Property Type: Continuing care retirement community
Location: Bentonville, Ark.
Project Objective: New construction
Financing Amount: $5.9 million
Source of Funding: Fixed-rate notes insured by the FHA Sec. 232 program, combined with 9 percent low-income housing tax credits.

Background and Challenges
Northwest Arkansas Senior Services (NWASSI) has been developing a 48-acre retirement community known as Legacy Village. As a new 501(c)(3) dependent on community support, it needed to minimize upfront cash needs. Construction of the original independent living garden homes was financed via entrance fee proceeds; financially riskier assisted living dementia services would be the next phase of development. In addition to multiple levels of care, the NWASSI board of directors wished to provide a limited number of affordable assisted living units.

NWASSI succeeded in securing tax credit equity to fund 20 affordable assisted living units, and Lancaster Pollard was brought in to finance 40 additional assisted living dementia units. All 60 units are being developed based on the Green House™ model.

Financial Solution
While a multi-faceted organization may sometimes rely on strong cash flows from one area of its operations (e.g., market rate independent living) to support other services, this can be risky. With that concern in mind, Lancaster Pollard financed the 40-unit project with HUD mortgage insurance, which is non-recourse to NWASSI, isolating the risk inherent in the assisted living portion. Further, because The Green Houses at Legacy Village are not cross-collateralized with any other community elements, NWASSI is free to independently develop other areas of its campus.

Besides being non-recourse, the Sec. 232 HUD mortgage insurance also provided a low interest rate and 40-year amortization. Thanks to donated land, NWASSI’s required cash contribution was limited to working capital for startup expenses.

Outcome
The new assisted living dementia care units will be grouped in 10-unit homes, each with a shared kitchen, family-style dining room, living room, laundry and patio. The combination of tax credits and HUD financing enables Legacy Village to continue its development of services.