ munis

Advertisement in the Sunday Philadelphia Inquirer for a new offering of 6% NJ municipal bonds $25,000 minimum maturing in 07/01/37.

The project is Lions Gate
http://www.retiretolionsgate.com/amenities_services.htm

The agent is Herbert J.Sims & CO. Their website is not complete.*Anyone have experience with them?
http://www.herbertjsims.com/main.php?main=0

Its very long, may be a good source of income & sell at a premium in 10 - 15 years.

Any thoughts?
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Re: 6% NJ munis
Old 06-19-2005, 03:35 PM   #2
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Re: 6% NJ munis

Quote:
Originally Posted by FunGoals
Advertisement in the Sunday Philadelphia Inquirer for a new offering of 6% NJ municipal bonds $25,000 minimum maturing in 07/01/37.

The project is Lions Gate
http://www.retiretolionsgate.com/amenities_services.htm

The agent is Herbert J.Sims & CO. Their website is not complete. Anyone have experience with them?
http://www.herbertjsims.com/main.php?main=0

Its very long, may be a good source of income & sell at a premium in 10 - 15 years.

Any thoughts?
Two comments:

1. Sell at a premium in 10-15 years? That loud outburst of laughter is the corporate/muni bond desk at your broker's office, where individual investors are nothing more than shark bait when we buy/sell individual bonds. Sure, it's not Elliot Spitzer-corrupt, but just because you see Muni or corporate yields at Yahoo's site yielding 4.5%, don't think for a minute that you'll be buying/selling anywhere near that. The markup/discount on the secondary market for bonds (corporate/muni) is outrageous (up to 5%). If you do buy it, plan on holding to maturity, unless you're willing to take a possible loss (or at the very least a gain so small you might be lucky to buy a few McDondalds Extra Value Meals) if you need the money in 10-15 years.

2. I don't know anything about the project - it sounds like it's funding a private development. Be careful about the following:
--tax implications/AMT: for 'private activity' bonds (such as this one) that aren't truly municipal activities, they are sometimes exposed to the Alternative Mininum Tax, and are not fully tax-free.
--creditworthiness: believe it nor not, just because a bond is a municipal bond doesn't mean it's backed by that municipality. For instance, there are quite a few municipal bonds in various parts of the country that are selling for a pretty good price (i.e. offer a fat yield). The reason? It's backed by General Motors, since the bond was sold to fund a municipal-sponsored facility for General Motors. Find out what the particulars are in terms of private insurance (there are several insurance companies that offer private insurance for Municipal bonds), as well as who is guaranteeing the repayment of principal and interest payments. What happens if the development hits contaminated soil or (God-forbid) uncovers a rare snail thought to be extinct for millions of years, or what if they have only sold 50% of the lots after 10 years?

Let me know what you find, as it sounds like it could be an interesting deal....

--Peter
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Re: 6% NJ munis
Old 06-19-2005, 06:05 PM   #3
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Re: 6% NJ munis

Instead, how about MMA or CHC? Mist of the income is tax free, easy to buy abd sell, and much more divrsified.
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Re: 6% NJ munis
Old 06-20-2005, 10:56 AM   #4
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Re: 6% NJ munis

Called Herbert J. Sims & CO

There are 4 series of bonds for a total of $83 million

2037 tax free yield 6%
2025 tax free yield 5.8%
2015 tax free yield 5.3
2010 tax free yield 5% with a put - can renew for 5 more years at a to be determined rate

The bonds are not rated or insured. The closing is July 14 & the rate may change at closing. Construction has started & will be completed in 2006. There is a $7.50 fee per bond when purchasing & a 1% fee for early redemption.

Prospectus is on the way.
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