Risk Factors: What you need to know

Risk Factors: What you need to know about Investing in an Exclusive Financing

Investment in municipal securities inherently involves a number of risks to bondholders. Such risks relate to impacts on the following:

  • Ability to collect revenues
  • Bankruptcy
  • Competition
  • Employee relations/Labor Issues
  • Federal and state regulation of the obligor’s industry
  • Parity indebtedness
  • Regulatory impacts on operations
  • Ability to foreclose upon collateral
  • Certain rights and remedies upon default
  • Construction-related risks for project financings
  • Factors impacting demand for the obligor’s services ɀ Impact of obligor’s 501(c)(3) status and other federal tax matters
  • Risks of redemption
  • Secondary market risks

For risks specific to any transaction, please refer to the Certain Bondholders’ Risks section of the Official Statement.

Risk Factors: What you need to know about investing in municipal bonds

  • Credit Risk – The borrower fails to pay principal and/or interest.
  • Interest Rate Risk – The market value of a bond drops when interest rates rise. While default risk is low, municipal bonds are subject to interest rate risk, or the risk that rising rates will lead to falling prices.
  • Call Risk – The bonds may be redeemed prior to their maturity date depriving the investors of anticipated potential income.
  • Liquidity Risk – The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss. High yield bonds in particular are subject to more risk than investment-grade bonds and are generally less liquid and more volatile than investment-grade bonds. There is no guarantee of liquidity.
  • Tax Risk – While tax-exempt municipal bonds may provide a tax advantage for some investors in that interest received on the bonds may be exempt from federal and/or state income taxes, there are certain cases where interest may be includible in income for purposes of calculating the federal alternative minimum tax applicable to a particular investor. Furthermore, certain actions or inactions taken on the part of the borrower for the bonds may result in interest paid on the bonds becoming taxable. All prospective investors should seek the advice of their own tax specialist prior to investment.
  • Regulatory Risks – The underlying project is subject to various government regulation. Changes in regulatory policies could have an impact on the ability of the investment to operate, the rent they charge, staffing levels and of the expenses that could negatively affect the revenue of the investment.

In general, as for all types of investments:

  • All investments involve risk and may result in a loss of principal.
  • There is no guaranty of reliable, consistent, predictable income.
  • Past performance is not indicative of future results.
  • The purchase and sale of securities must be reviewed on an individual basis considering the risk tolerance and investment objectives specific to each investor.

Sims Mortgage Funding Completes Metairie Manor Refinancing in Louisiana

Sims Mortgage Funding, Inc.

by Anthony Luzzi

From the Jersey Meadowlands to the Bayou – Sims Mortgage Funding Has It Covered!

Although it is headquartered in New Jersey, Sims Mortgage Funding seems to have a second home in Louisiana – we have closed close to $530 million in HUD-insured loans in the Pelican State. We returned there last month to complete a $10,814,900 refinancing for Metairie Manor, a 287-unit, Section 8 funded, affordable senior housing community owned and managed by affiliates of the Archdiocese of New Orleans.

The backstory? We originally refinanced Metairie Manor in 2012 when it paid off its HUD Section 202 Direct Loan; that refinancing produced about $250,000 in annual debt service savings that have been used to fund wellness and affordable nutrition programs, resident units deep-cleaning services, and enhanced transportation options. Interest rates for HUD-insured loans have dropped since the 2012 refinancing, so the Archdiocese brought us back to evaluate options to generate more debt service savings.

Our solution? We originated a new HUD-insured loan under the Section 222(a)7 program, an expedited review option that does not require an appraisal and has a pared-down application and underwriting format. This minimized the time it took us to develop the application and loan underwriting, and the time it took for HUD to review and approve the deal.

The result? The 223(a)(7) loan reduced the project’s interest rate by 33% and produced debt service savings of $118,000 annually. Moreover, in order to maximize annual debt service savings, we negotiated an extension of the loan term of almost 10 years. The additional savings from the new 223(a)(7) loan materially expands Metairie Manor’s capacity to provide services and programs to its residents, enhancing it already-solid reputation in the community. We also built approximately $700,000 into the new loan to supplement the existing Reserve for Replacements fund, so there is a stable platform to provide for Metairie’s physical needs in the future.

