Smooth, Fast Acquisition Financing with Subordinate Debt
Sims was approached by an affiliate of Affinity Living Group (“Affinity”) to provide financing in connection with the acquisition of a Portfolio of seven senior living communities in North Carolina. The Portfolio is comprised of 221 assisted living beds and 301 memory care beds. Sims successfully provided a mezzanine loan totaling $9.570 million to Affinity to complete the acquisition. This is the third financing that Sims has completed for Affinity, allowing it to reorganize and grow its portfolio resulting in more flexibility and savings.
There were several challenges associated with this financing:
- The debt needed to be structured in a way that met the requirements of the letters of credit and banks.
- Sims need to deal with multiple lenders and successfully negotiate complicated intercreditor arrangements.
- The terms of Sims’ mezzanine financing had to be flexible enough to allow for a potential refinancing with HUD in the future.
A new entity, Affinity Portfolio Funding III, LLC (the “Sims Issuer”), was formed to issue taxable bonds. The bonds were successfully sold to Sims’ high net worth accredited investors. The proceeds from the bonds were used by the Sims Issuer to fund the subordinate loan to Affinity. This approach allows Sims’ high net worth clients to invest in selected transactions but leaves the asset management and key decisions in the hands of Sims and its partner.
Sims was able to underwrite and then implement a subordinate debt structure that met the needs of Affinity as well as the Senior Lenders in a timely fashion. Sims’ ability to be flexible resulted in both short- and long-term cost savings for Affinity and allowed Affinity to preserve its capital for future projects.
A creative financing solution for strategic growth is an example of Sims using its extensive investor base to provide attractive financing to senior housing providers. Sims excels in filling the niches that allow an owner or developer to complete a transaction by providing custom financing such as mezzanine debt or preferred equity.
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