04-14-2021 Council Packet - Laserfiche WebLink

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19 Sale of Personal Residences. It is anticipated that many prospective residents of the Project will be required to sell their current homes to meet the financial obligations under their residence agreements. If prospective residents encounter difficulties in selling their current homes due to local or national economic conditions affecting the sale and finance of residential real estate, such prospective residents may not have sufficient funds to meet the obligations under their residence agreements, thereby causing a delay in scheduled occupancy of the Project or remarketing of vacated units, which would have an adverse impact on the revenues of the Corporation. Failure to Maintain Occupancy. The economic feasibility of the Project and its ability to provide revenues to the Corporation to make payments on the Series 2021D Bonds depend in large part upon its being substantially occupied. See APPENDIX C: “FINANCIAL FEASIBILITY STUDY” for occupancy projections and a sensitivity analysis setting forth projected financial results based on alternative occupancy assumptions. Occupancy of the Project may be affected by competition from existing competing facilities or from competing facilities which may be constructed in the area served by the Project, including new facilities which the Corporation, or its affiliates, may construct. Circumstances may occur, including but not limited to, insufficient demand for skilled nursing, independent living, assisted living and memory care services in the Project’s location, decreases in the population, deterioration of the structure and living facilities in the Project, and construction of competing projects or other more attractive living accommodations, which could increase the rate of vacancy. Further, the sustained failure of residents to meet their rental payment obligations would make it difficult for the Project to meet its current operating expenses which could result in a curtailment of essential services and decrease the desirability of the Project to existing or prospective residents. Damage, Destruction or Condemnation. Although the Corporation will be required to obtain and maintain certain insurance against losses from damage or destruction as set forth in the Loan Agreement, there can be no assurance that the Project will not suffer losses for which insurance cannot be or has not been obtained or that the amount of any such loss, or the period during which the Project cannot generate revenues, will not exceed the coverage of such insurance policies. If any portion of the Project is damaged or destroyed, or is taken in a condemnation proceeding, funds derived from proceeds of insurance or any such condemnation award for the Project must be applied as provided in the Loan Agreement. There can be no assurance that the amount of funds available to restore or rebuild the Project or to redeem the Series 2021D Bonds will be sufficient for that purpose, or that any remaining portion of the Project will generate revenues sufficient to pay the expenses of the Project and the debt service on the Series 2021D Bonds remaining outstanding. Natural Disasters. The Corporation believes that it maintains adequate insurance to cover any loss arising from natural disasters. There can be no assurance that in severe circumstances that such insurance will be adequate to rebuild the Project. Additionally, there can be no assurance that after experiences with natural disasters, residents will continue to choose to live in the State. Such decisions could have an adverse impact on the financial performance of the Project. Risk of Resident Non-Payment of Rent. There can be no assurance that any resident of the Project will pay rent when due. No governmental agency has guaranteed the rental payments due from residents. Thus, there can be no assurance that the rental payments received from the residents will be sufficient to enable the Corporation to make timely payments of principal, premium, if any, and interest on the Series 2021D Bonds. Residency agreements can be terminated by the Corporation for nonpayment of rent by residents. However, the Corporation has adopted a financial assistance policy under which it has committed to maintaining in residence, to the extent it is financially able, residents who become unable to pay. Real Estate Tax. The pro forma cash flows for the Project currently assume that the skilled nursing portion of the Project will receive an exemption from Minnesota property taxation. A reassessment resulting in an increase in property tax for the Project would have a negative impact on the revenue projections for the Project and may have a material adverse effect on the financial performance of the Project. Effect of Increases in Operating Expenses Substantial increases in operating expenses will affect future net operating income of the Project and the ability of the Project to generate rental revenue in amounts sufficient to satisfy the Corporation’s obligations under