CHICAGO The Illinois Finance Authority yesterday approved a plan sponsored by the Franciscan Communities Inc. to transform a vacant high-rise in Chicagos downtown Gold Coast neighborhood into an upscale continuing care retirement community with a $230 million financing.
The Clare at Water Tower is the name of the project and the actual borrower. Its a stand-alone credit affiliated with the Franciscans and the propertys owner, Loyola University. Ziegler Capital Markets Group is the underwriter and Jones Day bond counsel.
Ziegler expects to price the unrated bonds this fall, at which time construction on the two-year project would begin, according to Chester Labus, chief financial officer of the Franciscan Sisters of Chicago Service Corp.
About two-thirds of the bonds will sell at a floating rate backed by letters of credit from area banks with the remaining being sold at a fixed rate. The floating-rate bonds will be repaid with entrance fees and the 32-year fixed-rate piece with long-term project revenues.
The bonds will be backed by a gross revenue pledge and a leasehold mortgage. The Clare, located at the corner of Rush and Pearson Streets just a block off Chicagos Magnificent mile on Michigan Ave., has a 99-year ground lease with Loyola. Loyola will occupy the first two floors of the building.
The projects sponsors first brought the deal to the IFA in the spring of 2004 and had originally hoped to move forward this past spring, but that plan was based on aggressive pre-sales projections, Labus said. With about 60% of the facilitys most costly independent living units now pre-sold, finance officials said they are ready to market the deal to investors.
About 60% is whats needed for banks to feel comfortable based on the feasibility studies, said Zieglers Stephen Johnson. Proceeds of the sale will finance the demolition of the current structure on the site and development of a new high-rise.
The project is unique on several fronts. Few continuing care communities are developed in high-rises or located in an affluent part of a citys downtown. The facility is being marketed to affluent seniors, not those living on modest fixed-incomes.
Initial entrance fees range from $491,000 to $1 million for independent units with monthly fees ranging from $2,395 to $5,500. Assisted-living units start at $53,000 with monthly fees of $4,995. Between 90% and 95% of the entrance fees are refunded when residents leave. Residents who initially enter the nursing units dont have to pay an entrance fee. The Clare includes 271 independent living apartments, 54 assisted-living suites, and 32 private and semi-private nursing rooms.
The Clare will offer residents a lifestyle and personal services strategically designed to appeal to seniors seeking an active social environment, high-quality, maintenance-free housing, and supportive services in an upscale urban environment, according to IFA documents describing the project.
Once completed, the Clare will represent about 10% of the total stock of 2,230 of continuing care units operated by the Franciscans in 13 senior living facilities in the Midwest.
The 111-year-old Franciscan Communities has a highly-regarded reputation as a charitable organization that has dedicated itself to the care of the aged in hospitals and nursing homes, but the use of a tax exemption to finance a facility for affluent seniors, though legal under the tax code, has raised the eyebrows of some who hear about the project.
Labus defended the projects use of a tax exemption since it is permitted by the federal government for the benefit of all people. He also noted that the area is home to seniors, affluent as they may be, that would have to leave the area to find a continuing care facility.
We were looking to develop a continuing care facility downtown since our organization is based in Chicago and this was a wonderful opportunity with Loyola because there is a need, he said.
