An Exclusive Investment Opportunity: Searstone 2021

Searstone Logo

$263,630,000*
PUBLIC FINANCE AUTHORITY

Revenue and Refunding Bonds
Searstone CCRC Project

Series 2021A Revenue Bonds $104,850,000*
Series 2021B-1 Entrance Fee Principal Redemption Bonds $36,310,000*
Series 2021B-2 Entrance Fee Principal Redemption Bonds $32,240,000*
Series 2021C Taxable Entrance Fee Principal Redemption Bonds $5,315,000*
Series 2022A Forward Delivery Revenue Bonds $8,920,000*
Series 2023A Forward Delivery Revenue Bonds $75,995,000*

HJ Sims is pleased to serve as sole underwriter for Samaritan Housing Foundation, Inc., d/b/a Searstone Retirement Community, a life plan community located in Cary, North Carolina. The Community presently consists of 169 one- and two-bedroom independent living units, including 131 apartment-style, and 38 homes. Amenities are centralized in their “Clubhouse”, and include dining venues, indoor swimming pool, fitness and exercise area, spa/salon, game room, multi-purpose ballroom, and an art studio. Searstone also has gardens, walking trails and an approximately 16-acre lake.

Searstone’s healthcare services are delivered in Brittany Place, a standalone building on campus. Following a recent expansion financing completed in 2018 by HJ Sims, there are 14 assisted living units and 25 skilled nursing units. Pursuant to North Carolina Certificate of Need regulations, only residents from independent living may transfer to these areas, no direct admissions to healthcare are allowed.

The Highview at Searstone project will include 152 one- and two-bedroom independent living units, all under one roof. A new core of common amenities will be included in this building, which includes multiple dining venues, a large multipurpose room, and various gathering spaces for residents. In addition, the project includes substantial update to outdoor spaces throughout the community. To accommodate the significant increase in residents, Brittany Place is also being expanded as part of the project. In total, 53 new healthcare units are being constructed, including 14 specialized memory care units, a service line that Searstone does not currently offer. In addition to the memory care, the scope includes 15 assisted living and 24 skilled nursing units.

HJ Sims has been working with Searstone since 2012, before they opened in late 2013 financing the start-up. Now, Searstone is ready to start their important expansion project called “The Highview at Searstone” to accommodate growing market demand in the community. To learn more about the history of the Searstone financings with HJ Sims, please read about the previous case studies in their entirety:

About the Bonds

  • Series 2021A
    • $104,850,000*
    • Revenue Bonds
    • Bonds are exempt from Federal Income Tax
    • Minimum denominations of $25,000; accredited investors and QIBs only
    • Interest will be payable on June 1 and December 1 of each year, commencing June 1, 2022
    • First principal payment: June 1, 2027
  • Series 2021B-1
    • $36,310,000*
    • Entrance Fee Principal Redemption Bonds
    • Bonds are exempt from Federal Income Tax
    • Minimum denominations of $25,000; accredited investors and QIBs only
    • Interest will be payable on June 1 and December 1 of each year, commencing June 1, 2022
    • First principal payment: January 1, 2025
  • Series 2021B-2
    • $32,240,000*
    • Entrance Fee Principal Redemption Bonds
    • Bonds are exempt from Federal Income Tax
    • Minimum denominations of $25,000; accredited investors and QIBs only
    • Interest will be payable on June 1 and December 1 of each year, commencing June 1, 2022
    • First principal payment: July 1, 2024
  • Series 2021C
    • $5,315,000*
    • Entrance Fee Principal Redemption Bonds
    • Taxable Bonds
    • Minimum denominations of $25,000; accredited investors and QIBs only
    • Interest will be payable on June 1 and December 1 of each year, commencing June 1, 2022
    • First principal payment: July 1, 2024
  • Series 2022A
    • $8,920,000*
    • Refunding Revenue Bonds
    • Delivery of bonds on or about March 3, 2022
    • Forward delivery Bonds are exempt from Federal Income Tax
    • Minimum denominations of $25,000; accredited investors only
    • Interest will be payable on June 1 and December 1 of each year, commencing June 1, 2022
    • First principal payment: June 1, 2023
  • Series 2023A
    • $75,995,000*
    • Refunding Revenue Bonds
    • Delivery of bonds on or about March 3, 2023
    • Forward delivery Bonds are exempt from Federal Income Tax
    • Minimum denominations of $25,000; accredited investors only
    • Interest will be payable on June 1 and December 1 of each year, commencing June 1, 2023
    • First principal payment: June 1, 2024

Use of Bond Proceeds

Project

  • Financing capital expenditures, including
    • Costs relating to the expansion of the continuing care retirement community known as Searstone, specifically, an independent living and healthcare expansion project, The Highview at Searstone
    • The modification, improvement, or enhancement of certain infrastructure serving the Searstone Community 
  • Refunding the Series 2020A (Tax-Exempt) and Series 2020B (Taxable) Revenue Bonds 
  • Funding capitalized interest on the Series 2021 Bonds
  • Funding a portion of the Parity Debt Service Reserve Fund
  • Funding the 2021B-C Debt Service Reserve Fund
  • Paying a portion of the costs of issuing the Series 2021 Bonds
  • The Series 2022A Bonds will refund the outstanding Series 2016 Bonds
  • The Series 2023A Bonds will refund the outstanding Series 2017 Bonds

Security

  • Secured by interest in improvements to be constructed and assets of the Corporation,
  • Secured by a gross revenue pledge,
  • Secured by debt service reserve funds,
  • Secured by assignment of all marketing, development, management and construction contracts.

 Key Financial Covenants

  • 1.10x Debt Service Coverage Ratio; tested annually through 2027 and 1.20x Debt Service Coverage Ratio; tested annually from 2028 thereafter
  • 150 Days Cash on Hand/Liquidity Covenant; tested semi-annually
  • Marketing Covenant tested quarterly beginning with 78% at 12/31/21 rising to 90% by 6/30/24 or approximately 12 months after opening
  • Occupancy Covenant tested quarterly beginning one full quarter after opening or rising to 90% in 4 years
  • Cumulative Cash Operating Loss Covenant: testing to begin the full fiscal quarter following the issuance of the Certificate of Occupancy and ends the first full fiscal quarter following stabilization. 

We are currently accepting indications of interest for these tax-exempt bonds with an expected pricing the week of October 18, 2021, and anticipated settlement during the week of November 15, 2021. For more information including risks, please read the Preliminary Official Statement in its entirety. If you have interest in purchasing these bonds, please contact your HJ Sims financial professional as soon as possible.

*Subject to change

No dealer, broker, salesperson, or other person has been authorized to give any information or to make any representation other than those contained in the Preliminary Official Statement and, if given or made, such other information or representation should not be relied upon as having been authorized by the Issuer, the Borrower, or the Underwriters. The information set forth herein has been obtained from the Issuer, Borrower, and other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness by, and is not construed as a representation of, the Underwriters. The information contained herein is subject to change without notice. Under no circumstances shall this constitute an offer to sell or solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any offering or solicitation will be made only to investors pursuant to the Preliminary Official Statement, which should be read in its entirety. Investments involve risk including the possible loss of principal. HJ Sims is a member of FINRA and SIPC, and is not affiliated with Searstone Retirement Community.