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Westchester Meadows westchester meadows refinancing yields significant savings Hebrew Hospital Senior Housing, Inc. owns and operates a lifecare CCRC known as Westchester Meadows in Valhalla, New York. Westchester Meadows consists of 120 independent residential apartments, 10 enriched housing apartments and 20 skilled nursing beds. It is affiliated with Hebrew Hospital Home of Westchester, Inc., a skilled nursing facility adjacent to Westchester Meadows, HHH Home Care, Inc., a licensed home care agency in the Bronx, and Hebrew Hospital Home Foundation. Sims financed the initial construction for Westchester Meadows in 2000 with a combination of variable and fixed rate bonds. The variable rate debt was repaid with entrance fee proceeds, leaving $18.12 million of fixed rate debt outstanding. The interest rate on the bonds was 7.0% and the availability of lower cost of capital could lead to significant savings.
challenge Westchester Meadows needed to reduce expenses significantly as it had been experiencing financial losses at stabilized occupancy. Refinancing its 7.0% coupon bonds would help to stem the losses. Westchester Meadows had considerable capital tied up at its bond trustee, due to requirements of the bond indenture. In addition, Westchester Meadows had to accomplish the refinancing in a very short time frame, as the legislation in New York which allowed Industrial Development Agencies to issue tax-exempt bonds for continuing care retirement communities was set to expire on January 31, 2008. The financing, which was initiated in December, had to close by end of January, prior to the expiration of the legislation. implementation Herbert J. Sims & Co. developed a refinancing plan which incorporated letter-of-credit enhanced, tax-exempt bonds. Sims released all trustee-held funds, a portion of which were utilized to reduce the total amount of new debt. To limit exposure to increasing interest rates, Sims solicited interest rate swap bids through a competitive process. Sims extended the maturity on the debt by seven years in order to reduce the annual debt service payments. In addition, Westchester Meadows has full flexibility to redeem bonds at any time without any redemption premium, which will lower its total interest expense on the bonds. result Herbert J. Sims sold $14.985 million of variable rate, tax-exempt bonds enhanced by a letter of credit from Manufacturers and Traders Trust Company. The bonds had a 30-year maturity. The five year swap, which is coterminous with the letter of credit, is fixed at a rate of 2.84%. Approximately, $10.8 million was released from the trustee, and $6.4 million was used for the refinancing, with the remaining $4.5 million held by Westchester Meadows and not yield restricted. The savings results are substantial, as shown below:
In addition, the closing on the bonds occurred on January 30, 2008, as planned, the day prior to the expiration of the IDA authorizing legislation. |
