Sims Finances Campus Expansion and Reposition Project
“We really appreciate the personal interest HJ Sims took in our project. The team shared our vision of repositioning Northcrest’s campus so that it will continue to serve people in the area for years to come with the vitality it is known for. Their experience and ability to guide all stakeholders through the process with clarity was invaluable. We could not have moved forward with this project without the encouragement and support we received from HS Sims.”
– Deborah J. Russell, CFO, Northcrest
Partnered Right®
Northcrest Community (“Northcrest”) is a non-profit corporation located in Ames, Iowa providing housing, healthcare and other related services to residents through the operation of a Type A life care continuing care community (CCRC). Northcrest was incorporated in 1962, with its first residents moving in November of 1965. Well established within the community, Northcrest is a provider of choice in the region.
Their current campus is comprised of 42 town homes, 68 independent living units and 54 skilled nursing beds, 14 which are specially licensed for dementia care. Northcrest is undertaking an expansion project to their current campus which consists of the construction of a 24-bed replacement skilled nursing facility, 32 new assisted living apartments and 48 new independent living apartments with underground parking.
Additionally, Northcrest is expanding and renovating common areas, main kitchen, casual dining venue, multipurpose room, wellness center, beauty/barber salons, guest rooms, administrative offices, existing independent living apartments, and other associated site work and development.
Structured Right®
HJ Sims was engaged by Northcrest to facilitate a tax-exempt debt financing. The financing will allow Northcrest to complete a repositioning and expansion to their current campus as well as refinance the Community’s existing bank debt. Tax-exempt fixed rate bonds were the most cost-effective solution for the client and reduced Northcrest’s future refinancing risk. In addition to the traditional long term bonds, Sims created a series of Entrance Fee Principal Redemption BondsSM (EFPRB). The EFPRBs allow the client to capture initial entrance fees from new residents and reduce debt as quickly as possible. Due to the high velocity of pre-sales and Northcrest’s extremely strong cash position, the pre-sale requirement for the financing was 50%, less than the industry average requirement of 70%.
Executed Right®
The final structure created level debt service for the long term debt after the EFPRBs finish amortizing in the early years. Sims was able to generate significant demand for the bonds and achieve considerably lower yields than originally forecasted to the benefit of the client. At the recommendation of HJ Sims, Northcrest applied for and obtained a BB+ rating from Fitch Ratings which helped to contribute to the lower yields. Additionally, approximately $4 million of the bonds were distributed through Sim’s Private Client Group. The final structure included an EFPRB series and 5 term bonds with the final maturity being in 30 years. Further, a call feature of 6 years at a 103% premium gives Northcrest future flexibility with the ability to complete advance refundings no longer available.
Financed Right®
With Sims’ leadership in collaboration with the full Northcrest working group, Northcrest Community successfully completed the $54,215,000 financing and realized its goals of funding the construction of a strategic large expansion and repositioning to the current campus, refunding outstanding bank debt and obtaining an arbitrage yield less than 5%. The financing was successfully sold on December 6, 2018 and closed December 20, 2018 and resulted in an arbitrage yield for the issue of 4.72%. The use of the EFPRBs is expected to reduce debt by nearly 25% within 5 years.
For more information on how Menorah Park was Financed Right® by HJ Sims, please contact
Aaron Rulnick
(301) 424-9135