Sims Uses “HUD Plus” to Refinance 7-Property Portfolio
Sims was approached by an affiliate of Affinity Living Group (“Affinity”), a spin-off of Meridian Senior Living, to assist in refinancing various forms of existing subordinate debt that remained on a portfolio of seven senior living properties after it had been refinanced with HUD. Using its “HUD Plus” program, Sims successfully provided a mezzanine loan totaling $6.05 million to Affinity to complete the refinancing.
There were a number of challenges associated with this financing:
- The debt needed to be structured in a way that was flexible and met the requirements of four recently completed HUD financings.
- The terms of Sims’ mezzanine financing had to allow for the financing of some further capital improvements and the potential sale of one of the portfolio properties.
- Affinity was under time constraints to complete the financing.
This Sims HUD Plus financing met both HUD’s and Affinity’s requirements and allowed the transaction to be closed on an expedited basis.
A new entity, Affinity Portfolio Funding, LLC (the “Sims Issuer”), was formed to issue one series of bonds. The bonds were successfully sold to Sims’ high net worth accredited investors. Proceeds from the bonds were used by the Sims Issuer to fund the subordinate loan to Affinity. Sims was able to close the subordinate financing in less than 30 days after mailing its placement memo.
The ability of Sims to quickly underwrite and then implement a subordinate debt structure met the needs of Affinity as well as HUD. Sims’ ability to be flexible and close quickly allowed the owners to refinance higher cost debt and avoid making an additional equity contribution to the transaction. The creativity of Sims’ bankers resulted in both short and long-term cost savings for Affinity. A creative financing solution for increasing the proceeds of a refinancing is an example of Sims using its extensive investor base to provide powerful financing to senior housing providers.