Aviva refinances debt for savings and capital improvements
“Working with Aaron Rulnick and the HJ Sims team made a world of difference in the Aviva refinancing project. Due to the significant uncertainty in the Tax Exempt Bond market, Aaron guided us as both a coach and a singular sense of motivation to make sure that not only did we meet deadlines but able to exceed them. Through HJ Sims, our organization is saving $200,000 a year which for an organization and budget of our size is not only significant but life changing.”
– Jay Solomon, Chief Executive Officer, Aviva – A Campus for Senior Life
Sarasota-Manatee Jewish Housing Council, Inc. d/b/a Aviva, is a nonprofit corporation located on an approximate 26-acre site in Sarasota, Florida. Aviva owns and operates a rental senior living community consisting of: Kobernick House which includes 190 apartments, a commercial kitchen, dining rooms, activity rooms, beauty shop, on-site pharmacy, offices and related amenities; Anchin Pavilion, a three story building with 70 assisted living units, common areas including a dining room, a chapel, a rehabilitation center, a beauty salon, a library and activity rooms. Of Anchin Pavilion’s 70 units, 33 are specially designed for residents with memory impairments including Alzheimer ’s disease; and Benderson Family Skilled Nursing and Rehabilitation Center which is currently licensed for 45 beds.
In recent years, Aviva has been reinvesting back in to its facilities to modernize the campus and to address deferred maintenance issues. As Aviva’s existing Series 2007 bonds became currently callable, Sims analyzed the possibility of refunding the Series 2007 bonds for debt service savings. Market conditions in the fall of 2017 suggested Aviva could refund its Series 2007 bonds for debt service savings, and allow Aviva to reallocate operating funds from a reduction in debt service payments towards campus improvements.
Aviva and Sims originally planned to refund the Series 2007 bonds in the first quarter of 2018. However, at the end of 2017, proposed 2017 tax reform bills created heightened uncertainty in the tax-exempt borrowing markets and created financing dilemmas for tax-exempt borrowers. A proposed elimination of tax-exempt Private Activity bonds would have precluded Aviva from refinancing its debt on a tax-exempt basis, likely eliminating the economic benefits of refinancing, as well as financing future capital needs on a tax-exempt basis. Instead, future borrowings would require financings at higher taxable rates. Accordingly, Aviva and Sims expedited the financing process in order to provide debt service savings amongst uncertainty.
The financing was successfully completed on December 28, 2017, amidst a historic year-end volume of tax-exempt borrowing resulting from the proposed federal tax reform. The 2017 bonds will generate approximately $200,000 of annual savings, and $3.2 million/ 8.9% net present value savings. The new structure eliminated a double debt service repayment in the final year by extending the maturity by one year, and also created an opportunity as a source for reinvestment through additional debt capacity. Sims priced the 2017 bonds with a 5yr call @105 declining to par in 10 years. The shorter call date maximizes future refunding opportunities in the wake of 2017 Tax Reform’s elimination of advance refundings.
For more information on how Aviva was Financed Right® by HJ Sims, please contact: