HJ Sims Obtains Construction Financing to Extend Organization’s Services to Second Campus
Partnered Right®
Canterbury Woods has deep roots providing care to the Buffalo, NY area through affiliated organizations dating back to 1858. HJ Sims has been involved since its inception by providing seed capital in 1996 for its initial development, underwriting tax exempt bonds for construction of the community in 1998 and expansion financing in 2005. Today, the community consists of 243 independent living apartments and patio homes as well as enriched housing and skilled nursing beds. The community has consistently enjoyed high occupancy across all levels of care.
The dynamic leadership team and board have always explored new ways to increase the number of area seniors served by the organization. When it was announced that the former site of an acute care hospital in the Gates Circle area of downtown Buffalo was going to be redeveloped into a mixed use space, management saw an opportunity to build a new community that could leverage the services and amenities provided on the Williamsville campus. An agreement was reached with Canterbury Woods to acquire a portion of the site once the hospital demolition and site remediation were completed.
Structured Right®
In order to maximize the tax credits available through the remediation of the site, a for-profit limited liability corporation was formed which would be the borrower for the $3.3 million site demolition loan. Since Canterbury Woods would be acquiring a portion of the site upon completion of the demolition and remediation, management agreed to guarantee the loan needed to finance this work.
Once the site was acquired, Canterbury Woods would begin construction of a new community consisting of 53 independent living unit apartments and 5 enriched housing units in a six story building with underground parking. The commons area would include dining, social areas, wellness and a beauty salon. Total cost of the development will be approximately $41 million.
Working with management, HJ Sims structured a two-step process that would accomplish financing of both the site demolition and construction of the new community. The site demolition loan to the limited liability company would be repaid when the remediated property was acquired by Canterbury Woods. The construction loan would be repaid with entrance fees as new residents moved into the community.
The new Gates Circle campus was not organized as an affiliate of Canterbury Woods, so any financing had to comply with the organization’s existing limitations on indebtedness and permitted liens. Management wanted covenants related to the new financings to mirror the existing tests to minimize the administrative burden. Indicative of its confidence in the new community, management desired term sheets that did not have pre-sale requirements, which are typical in similar new development financings.
Executed Right®
Due to the short term nature of both loans, the most efficient and cost effective financing method was taxable bank debt. Leveraging HJ Sims’ extensive experience in obtaining bank financing for its clients throughout New York State, requests for proposals were sent to numerous financial institutions in the Buffalo area that generated strong responses. Canterbury Woods’ reputation for financial strength and quality of care made this an attractive opportunity for banks that were eager to establish a relationship.
In order to maintain the development schedule, it was necessary to obtain the site demolition financing as soon as possible. Working with management, HJ Sims was able to solicit, negotiate and close this first step within 5 weeks of the bank meeting. The terms from the selected bank included an all-in interest rate of approximately 1.50% with no closing fee and no bank counsel fees.
Financed Right®
On April 28, 2016, approximately 5 months after site remediation was completed, the property was acquired and the required local zoning approvals were received, Canterbury Woods closed on the $32 million construction loan with the same bank. Although management is confident the Gates Circle community will be constructed on schedule and fill quickly, it was able to obtain financing for nine years at an initial variable rate of just over 2.00%.
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For more detailed information on how Canterbury Woods was Financed Right by HJ Sims, please contact Andrew Nesi.