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Oregon Senior Facility Looks East for Inaugural Bond: Muni Deals

Rose Villa Inc., a retirement community in Oregon, is borrowing in the $3.7 trillion municipal market for the first time with an unrated $62 million offering this week through a Wisconsin authority.

The center, which houses 200 residents eight miles (13 kilometers) south of downtown Portland, is building 75 independent-living units, according to deal documents.

Construction will start in July and last 21 months, said Sarkis Garabedian, a Seattle-based senior vice president at B.C. Ziegler & Co., the underwriter. Last week, investors visited the facility, which has no muni debt, he said.

“We expect to have strong demand for this, especially in a market where we’re light in supply,” he said. “It’s a well-conceived project.”

Investors may see rates “in the low 6 percent range” for federally tax-exempt bonds maturing in 2049, he said. That would be about 2.5 percentage points above 30-year benchmark munis, data compiled by Bloomberg show.

With benchmark yields setting one-year lows, investors have taken on more risk in 2014 to bolster returns. High-yield munis have earned 9.7 percent this year, compared with 5.7 percent for the entire market, S&P Dow Jones Indices show.

Risks Explained

For buyers of the Rose Villa debt, risks include if occupancy targets aren’t achieved and if residents live longer than expected, limiting turnover of units, bond documents show. Fifty-four of the units have been sold, Garabedian said.

The new homes will have a view of the Willamette River, the center said.

“The community neighborhood will feel more like a hip Portland district than a traditional retirement community,” according to a release from Rose Villa.

Sandra Burdeshaw, a spokeswoman for the center, referred questions to Garabedian.

Garabedian said there’s no mechanism to sell unrated debt on the state or county level. As a result, the issuer is a Wisconsin conduit agency called Public Finance Authority, a collaboration of the National Association of Counties, the National League of Cities, the Wisconsin Counties Association and the League of Wisconsin Municipalities.

Since 2010, it has completed 66 deals for borrowers across the country, worth about $2 billion, said Scott Carper, a program manager at the Madison-based agency.

The center joins issuers offering about $6 billion in bonds this week, down from $6.8 billion last week.

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