HJ Sims Finances Largest Non-Profit Senior Living Provider
Partnered Right®
The Evangelical Lutheran Good Samaritan Society (the “Society”) is a not-for-profit corporation, founded in 1922, that operates skilled nursing facilities, residential housing for seniors, home and community based health services and affordable housing projects in 224 locations across the United States and is the largest not-for-profit provider of senior care and services in the country.
Sanford Health is an integrated health system headquartered in South Dakota. It is the largest, rural, not-for-profit health care system in the nation with 45 hospitals and 289 clinics in nine states and three countries. With 28,000+ employees, including 1,300+ physicians in more than 80 specialty areas of medicine, Sanford Health is the largest employer in the Dakotas.
The Society and Sanford Health both operate skilled nursing and assisted living centers in the Bismarck-Mandan, North Dakota community. Additionally, Sanford Health operates an acute care hospital in Bismarck, ND. Sanford Health and the Society entered into an agreement to form a joint venture (“the Joint Venture”) to operate their respective senior and skilled living facilities in the Bismarck – Mandan market and to build a new $28,000,000 replacement skilled nursing facility. This new Joint Venture would be managed by the Society. The Joint Venture partners would close one existing but outdated skilled nursing facility and transfer the bed licenses and residents to the new facility. Further, Sanford Health had 56 skilled nursing bed licenses on so called “lay away” that would be assigned to the new facility. In addition to accommodating the transferred residents, the new facility would operate a transitional care unit for patients discharged from the local Sanford Health hospital and from other acute care providers.
The Joint Venture would own the newly constructed skilled nursing facility and lease remaining buildings from the respective Joint Venture party. The Society had built the replacement SNF using a short term line of credit, and the Joint Venture agreement stipulated that $20,080,000 of the construction and equipping costs be reimbursed to the Society.
Structured Right®
The Joint Venture partners retained Sims to obtain a long-term, tax-exempt loan secured by a mortgage on the new building and Joint Venture revenues. No additional credit support was available from either Joint Venture partner due to limitations in Sanford Health and Society Obligated Group Master Trust Indentures regarding guarantees to third parties.
Executed Right®
Sims conducted a mortgage loan RFP process focusing on regional banks that were familiar with the Joint Venture partners and in some cases had existing relationships. Banks with operations in North Dakota and, specifically, the Bismarck – Mandan market were of particular interest. Sims also conducted an appraisal analysis to confirm sufficient facility value such that typical loan to value constraints were achievable.
Most importantly, documents securing the bonds originally issued to finance the buildings now subleased to the Joint Venture required bondholder consent.
Financed Right®
The team selected a regional bank headquartered in Sioux Falls to lead a group of three banks that would originate a $20,470,000 mortgage loan with a 30-year amortization and a 10-year fixed tax-exempt rate of 3.0%. Sims also coordinated the overall timing of necessary TEFRA and county board meetings and, ultimately, the closing of the mortgage loan. Morton County North Dakota was selected to serve as issuer of the tax exempt mortgage note, and Sims coordinated the retention of bond counsel and the preparation of necessary bond documents.
Sims negotiated a three year funding of a $1,000,000 debt service reserve fund and obtained other favorable covenants.
For more information, please contact:
Aaron Rulnick
(301) 424-9135