| Havenwood-Heritage Heights |
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“Your constant availability by regular phone and cell phone was welcomed when often times these types of sophisticated deals require someone to answer key questions or run numbers at the spur of the moment. You have been there for us and it is greatly appreciated by the entire Havenwood-Heritage Heights team. We made a terrific choice many years ago by selecting Herbert J. Sims”
Michael Palmieri challenge United Church of Christ Retirement Community, Inc. d/b/a Havenwood-Heritage Heights (“HHH”) consists of 425 independent living units, 55 assisted living units and 115 skilled nursing beds on 2 campuses in Concord, NH. The first campus, Havenwood, was opened in 1967, while the second campus, Heritage Heights, opened in 1980. In 2003, HHH began the process of repositioning and improving the physical plant of its Havenwood campus, a process which is ongoing. The repositioning includes the construction of new independent living units, the upgrading of central community spaces, the addition of many new amenities for the residents and renovations to the health center. In addition, occupancy rates at the Havenwood campus had begun to slump, largely due to the large inventory of studio and studio/alcove units. To improve the occupancy and cash flow of the Havenwood campus, management has begun the process of combining many of these small, difficult to market units into larger, more attractive units which have become very popular with prospective residents.
solution Sims crafted a plan of finance which included $16.5 million of letter of credit enhanced variable rate bonds and $12.745 million of non-rated fixed rate term bonds. $1.5 million of the variable rate bonds will be redeemed from entrance fees from the renovated IL units. The interest rate on the remaining $15 million of variable rate bonds will be fixed via an interest rate swap for a period of 10 years. The Series 2006 bonds will include no guarantee or credit support from the HHH Trust Fund, and will maximize the maturity of the bonds to allow HHH to borrow an additional $6 million to fund the continued repositioning of the Havenwood campus. In addition to creating the capacity to add $6 million of new money, the Series 2006 bonds will provide significant annual debt service savings to HHH, helping it to further enhance the quality of care and service that it provides to its residents. result Due to Sims’ skill in negotiation with the letter of credit providers and its strength in the pricing of the fixed rate bonds, HHH achieved perhaps the lowest ever cost of capital for a non-rated CCRC provider in New Hampshire. The non-rated fixed rate bonds were priced by Sims with an average coupon of 5.34%, with a final maturity in 2030. In addition, due to the 10 year term of the LOC and the execution of a 10 year floating to fixed rate swap, Sims secured an all-in annual rate on the variable rate bonds of approximately 4.65%. The resulting annual cost of capital for HHH is approximately 4.95%. Not only did Sims provide HHH perhaps the lowest ever cost of capital for a non-rated CCRC provider in New Hampshire, it also met each of the financing goals, as laid out by the Management and Board of HHH:
We appreciate the opportunity to work with HHH and look forward to continuing our relationship with them as they continue to build towards a prosperous future. |
HHH selected Herbert J. Sims & Co., Inc. (“Sims”) to help it refinance its Series 1995 fixed rate term bonds. The challenges to Sims were clear: achieve the lowest possible cost of capital; most flexible financial and operating covenants; limit HHH’s exposure to interest rate risk; eliminate any credit reliance upon the HHH Trust Fund, and; maximize HHH’s capacity to incur additional debt to fund the continued repositioning of the Havenwood Campus.