The takeaway? The new 223(a)(7) loan will enable Metairie Manor to expand its programs and services and increase its capital reserves – all to be accomplished without an increase in the existing Section 8 funding.

An encore? The Metairie Manor refinancing is the eleventh HUD-insured loan we have closed for the Archdiocese and its management affiliate, Christopher Homes, Inc.

For more information, please contact Andrew Patykula at [email protected].

Sims Mortgage Funding, Inc. originates, underwrites, and funds loans for Healthcare, Multifamily and Hospital projects. We have completed over $2 billion in HUD-insured transactions and are an approved LEAN (healthcare) and MAP (multifamily) lender.

Sims Mortgage Funding, Inc. is a wholly owned subsidiary of HJ Sims.

An Exclusive Investment Opportunity: Benedictine Health System

Benedictine Health System Logo

**This financing has been successfully closed. Please contact you advisor for any potential secondary market opportunities.**

$79,065,000*
DULUTH ECONOMIC DEVELOPMENT AUTHORITY
(St. Louis County, Minnesota)

Revenue Bonds
BENEDICTINE HEALTH SYSTEM
SERIES 2021A

HJ Sims is pleased to serve as sole underwriter for tax-exempt Series 2021A revenue bonds on behalf of Benedictine Health System, a Minnesota nonprofit corporation, a Catholic healthcare system that provides long-term care services, congregate housing, assisted living, rehabilitation services and other health-care and social services. Benedictine is the 10th largest not-for-profit senior living provider in the country. Benedictine Health System is the parent corporation of the Obligated Group, among other entities.

The Benedictine Obligated Group consists of 21 senior living communities in Minnesota and North Dakota that in aggregate comprise of 1,242 nursing beds, 811 assisted living units, and 153 independent living units.

The vision of Benedictine is to enhance its communities (Benedictine Living Communities) where health, wellness and choice come to life. The core values of Benedictine are hospitality, stewardship, respect, and justice.

About the Bonds

  • Series 2021A
    • $79,065,000*
    • Non-rated, tax-exempt
    • Bonds are exempt from Federal Income Tax and exempt from State of Minnesota Income Tax
    • Denominations of $5,000
    • Interest will be payable on January 1 and July 1 of each year, commencing January 1, 2022
    • First principal payment: July 1, 2022

Project

  • Fund $10,000,000 of capital improvements at select communities
  • Refund the outstanding tax-exempt bank debt on the Minnesota communities
  • Fund Debt Service Reserve Fund

Security

  • Secured by gross revenues and mortgage.
  • Debt Service Reserve Fund.

 Key Financial Covenants

  • 1.20x Debt Service Coverage Ratio; tested annually.
  • 60 Days Cash on Hand; tested semi-annually.

We are currently accepting indications of interest for these tax-exempt bonds with an expected pricing the week of June 28, 2021, and anticipated settlement during the week of July 12, 2021. For more information including risks, please read the Preliminary Official Statement in its entirety. If you have interest in purchasing these bonds, please contact your HJ Sims financial professional as soon as possible.

LEARN MORE
877.577.3365

*Subject to change

No dealer, broker, salesperson, or other person has been authorized to give any information or to make any representation other than those contained in the Preliminary Official Statement and, if given or made, such other information or representation should not be relied upon as having been authorized by the Issuer, the Borrower, or the Underwriters. The information set forth herein has been obtained from the Issuer, Borrower, and other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness by, and is not construed as a representation of, the Underwriters. The information contained herein is subject to change without notice. Under no circumstances shall this constitute an offer to sell or solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any offering or solicitation will be made only to investors pursuant to the Preliminary Official Statement, which should be read in its entirety. Investments involve risk including the possible loss of principal. HJ Sims is a member of FINRA and SIPC, and is not affiliated with Benedictine Health System, Benedictine Obligated Group or any of its related entities or any other organization referred to herein.

