Arbor Ridge at Brookmeade

expanding a mission and obtaining low-cost financing in a difficult environment

As an expansion of its mission to serve the senior population of the Hudson Valley region in New York, the Baptist Home at Brookmeade decided to develop a portion of its campus with the addition of independent living apartments and assisted living suites. Working with Haskell Community Developers, the Baptist Home developed a community concept which included the existing 120-bed nursing home, 54 independent living apartments and 26 assisted living suites, to be known as Arbor Ridge.

The Baptist Home planned to finance the development of Arbor Ridge with the issuance of tax-exempt bonds, but the cost to develop, construct and equip Arbor Ridge was projected to be over $25 million. This posed a substantial problem, as the Dutchess County Industrial Development Authority, the preferred issuing authority for the bonds, is limited to issuing bonds in maximum amounts of $20 million for projects like Arbor Ridge. Since it did not have cash on hand to fund the shortfall, the Baptist Home needed a financing solution which met its unique needs.

solution

Herbert J. Sims & Co., Inc. developed a financing strategy which separated the corporate ownership structures of the independent living and assisted living components of the project. The independent living component would be owned by Arbor Ridge at Brookmeade, Inc., while the assisted living component would be owned by Brookview, Inc, both of which are independently incorporated not for profit organizations. Since a) the two portions of the project were to built as separate buildings b) they were incorporated separately as independent, not for profit organizations, and c) the cost to develop, construct and equip each was below $20 million, they could each be financed by separate bond issues.

result

Sims’ financing strategy included the issuance of letter of credit enhanced variable rate bonds. Sims led the Baptist Home through the process of soliciting and negotiating letter of credit proposals. Not only was the letter of credit secured on favorable financial terms, but it also had a 10-year term, substantially longer than the industry norm of 5 years.

In September 2007, Sims completed the underwriting of variable rate bond issues in the amount of $19,845,000 for Arbor Ridge at Brookmeade, Inc. and $10,610,000 for Brookview, Inc. As a result of Sims’ innovative financing strategy and negotiation of a letter of credit for the entire financing, Arbor Ridge will enjoy a long-term capital solution with a 10-year fixed rate cost of capital of approximately 4.95%.

Herbert J. Sims & Co., Inc. thanks the Baptist Home for the opportunity to assist it with the financing of Arbor Ridge, and we look forward to the continued success of the organization.