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The Estates at Carpenter's sims finances refunding and expansion for long-time florida client background On May 1, 2008, Sims closed the financing of $26,555,000 long-term fixed rate tax-exempt bonds for Carpenter’s Home Estates, owner of The Estates at Carpenter’s, a continuing care retirement community opened in 1986 in Lakeland, Florida. Proceeds of the financing will be used to refund an outstanding 1998 bond issue underwritten by Sims, to fund renovations to and expansion of the community’s skilled nursing and assisted living facilities and to construct a new building containing 32 additional independent living apartments.
The Estates currently includes 340 independent living apartments, 49 assisted living units and 72 skilled nursing beds, together with extensive common areas, located on 33 acres in a suburban area of Lakeland, midway between Tampa and Orlando. Because of the age of the community and the rapid growth of the region, management has determined to expand the campus strategically to meet increased demand and changing resident preferences. Since managing financial challenges occurring in the early 1990’s, The Estates remains fully occupied and has developed a very strong financial position. the challenge In addition to providing funding for the renovation and expansion projects, the management of The Estates desired to reduce the cost of funds outstanding under the existing bonds and to finance the new projects at the lowest practical cost. From the time Sims was retained to underwrite the bonds until the financing was ready to be marketed, interest rates on long-term bonds increased by more than 100 basis points in a market with decreased institutional investor liquidity. Compounding the challenge, the City of Lakeland, Issuer of the bonds, has a policy of requiring large denomination bond sales and an investor letter, limiting retail and institutional sales to accredited and qualified institutional purchasers only. results Early in the financing process, Sims performed a rating analysis for the company and urged management to seek an investment grade rating from Fitch Ratings, Inc., which resulted in a BBB- rating, with an indication that the rating could improve after completion and occupancy of the new independent living units. The rating not only increased investor interest in the bonds and reduced the overall cost of capital, but it also reduced costs of issuance by eliminating the need for a feasibility study. In order to facilitate future expansion, Sims included in the financing a “carve-out” for future expansion projects that would allow additional debt to be incurred based primarily on occupancy of existing units and sales of planned new units, improving the access to additional debt for new projects. Because of the investor letter, the bonds were sold primarily to institutional investors, with an average coupon of 6.30% and a final maturity due in 2043 at 6.375%. In comparison, a non-rated Florida senior living transaction priced the same week by another underwriter was priced at 7.375%. The revenue Bond Index (RBI) at the time of pricing was 5.06%. |