An Exclusive Investment Opportunity: Presbyterian Senior Living

Presbyterian Senior Living Logo
Presbyterian Senior Living Logo

**This financing has been successfully closed. Please contact you advisor for any potential secondary market opportunities.**

$60,370,000*
PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

$60,370,000* Series 2021 Long-Term Fixed Rate Bonds
(Pennsylvania Economic Development Financing Authority Revenue Bonds / Presbyterian Senior Living Project)

HJ Sims is pleased to serve as sole underwriter for Presbyterian Homes Obligated Group (the “Obligated Group”) consisting of: Presbyterian Homes, Inc.; Cathedral Village; Presbyterian Homes in the Presbytery of Huntingdon; The Long Community, Inc.; Quincy Retirement Community; and PHI Investment Management Services, Inc. (collectively, the “Obligated Affiliates”). The Obligated Affiliates own, operate, and manage 12 continuing care retirement communities, three stand-alone independent living facilities, and two stand-alone personal care homes – all located throughout Pennsylvania, Ohio and Delaware. 

The Series 2021 bonds will (1) refund certain outstanding bank debt; (2) provide approximately $38MM in proceeds to fund certain capital improvements to the Communities; and (3) pay for costs of issuance.

The not-for-profit organizations that make up the obligated group are all Pennsylvania-based not-for-profit senior living communities, each of which are 501(c)(3) organizations. 

Virtual Site Visits/Tours

Learn more about each of the Presbyterian Senior Living communities and locations throughout Pennsylvania, Maryland, Ohio, and Delaware.

About the Bonds

  • Series 2021
    • $60,370,000*
    • Fitch Rated “BBB+” Stable Outlook, tax-exempt
    • Bonds are exempt from Federal Income Tax and exempt from Commonwealth of Pennsylvania Income Tax
    • Denominations of $5,000
    • Interest will be payable on January 1 and July 1 of each year, commencing January 1, 2022
    • First principal payment: July 1, 2022
    • Final maturity: July 1, 2046

Project Highlights:

  • The Obligated Affiliates are managed by PHI, a Pennsylvania non-profit organization, which is also the parent corporation of the Obligated Affiliates, among other entities. PHI is NOT a member of the Obligated Group
  • The communities included in the Obligated Group have a total of approximately 1,558 independent living units, 506 personal care or assisted living units and 1,031 skilled nursing units among them.
  • Secured by gross revenues and mortgage.

 Security

  • Revenue pledge
  • Real estate pledge

 Key Financial Covenants

  • Debt service coverage ratio of 1.25x (tested quarterly)
  • Reserve Ratio of 0.25 required (cash: debt), tested semi-annually.
  • Event of Default if below 1.0x for one fiscal year

We are currently accepting indications of interest for these tax-exempt bonds with an expected pricing the week of June 21, 2021, and anticipated settlement during the week of July 14, 2021. For more information including risks, please read the Preliminary Official Statement in its entirety. If you have interest in purchasing these bonds, please contact your HJ Sims financial professional as soon as possible.

LEARN MORE
888.978.1743

*Subject to change

No dealer, broker, salesperson, or other person has been authorized to give any information or to make any representation other than those contained in the Preliminary Official Statement, and, if given or made, such other information or representation should not be relied upon as having been authorized by the Issuer, the Borrower, or the Underwriters. The information set forth herein has been obtained from the Issuer, Borrower, and other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness by, and is not construed as a representation of, the Underwriters. The information contained herein is subject to change without notice. Under no circumstances shall this constitute an offer to sell or solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Investments involve risk, including the possible fluctuation of principal. Investments involve risk including the possible fluctuation of principal. Past performance is not indicative of future results. The purchase and sale of securities should be conducted on an individual basis considering the risk tolerance and investment objectives of each investor and with the advice of counsel of a professional advisor. HJ Sims is an independent financial services firm and is not affiliated with Presbyterian Senior Living, Presbyterian Homes Obligated Group or any of its related entities or any other organization referred to herein.

