Property Type: Continuing Care Retirement Community
Location: Franklin, Ind.
Project Objective: Expansion/Renovation
Financing Amount: $25 million/$8.9 million swap
Source of Funding: Variable-rate tax-exempt bonds enhanced with bond insurance; swap

Background and Challenges
Franklin United Methodist Community sought to refinance $7.1 million in outstanding debt and to finance projects including a 28-bed expansion, extensive remodeling and a new wellness center. Its credit background included success in growing its cash and investments.

Financial Solution
Lancaster Pollard’s comprehensive analysis of several credit enhancement options demonstrated that bond insurance would carry long-term cost benefits that outweighed its higher up-front expense. Additionally, Lancaster Pollard obtained a significant reduction in the bond insurance premium by coordinating a site visit with Fitch that ultimately led to an underlying investment-grade rating on the property. The bonds themselves carry an S&P rating of “AA/A-1+.” A swap fixes the interest rate on a portion of the bonds at an attractive 3.92 percent for 30 years.

Outcome
Franklin United Methodist Community’s expansion projects include a two-story addition to its health center and additions to the dining center. It was able to reimburse itself for monies already spent on the project, resulting in an immediate increase in liquidity.  Existing debt of $7.1 million was refinanced, and by taking advantage of low interest rates, the property was able to improve its existing strong infrastructure and remain prepared to take on any future projects.