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The Handbook of Municipal Bonds by FRANK J. FABOZZI, SYLVAN G. FELDSTEIN

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CASE STUDY 17
Westminster-Canterbury of the Blue Ridge Continuing Care Retirement Community
Marie S. Pisecki Managing Director BB&T Capital Markets
 
 
 
This case study assesses the strengths and weaknesses of the Westminster-Canterbury of the Blue Ridge continuing care retirement community (CCRC) project that were apparent at the time the bonds were sold, as well as the lessons learned through the benefit of hindsight. We also discuss how an investor might weight the risks against the rewards of 6.375% tax-exempt yield in deciding whether to invest in this project.

OVERVIEW

CCRC bonds are typically sold on an unrated basis, often at aggressive spreads compared to other unrated bonds. One reason for the favorable pricing is the liquidity provided by strong retail appetite for this paper, particularly in Virginia. Issue details are provided in Exhibit 17.1. The $79.8 million in Series 2001 bond proceeds were used to finance a major expansion to this life care retirement community in Charlottesville, Virginia, consisting of 122 new independent living unit (ILU) apartments and a new kitchen, dining area, and community center. The apartments and common areas were to be completed in November 2003 and achieve 95% occupancy by June 2005. Separately, management planned to cash-fund 10 new cottages after the apartments were completed. The cottages would become available for occupancy in November 2004. Prior to the expansion, the unit mix at Westminster-Canterbury of the Blue Ridge consisted ...

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