Middle Market Success Stories Webinar

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1-800-HJS-1935
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June 2021

Middle Market Success Stories
Learn from the Leaders

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Webinar Details

Session Date & Time: Tuesday, June 29, 2021 from 1:00pm-2:00pm ET

Thought Leadership and Webinar Description:

We took a critical look at the increasing pressure on senior living providers to meet the demands of the emerging middle market. Learn what the Baby Boomer generation and their families are looking for when exploring their options in the middle market housing and services. During this discussion, we reviewed the strategic significance of extending housing offerings to the middle market. While many providers are considering entering in the middle market arena, few have taken the leap due to their inability to find an operating and financial model that ‘works’ with the lower monthly rental rates. Featured speakers shared case studies of their own middle market senior housing models identifying key success factors for development, pricing and operating models.

Key Takeaways:

  1. Identify the viability of middle market products in your region.
  2. Embrace the different operating mentality needed to successfully launch and operate a moderate-priced housing product.
  3. Absorb tangible suggestions from operators who have experience profitably operating middle market products.

Additional Q&A from our Presenters

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Featured Speakers

William Pettit

President, Merrill Gardens

William “Bill” Pettit is the president of the R. D. Merrill Company with responsibility for Merrill Gardens and sister company Pillar Properties. Merrill Gardens is one of the most respected assisted living operators in the country with 70 communities in 20 states. Pillar Properties is an award-winning owner and operator of multi-family housing with 1,700 units in operation and the developer for Merrill Gardens new communities.

Bill joined the R. D. Merrill Company in 1992 after 18 years in the banking industry. He was instrumental in the formation of the company, starting with one community in 1993. He directed the rapid growth and timely execution of acquisitions and developed the policies that speak to the Merrill Gardens and Pillar Properties commitment to quality.

Bill was a 2018 Seattle Business Magazine Executive Excellence Award winner and under his leadership the R. D. Merrill Company was named the Family Business of the Year for its commitment to residents, team members and community service.

Bill received a bachelor’s degree from Princeton in 1971 and a MBA from the University of Oregon in 1973. He was the first senior living executive in residence for Washington State University. He serves on the Argentum Board of Directors and he is the past Chairman of the Executive Board of the American Seniors Housing Association (ASHA).

Matthew D. Rule, Esq.

Senior Vice President of Housing Development, National Church Residences Investment Corp.

Matt Rule is Senior Vice President of Housing Development at National Church Residences. Matt leads NCR’s acquisitions, development finance, originations, and construction teams. In the past five years his team closed over 30 LIHTC transactions, purchased over 3,000 affordable senior units and closed over $100,000,000 of new market rate senior housing production. In 2015, Affordable Housing Finance (AHF) named Matt as one of six Affordable Housing Young Leaders. Prior to joining NCR, Matt was a transactional attorney at Squire Sanders, LLP (currently known as Squire Patton Boggs) where he served as legal counsel for a variety of low income housing tax credit developers, syndicators, direct investors and lenders. Matt is a graduate from The Ohio State University Michael E Moritz College of Law where he graduated with distinction as Summa Cum Laude, Order of the Coif. Matt is active at Vineyard Church in Columbus, Ohio and currently serves as the Vice President of the Ohio Housing Council and as a Board Member of the Central Ohio chapter of the Juvenile Diabetes Research Foundation. In the past he has served as a Board Member the National Affordable Housing Trust (2018-2020), a Board Member of the Upper Arlington Rotary Club (2018-2020), a member of the Upper Arlington Citizen Financial Review Task Force (2019) and as the Chair of the Finance Subcommittee of the Upper Arlington Community Center Feasibility Task Force (2020). Matt is married and has four very energetic children.

For more information or if you have any questions regarding the content of this webinar, please contact Lynn Daly at 312.505.5688 or [email protected], Curtis King at 512.519.5003 or [email protected] or any HJ Sims banker at 1-800-HJS-1935.

