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Atherton Baptist Homes Sims Underwrites California Fixed-Rate CCRC Bond Issue description Sims closed the $46.5 million expansion and repositioning transaction for Atherton Baptist Homes ("Atherton") on January 28, 2010. The transaction included $43.9 million of tax-exempt, fixed-rate bonds and $14.6 million of Sims Entrance Fee Principal Redemption Bonds. The bonds were issued through the City of Alhambra, CA and rated 'BB' by Fitch. Atherton is a California non-profit corporation that has provided care and services to seniors since 1914. It owns and operates a stand-alone continuing care campus consisting of four levels of care on approximately 15 acres located in Alhambra, CA — 170 independent living units, 38 assisted living units (including memory support) and 99 bed skilled beds. The campus includes numerous buildings and single-family structures; it reflects the character of a residential neighborhood developed over generations rather than a master planned campus.
 The Courtyard at Atherton - Alhambra, CA Atherton desired to develop 50 new residential living units, a 95 car underground parking garage and various renovations to its existing nursing facility and dining venues. The expansion would enhance Atherton’s independent living market position and improve parking on the campus without impairing its unique neighborhood aesthetics. challenges When Atherton initiated development and finance planning in 2007, a letter-of-credit backed variable rate structure was desired. Subsequent economic events impaired the desired variable rate structure as a viable option, interrupted development and presales progress, affected current operations, occupancy, and financial performance as well as the campus transition plan that was already in-progress. Capital markets and residential housing market conditions created uncertainty among independent living resident prospects as to whether Atherton would indeed be able to obtain financing to start construction, which slowed the momentum of presales. Although construction savings were successfully negotiated and achieved, construction start needed to occur by the end of January 2010 in order to maintain the favorable cost savings. Downgrades related to the State of California and the cost, uncertainty and timing considerations of Cal-Mortgage insurance were additional key challenges and concerns. solution Sims defined a tax-exempt, fixed-rate finance structure and obtained approval to issue the bonds on a non-rated basis through the City of Alhambra. The finance structure included $29,300,000 of fixed rate bonds with 20-year and 30-year maturities combined with $14,640,000 of Sims Entrance Fee Principal Redemption Bonds. The need for credit enhancement and its related timeline and costs were eliminated, and additional flexibility regarding sales to retail investors was achieved. Sims was also able to assist Atherton in obtaining a ‘BB’ rating from Fitch, which further improved the credit profile of the transaction and positioned the organization for a rating upgrade after achieving stabilized occupancy. Bonds were issued in $5,000 denominations (with a required $10,000 minimum purchase) and successfully sold by Sims to its retail accounts and institutional investors. The bond issue was significantly oversubscribed. |
