HJ Sims

Coburg Village

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Sims closes $35.million financing for repositioning Coburg Village (The Lutheran Care Network) and expanding its rental independent units

Project Description

Coburg Village consists of 210 unit rental retirement housing community located on a 26 acre site in Rexford, Saratoga County, New York.  Coburg Village will expand by adding 78 independent living units primarily on an adjacent 8.3 acre site.  The new 78 units will be connected to the Coburg Village community center.  Plans also include reconfiguration of the entrance road and front entrance and renovation and expansion of common areas to accommodate the new residents.

Challenges

The bank which credit enhanced Coburg Village’s Series 2006 bonds did not want to finance the expansion project and would not agree to share its first mortgage with other lenders who were willing to finance the expansion project.    The letter of credit bank would not agree to waive or reduce its termination penalty if Coburg Village terminated the letter of credit.    Bond counsel determined that the termination penalty could not be financed with tax exempt bonds.  The Series 2006 bonds contained an attractive variable interest rate, and Coburg Village wanted to minimize the increase in the Series 2006 bond interest rate.   Furthermore, the New York State legislature failed to renew the Clifton Park Industrial Development Agency’s authority to finance senior housing communities.

Solutions

Sims evaluated several plans of finance including fixed rate non-rated tax exempt bonds, letter of credit enhanced tax exempt bonds and direct bank purchase of tax exempt bonds.   Due to high non-rated tax exempt fixed interest rates, the bank financing options were most attractive.  To eliminate the cost of issuing refinancing bonds Sims worked with bond counsel to determine that a new bank could purchase the Series 2006 bonds.   Sims prepared and distributed a request for bank financing.   After evaluating the responses, Sims concluded the best option was to have one bank purchase the 2006 outstanding debt, make a taxable loan to pay the letter of credit termination penalty and purchase the new bonds issued by Dormitory Authority of the State of New York to finance the expansion and renovation.   The bank agreed to a 30 year maturity for the new Series 2011 bonds and a bank put option in eight years for both the Series 2006 and Series 2011 bonds.   Both series of bonds contain a tax exempt variable interest rate which will be converted to a fixed interest rate with interest rate swaps provided by the bank which purchased the bonds.   The all-in cost of capital including the interest rate swaps is expected to be approximately 4.0%.