challenge

Cadbury Senior Services, Inc. sponsored and developed a start-up retirement community to be known as Cadbury at Lewes. Cadbury sought to secure the lowest cost of capital and the most flexible financing terms for the project. Initially, and prior to receipt of zoning approvals or local permits, Cadbury required financing for the purchase of the land, marketing and other pre-construction costs. Cadbury Senior Services needed to finance the project with minimal equity and required permanent financing which paid off all pre-development capital lenders in full. Once the project was built and open, Cadbury wanted to significantly reduce its leverage by paying down debt.

solution

Cadbury at Lewes, Inc. engaged Sims to finance the construction and development of its new CCRC, in the County of Sussex, Delaware. New Life Management & Development, Inc. served as the developer and marketing agent. First, Sims structured a non-rated $3.5 million bond anticipation note issuance which paid for the land and marketing costs, using the land as collateral. Because permits and approvals took longer than expected and the development funds were almost exhausted, Sims quickly raised another $450,000 to pay for marketing costs until the final approvals were in place. For the permanent financing, Sims structured short-term variable rate bonds which provide a low cost of capital and can be redeemed at any time, and long-term, fixed and adjustable rate bonds with favorable call protection to allow for early redemption.

Artist Rendering of Cadbury at Lewes - Lewes, DE

implementation

Sims sought a letter of credit to enhance $26.5 million of the $48.785 million bond issue. negotiated extremely favorable terms for Cadbury at Lewes, including low upfront and annual no required guarantees. The bonds, issued through Sussex County, Delaware, were structured combination of variable, adjustable and fixed interest rate of interest. The variable rate bonds expected to be repaid within three years with the proceeds of first generation entrance fees. adjustable rate bonds provide flexibility and can be paid off in 5-years or remarketed for intermediate term. In addition, a portion of the fixed rate bonds can be redeemed in five years.

result

Cadbury at Lewes issued $48.785 million of tax-exempt bonds structured in three series:

1. $26.5 million of variable rate bonds backed by a letter of credit from Citizens Bank
2. $4.0 million of non-rated, 5 –year adjustable rate bonds at a rate of 5.0% with a 30-year maturity
3. $18.285 million of non-rated, fixed rate bonds with an average yield of 5.93%.

The permanent financing paid off all seed capital lenders, including Sims’ bond anticipation notes and interim loan in full. In addition, Sims helped Cadbury to lock in a fixed rate of 3.54% for the variable rate bonds through an interest rate swap agreement, thereby minimizing any interest rate risk to the project.

Vic Amey, Chief Executive Officer of Cadbury Senior Services, reports, “I was very pleased with the effort that representatives from Sims made to truly get to know the area and the project. They did their homework and it really paid off in the end in the form of an excellent financing.”