Kendal on Hudson
On May 7, 2014, BB&T Capital Markets closed an $18,000,000 Bank Financing for Kendal on Hudson (“Kendal on Hudson”), which operates a not for profit retirement community in the village of Sleepy Hollow, New York. Proceeds of the financing financed KoH’s Project Renew (as described below). The completion of this financing marked the successful conclusion of KoH’s multi-step capital formation strategy. After the successful closing of the Series 2013 refinancing, BB&T Capital Markets (“BB&T”) continued to work with KoH to formulate the financing plan for “Project Renew”. Project Renew is primarily a repositioning of KoH’s assisted living and skilled nursing health center. The project components will include the addition of 13 safe and secure memory support units (certified as Special Needs Assisted Living Residence or “SNALR”). Of the 13 units, 6 will be certified as Enhanced Assisted Living Residence (“EALR”) in order to allow aging in place. KoH will also add 10 assisted living beds which will all be certified as EALR. Project Renew will also renovate several areas on campus including the fitness/wellness center, resident care center, and outpatient therapy suite. BB&T presented KoH with several financing alternatives, which included both bond and bank financing for Project Renew. Based on the anticipated availability and attractiveness of bank financing, BB&T coordinated a bank solicitation process that included 17 regional and national commercial banks. The solicitation received strong interest from multiple banks in the market. BB&T assisted KoH in theevaluation process of the bank proposals as well as providing a fixed rate bond option. Ultimately, KoH opted to move forward with bank financing and to work with First Niagara Bank, whose proposal was the most attractive, based on “all-in” cost of financing, length of bank commitment, along with loan covenants and terms. KoH was able to secure a “natural” fixed rate of 3.34% with a 10-year put provision and final maturity (and amortization) of 25 years. Amidst the Project Renew financing process, KoH also faced its first annual Fitch rating surveillance review. BB&T worked with KoH to frame the positive impact of the $18 million financing and $3.5 million of equity contribution towards Project Renew on the projected financial ratios and emphasize Management’s continued marketing and operating initiatives. Consequently, Fitch affirmed the “BBB”rating (stable outlook), citing the organization’s solid historical occupancy, operating profitability, and liquidity and its relationship to Kendal Corporation, the parent organization. In addition, Fitch views KoH’s strong independent living occupancy and waitlist demand as a primary credit strength. Although Project Renew presents an elevated debt burden and construction risk, Fitch noted that the project will provide for a wider array of healthcare services. The successful completion of the Series 2014 Bank Loan was an important milestone for KoH, enabling KoH to solidify its long-term capital structure with a new committed banking partner. Kendal on Hudson is now better positioned to serve the aging community in Westchester County, NY.