RPP has initiated a two phase repositioning strategy to serve more effectively its existing and prospective new residents. Phase 1, which began in 2017, entails renovations and improvements to RPP’s existing mid-rise tower to optimize the unit mix and improve the continuum of care, including the addition of a assisted living memory support specialty care area. The total Phase 1 cost is approximately $30 million. Phase 2 involves the construction of a new tower containing 58 Independent Living units. The total cost of Phase 2 is estimated to be approximately $52 million.
As the plans for its repositioning project began to materialize, it was clear that RPP could secure the permits and approvals necessary to proceed with Phase 1, but the viability of Phase 2 was still uncertain. Accordingly, RPP worked with Wye River to assess its financing options for both phases and, taking into consideration a number of factors, including the prospect of rising interest rates, RPP elected to pursue a financing structure that would allow it to secure a long-term fixed cost of capital for Phase 1 and to retain the flexibility to issue additional debt for Phase 2 if and when the feasibility of Phase 2 became certain. Through a competitive solicitation, RPP secured 15 year commitment for $30 million of tax-exempt bank financing with a 25 year amortization term. The transaction was structured as a variable-rate draw down bond, which reduced the interest cost during construction, with a forward-starting interest rate swap to produce a “synthetic” fixed rate once the project was completed.