$89.895 Million Non-Rated Expansion Financing for Whitney Center

Herbert J. Sims & Co., Inc. closed an $89.895 million non-rated, fixed-rate, tax-exempt bond issue for the Whitney Center expansion project in Hamden, Connecticut. Whitney Center is a continuing care retirement community. It currently includes 170 residential living and seven assisted living units located in a six-story building and 59 skilled nursing beds located in a one-story building. The proceeds of the Series 2009 issue will finance the first phase of Whitney Center’s Renaissance Project, which includes the construction of a seven-story building containing 87 new independent living apartments, cultural arts center, library, salon and spa, a separate parking garage and renovations to existing common areas. Several existing units and beds will be taken out of service. The unit configuration, after completion of the first phase of the Renaissance Project, will include 251 residential living apartments, 7 assisted living units and 57 skilled nursing beds. The second phase of the Renaissance Project will include the construction of a new (replacement) health- care center with 24 skilled nursing beds, 24 memory support private rooms and 32 assisted living units.

Whitney Center Expansion - Artist’s Rendering

challenge

Earlier this year, the plan of finance included the new health care center and 14 additional new independent living units, resulting in an approximate $134 million project cost. Whitney Center planned to finance the project with equity, a bank construction loan and letter of credit enhanced tax-exempt bonds to achieve a lower cost of capital. However, capital constraints precluded the interested banks from providing the $124 million of requested financing. Whitney Center worked with Eventus Strategic Partners and Sims to decrease the financing request and improve financial performance by deferring the healthcare center replacement. Sims, Eventus and Whitney Center approached the banks with a lower financing request of $85 to $89 million and offered several financing options, including an all-bank financing and a hybrid of non-rated, fixed-rate, tax-exempt bonds and bank financing. Despite the decrease in the borrowing amount and improvement in financial performance, the banks were not able to provide a financing commitment.

solution

To meet Whitney Center’s goal of breaking ground in December, 2009, Sims devised an all non-rated tax- exempt bond issue which included $39.5 million of Sims’ own Entrance Fee Principal Redemption BondsSM. These bonds, created by Sims in 2006, provide the ability to use incoming entrance fees to redeem short-term debt with a lower fixed-rate cost of capital. Furthermore, Sims included $3.7 million of 33-year adjustable rate bonds with a 6-year reset date and $3 million of 20-year fixed-rate term bonds with a 5-year call date to increase Whitney Center’s ability to redeem additional debt should fill-up occur more rapidly than expected. The remaining $43.695 million of debt is comprised of long-term, fixed-rate bonds with a 33-year final maturity.

Due to our excellent sales efforts, Sims placed the $89.895 million bond issue with very attractive interest rates. Sims sold approximately $24 million of the bonds to retail (individual) investors. The end result includes a 6.69% average yield for the Entrance Fee Principal Redemption BondsSM, a 7.25% yield for the adjustable rate bonds and a 7.79% average yield for the long-term fixed rate bonds.