description

WindsorMeade of Williamsburg (the “Community”) is a start-up continuing care retirement community located in Williamsburg, Virginia, owned and operated by Virginia United Methodist Homes of Williamsburg, Inc. (“VUMHW”). VUMHW is affiliated with Virginia United Methodist Homes, Inc. (VUMH), which was founded in 1948 and owns and operates five continuing care retirement communities and one assisted living community located throughout Virginia. The first phase of the Community will consist of 85 independent living apartments, 96 detached villas, 14 assisted living apartments, and 12 health care units. The Community is located within 10 minutes of Colonial Williamsburg and the College of William and Mary. While VUMH has provided significant financial support for WindsorMeade as described below, VUMH is not obligated to pay the debt service for the VUMHW bonds.

challenge

Initial marketing of the Community was successful, resulting in 83% pre-sales by the end of 2004. In the spring of 2005, significant increases in project costs, due in part to escalating construction prices, caused Management to redesign the Community and increase the entrance fee pricing for new depositors. During the process of redesigning the Community and repricing the entrance fees, a significant number of cancellations occurred resulting in pre-sales dropping to a low of 59% in November 2005.

solution

Shortly after the redesign process was initiated, Sims was hired to work with Management and its consultants on the redesign of the Community and to develop a viable financial model and plan of finance. Once the redesign of the Community and the financial model were completed, marketing of new reservations resumed. In addition, VUMH secured a bridge loan to start construction on the Community, which began in March 2006. By May 2007, WindsorMeade had achieved 70% pre-sales.

implementation

The Series 2007 Bonds were structured with a combination of variable, adjustable and fixed rate taxexempt bonds. The variable and adjustable rate bonds are expected to be repaid within approximately three-and-a-half years with the proceeds of first generation entrance fees. The structure of the financing also included a long-term Ground Lease and an Administrative Services Agreement between VUMH and VUMHW. In addition, the Series 2007 Bonds are non-recourse to VUMH or any of its related communities.

In addition to providing the site for the Community through the long-term Ground Lease, VUMH has provided approximately $14.65 million of financing, structured as subordinated debt, as well as a $500,000 equity contribution, providing a substantial capital base for the senior debt.

result

On August 1, 2007, VUMHW issued $114.270 million of tax-exempt non-rated bonds structured in three series:

1. $65.9 million of short-term, variable rate bonds backed by a letter of credit from LaSalle Bank
2. $5.0 million of non-rated, 5-year adjustable rate bonds with an initial rate of 5.25% and a 30- year maturity; and
3. $43.3 million of long-term fixed rate bonds with 10-, 20- and 30-year maturities and yields ranging from 5.25% to 5.55%

In addition to financing a portion of the remaining construction costs and reserves for the Community, the Series 2007 Bonds repaid the outstanding bridge loan and reimbursed VUMH for a portion of costs it incurred on behalf of the Community.

Chris Henderson, CEO of VUMH and VUMHW commented that “without the support of past and present board members, dedicated financial professionals and strongly committed future residents, this community would not be a reality.”