Honolulu's newest continuing care retirement community, 15 Craigside, has broken through the credit crunch to become the first such U.S. development to be financed in more than 18 months.

Ziegler Capital Markets recently announced that $86 million in tax-exempt bonds, the largest fixed-rate financing in this category this year, have been sold to finance the project's construction.

After a nearly eight-month, financing-related delay, construction will begin next week on the 13-story, 170-apartment complex for moderate-income seniors. Completion is slated for late 2010 with occupancy beginning in early 2011. The community, which will be constructed on 1.5 acres at the intersection of Nuuanu Avenue and Craigside Place in Honolulu, will be managed by Arcadia, which has been in Hawaii since 1967.

“;The Arcadia family of companies appreciates the confidence which bond investors have shown in us as we now begin construction of the first continuing care retirement community for moderate-income seniors on Oahu,”; said Emmet White, chief executive officer of Arcadia and 15 Craigside.

Twenty-eight investors participated in the transaction, which is a positive indicator of the availability of fixed-rate market financing, said Mary Munoz, managing director of Ziegler Capital Markets, Senior Living Finance.

White said the project, which began selling in September 2006, is 72 percent sold.

“;It froze on us when we were ready to go the bond market, but our sales stayed with us and a lot of people liked what we were doing,”; he said. “;Arcadia made a conscious decision to stand behind this startup, which was part of our family.”;

To move the transaction along, Arcadia converted $5.2 million of its own funding into pre-finance capital and $7 million in liquidity support, and deferred the development fee for a limited time to allow the project to achieve stability, White said.

“;It was a mountain for us to climb, but in the end, the investors were impressed and satisfied that the quality of management at this local level was sufficient to support the $86 million investment,”; he said.

For the project to move forward, the lender must have been very confident in the borrower and in senior care housing, said Mike Hamasu, director of the research and consulting division at Colliers Monroe Friedlander Inc.

“;In this situation, it looked like they jumped a number of major hurdles and got the financing in a very difficult market,”; Hamasu said. “;From what I understand, the developer has done this before, so the history of the borrower probably had a lot to do with the confidence of the lender.”;

Because of the intense need for senior communities in Honolulu, 15 Craigside is expected to sell out in six months, White said. While many Hawaii families have traditionally taken care of senior members, that is becoming less plausible as more young people move away.

“;They won't be able to build enough (senior care housing) to keep up with market demand,”; he said.

By 2020, Hawaii is projected to have 400,000 residents aged 65 and older, White said

“;As one of the fastest-growing aging populations in the country, assisted living is in high demand in Hawaii,”; Hamasu said. “;This is definitely a trend that is happening whether or not various lenders see it as a positive.”;

Above is an artist's drawing of 15 Craigside, which is set to be completed in 2010.