$47.8 Million Expansion and Renovation Financing

description

Air Force Villages is a "BBB" rated organization consisting of two CCRC campuses, a Foundation and other related organizations located in San Antonio, Texas. It is the nation’s premier military retirement community serving retired officers and their families of the Army, Navy, Air Force, Marines and Coast Guard. Air Force Village I is located near Lackland Air Force Base and premier medical facilities, opened in 1970, and is home to over 500 residents. Air Force Village II has grown to a vibrant neighborhood of 700 residents since its opening in 1987.

Air Force Village II - San Antonio, TX

Air Force Villages recently developed a “five star” master plan titled the Building on Success Program to expand, upgrade and reposition both campuses to include new unit designs, a town center, new assisted living and state-of-the art health center facilities as well as new independent living home neighborhood, and dining venues—all within gated communities.

challenges

Air Force Villages engaged Sims in February 2008 to assist with project planning, capital structure evaluation and implementation of the selected finance plan. The Villages desired to proceed with the first phase of the Building on Success Program during one of the most challenging capital market and credit periods in history in order to take advantage of a favorable construction environment, address increasing demand and wait list growth as well as enhance the organization’s competitive position. To achieve desired objectives, Air Force Villages required approximately $69.5 million to fund the first phase program scope and construction costs. Air Force Villages did not want to liquidate investments at their current valuations, and they needed flexibility to enable funding for the future build-out of elements that were not yet fully defined.

solution

Sims defined and implemented a finance structure that consisted of two separate debt components. The first component consisted of a $20 million revolving bank line-of-credit in order to fund the independent living neighborhood build-out and provide the desired flexibility to expand, based on demand and sales velocity. The bank financing is planned to be taken out with entrance fees and a future tax-exempt bond issue.

The balance of the debt structure included a $47.8 million tax-exempt fixed rate bond issue sold to Sims retail investors and institutional accounts. The fixed-rate structure provided the debt service stability and covenant flexibility desired so that the organization can continue to focus on its expansion program and core operations. Sims’ retail distribution capability and planning involvement from the early stages of the project resulted in a cost of capital to Air Force Villages that was lower than other recently completed BBB bond issues from another underwriter in the senior living sector.