Meet Our Team

HJ Sims Secures $41.9M of Bank Financing for Expansion Project and Refinancing

FOR IMMEDIATE RELEASE

CONTACT: Tara Perkins, AVP | 203-418-9049 | [email protected]

HJ Sims Secures $41.9M of Bank Financing for Expansion Project and Refinancing

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the successful closing of a May 2021 financing in the amount of $41.89MM for Sunset Retirement Communities (Sunset), a multi-campus not-for-profit senior living provider located in Michigan.

In 2009, Sunset embarked on development of Waterford Place, completing the campus in 2015. In 2020, Sunset pursued phase three, including the addition of 62 independent living apartments, 20 villas and amenity spaces. Sims was engaged to identify the optimal capital structure for Sunset’s project financing, while reviewing existing bank debt.

The market study for phase three (completed in March 2020) supported the need for the expansion. COVID-19 slowed down pre-sales and created a need for management to focus on existing operations. After approaching potential lenders in May 2020, Sunset’s management team delayed the financing. However, Sims continued to work with Sunset, exploring capital structures. With its strong balance sheet and foundation support, Sunset moved forward with development of the 20 villas and self-funded construction costs.

During Autumn 2020, Sims re-analyzed financing options for Sunset’s apartment expansion and existing debt. Hefty termination costs associated with an existing long-term swap limited the number of viable refinancing options. Sims identified a new commercial banking partner that would finance the apartment project and replace one of the lenders.

In order to minimize Sunset’s long-term cost of capital and avoid large forward starting swap premiums, Sims worked with the lending partner to allow for the new money long-term bond proceeds to be drawn first such that the forward swap could take effect in just five months. By drawing the long-term proceeds first, Sunset has time to secure proceeds from strategic initiatives, which will be applied to project costs before any draws on the short-term bond proceeds. This allows Sunset to further minimize its funded interest costs during construction. 

On May 12, 2021, Sims closed the Series 2021 financing for Sunset, which included three unique tranches of debt:

  • $13.40M of Series 2021A Bonds, partially refunding Series 2014 debt and enabling Sunset to avoid any disruption or incurring a greater cost of capital.
  • Up to $9.90M of Series 2021B Bonds, funding construction costs associated with the project and minimizing annual debt service burden.
  • Up to $18.59M of Series 2021C Bonds, funding construction costs associated with the project and enabling Sunset to deliver and minimize the overall debt service.

The Series 2021 financing, coupled with management’s prudent strategic decisions, positions Sunset for operational success and growth.

“Pursuing debt financing for an expansion and bank replacement during COVID-19 was challenging, but Sims made it happen. With Lynn Daly and Kerry Moynihan on point, Sims relentlessly pursued every avenue to ensure Sunset was Financed Right®. Sunset is very grateful for the Sims team’s expertise, industry connections and ability to close a deal with the right terms on an aggressive schedule. Sunset could not have picked a better partner. There is no question who our partner will be on future financings,” said Steven Bossenbroek, CFO, Sunset Retirement Communities.

Financed Right® Solutions—Lynn Daly: [email protected] or Kerry Moynihan: [email protected] 

ABOUT HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm. Headquartered in Fairfield, CT, Sims has nationwide investment banking, private wealth management and trading locations. Member FINRA, SIPC. Testimonials may not be representative of another client’s experience. Past performance is no guarantee of future results.  Facebook, LinkedIn, Twitter,  Instagram.

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Sunset Retirement Communities (May 2021)

Sunset Retirement Communities is a multi-campus not-for-profit senior living provider located in West Michigan. HJ Sims was engaged to identify the optimal capital structure for Sunset’s project financing while also reviewing their existing bank debt with two different banks.

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Watermark Retirement Living (May 2021)

Watermark Retirement Communities Logo

Watermark Retirement Living, which manages 65 communities in 21 states with additional communities under development, including CCRC’s, standalone independent living, assisted living and memory care communities in addition to Medicare-certified rehabilitation and skilled nursing neighborhoods, has partnered with ZOM Living, a highly regarded luxury multifamily developer, to develop two luxury senior living communities in South Florida.

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