sims underwrites $296 million for a start-up ccrc in challenging market conditions

“Sims proved to be invaluable in arranging for pre-finance funding and securing the most cost effective capital in a very volatile, difficult market. Their guidance and expertise resulted in a successful outcome for our project, the largest long-term, fixed rate, non-rated bond issue for a start-up CCRC.”

James Davis
President & CEO
Amsterdam Nursing Home Corp.

In December 2007, Herbert J. Sims & Co., Inc. (“Sims”) underwrote a $296,395,000 bond issue to fund the development and construction of The Amsterdam at Harborside (“The Amsterdam”), a start-up life care community to be located in the Town of North Hempstead, New York. The Amsterdam will consist of 226 independent living apartments, 32 assisted living units, 18 units of special needs assisted living and 56 skilled nursing beds to be built on 8.9 acre site. The Amsterdam is the final component of a planned unit development which includes an active adult community, an 18-hole championship golf course, a 9-hole executive golf course, driving range and park land.

The Amsterdam is an affiliate of Amsterdam Nursing Home Corporation, Inc. (“the Corporation”), which was founded in 1872 and operates a 409-bed skilled nursing facility in Manhattan that maintains clinical and academic relationships with New York-Presbyterian Hospital. The Amsterdam will be the first CCRC owned by the Corporation.

Development Management services for The Amsterdam are being provided by an affiliate of Affirmative Equities Company II LP, while Marketing and Development Advisory services are being provided by affiliates of Greystone Communities.

pre-construction financing

Sims became formally involved with The Amsterdam in 2004, when Sims provided a $14 million MatchCap℠ seed capital financing which, together with a $3 million investment from Amsterdam Continuing Care Health System, Inc., the sole member of The Amsterdam, and a $16.2 million land loan, arranged by Sims and provided by HSH Nordbank, funded the acquisition of the project site and initial development and marketing efforts. Further pre-construction capital was provided by a $4.0 million seed capital investment by Sunrise Senior Living Investments, Inc., a $250,000 seed capital investment by Greystone and a $20 million land loan, arranged by Sims, which refinanced the initial $16.2 million land loan from HSH Nordbank. In total, $41.25 million of pre-construction capital was raised to acquire the project site and fund development and marketing costs through the pre-construction phase of development.

financing challenges

The financing for The Amsterdam presented a number of interesting challenges for Sims. The financing structure included $176,395,000 of non-rated tax-exempt bonds – the largest non-rated bond issue ever for a CCRC development. The schedule called for a closing before Christmas, but the preliminary official statement did not mail until November 27th. Simultaneously, the credit market environment was deteriorating, with almost daily announcements of mortgage writedowns inhibiting liquidity. The larger the financing was, the more buyers that were needed and the more difficult it was to underwrite. With a sophisticated marketing plan that included direct mail, internet, radio and newspapers, Sims was able to price the bonds at favorable rates compared to other underwritings. Amsterdam’s 35-year fixed rate was 35 basis points lower than a $128 million financing and 2 basis points lower than a $34 million financing for multi-facility owners.

financing results

The final bond structure included $95,100,000 of tax-exempt variable rate bonds and $24,900,000 of taxable variable rate bonds, both secured by a letter of credit from LaSalle Bank, $167,895,000 of nonrated, tax-exempt fixed rate maturities up to 35 years and $8,500,000 of non-rated, tax-exempt adjustable rate bonds.

As underwritten, The Amsterdam’s bond issue represents:

Sims thanks The Amsterdam for the opportunity to further the development of an outstanding new senior living community.