“The Board and Management of Active Retirement Community, Inc. d/b/a Jefferson’s Ferry are very pleased with the recent refinancing of our bonds and the excellent support we received from Herbert J. Sims, Inc. Sims’ Involvement was an integral part of Jefferson’s Ferry’s ability to receive an investment grade rating from Standard and Poors and to refinance our bonds at a very favorable rate. Sims’ professionalism, skill, and ongoing effort during the refinancing will benefit Jefferson’s Ferry and its residents for years to come.”

Karen Brannen
Executive Director

fixed rate yield below 5.0% for jefferson's ferry refinancing

challenge

Active Retirement Community, Inc. owns and operates a retirement community known as Jefferson’s Ferry in South Setauket, New York. In 1999, Sims sold $82.7 million of bonds to fund the development and construction of Jefferson’s Ferry. Jefferson’s Ferry opened in 2001 and filled up its independent living units within 12 months and paid off $32.5 million of short-term and adjustable rate debt. Jefferson’s Ferry had outstanding $50.185 million of non-rated fixed rate debt with an average interest rate of 7.24%. The management team and board sought to improve profitability by significantly lowering their debt service. With a fairly flat yield curve, management and the board felt it would be prudent to lock in long-term fixed rates without taking on any interest rate risk.

solution

Jefferson’s Ferry engaged Sims to advance refund the outstanding fixed rate bonds. Sims determined that Jefferson’s Ferry was a good candidate for an investment grade rating, which would provide additional savings over non-rated bonds. Sims structured a finance plan with fixed interest rates to eliminate any interest rate risk.

implementation

Sims prepared a formal presentation for Standard & Poor’s Public Finance Ratings (“Standard & Poor’s) which included members of the management team and the board of directors to showcase Jefferson’s Ferry and its many successes. After a favorable credit assessment from Standard & Poor’s, Jefferson’s Ferry continued toward a rating, which would save approximately 50 basis points on the interest rate. Sims structured flexible bond covenants and quickly put together bond documents to take advantage of favorable market conditions.

result

Standard & Poor’s assigned a “BBB-” rating on the Series 2006 bonds. On behalf of Jefferson’s Ferry, Sims distributed $55.545 million of fixed rate, tax-exempt bonds with an average yield of 4.976%. This yield is 16 basis points lower than the Revenue Bond Buyer Index, an index of “A1” rated municipal revenue bonds. It is also 226 basis points lower than the 1999 fixed rate bonds. As a result of the refinancing, Jefferson’s Ferry will be saving approximately $450,000 per year in debt service. The net present value savings realized is $4.6 million, or 9.2% of the refunded bonds.