United Methodist Homes of New Jersey / Bristol Glen

sims' powerful retail distribution system delivers attractive fixed interest rate

background

United Methodist Homes of New Jersey (UMH-NJ) was founded in 1907 and currently operates 10 communities in New Jersey which provide housing and healthcare to seniors. Four of those ten communities are members of the Obligated Group.

Sims previously underwrote six bond issues between 1993 and 2003 for the Obligated Group to finance new development, renovation and expansion of five senior housing campuses in New Jersey. The outstanding debt of those six bonds issues is currently $96.4 million, and the maturities range from 2008 to 2034.

new project

Bristol Glen - Newton, NJ

The new bond issue will be used to finance an expansion to Bristol Glen, including additional residential apartments, memory support apartments, assisted living apartments and additional service and common areas. The new units will enhance Bristol Glen’s continuum of care and its competitive position in the northwestern New Jersey market.

challenge

UMH-NJ wanted to minimize both the cost of issuance and the interest cost of the new Bristol Glen bond issue.

results

A key step in lowering the cost of issuance was eliminating the need for an independent feasibility study. In the master trust and supplemental indentures for the prior bond issues, Sims created the opportunity for UMH-NJ to issue additional debt if it could provide an officer certificate showing compliance with historic pro-forma debt service coverage and reserve ratio tests. UMH-NJ comfortably met the historic pro-forma tests based on its fiscal 2007 financial performance. Therefore, UMH-NJ did not have to engage a third party consultant to prepare a feasibility study.

Standard & Poor’s expanded its outstanding rating on the six prior bond issues to include the new issue. The new bonds and prior bonds were rated BB+ (negative outlook) by Standard & Poor’s. To lower the interest cost of the new bonds, Sims developed a marketing and distribution plan focused solely on sales to its retail investors. As a result, Sims distributed all the bonds to retail investors with a 30 year interest rate of 6.625%. In comparison BBB rated bonds priced the same week at 6.42%, and a $7 million CCRC completion bond issue was priced at 7.00%.