HJ Sims Continues to Partner with Asbury Communities to Assist with Multiple Strategic Initiatives in Pennsylvania
“Over the past few years, Asbury has partnered with HJ Sims on several financings. We continue engaging Sims as they really do deliver on their tagline of Partnered Right®, Structured Right®, Financed Right®, and Executed Right®. Sims always exceeds our expectations.”
– Andrew Jeanneret, Chief Financial Officer, Asbury Communities, Inc.
Partnered Right®
Asbury Communities, Inc. (“Asbury”), owns and operates life plan communities in Maryland and Pennsylvania, as well as HUD Section 202 senior housing buildings, a foundation, and a for-profit technology consulting firm. All of the facilities that are included in its Maryland and Pennsylvania Obligated Groups are owned and operated by Asbury Atlantic, Inc., a wholly-owned subsidiary of Asbury Communities.
Asbury’s Pennsylvania Obligated Group (the “PA Obligated Group”) consists of two life plan communities – Bethany Village Retirement Center (“Bethany Village”) located in Mechanicsburg, Pennsylvania, and Springhill (“Springhill”) located in Erie, Pennsylvania. Bethany Village consists of two campuses with an aggregate of 400 independent living units, 100 assisted living units, and a 69-bed skilled nursing center and related amenities. Springhill has 158 independent living units, 35 personal care units and an 80-bed skilled nursing facility.
Over the past two years, HJ Sims has assisted Asbury in several capacities to expand and fulfill its mission in Pennsylvania. In early 2021, HJ Sims acted as both underwriter and placement agent to refinance the PA Obligated Group’s outstanding bonds to generate significant savings. Later that year, HJ Sims and Asbury worked on an acquisition for Chandler Estate, a community based in Pen Argyl, PA that had approximately 106 units operating at the time of acquisition. Most recently, HJ Sims served as placement agent to fund capital improvements within the PA Obligated Group that will upgrade the infrastructure at both Bethany Village and Springhill.
Structured Right®
Chandler Estate Acquisition
In 2021, Asbury requested HJ Sims’ assistance in procuring financing for its acquisition of Chandler Estate, an independent living and personal care community located in Pen Argyl, Pennsylvania. The Chandler Estate acquisition was accomplished using a newly formed for-profit subsidiary of Asbury’s existing for profit organization, The Asbury Group, Inc. Asbury sought HJ Sims’s assistance in identifying a banking partner that would reimburse Asbury for a portion of the purchase price of Chandler Estate and that would also be open to financing potential expansion projects at Chandler Estate while minimizing any support from existing Asbury entities.
2022 Capital Improvement Financing
To determine the borrowing amount and the most efficient structure for funding the capital improvements, HJ Sims ran several fixed-rate bond and bank debt scenarios to determine the impact to the PA Obligated Group’s metrics. Ultimately, Asbury chose to utilize an $18 million tax-exempt bank loan to finance the infrastructure improvements. The bank loan offered the lowest cost of capital compared to fixed rate bonds due to lower interest rates offered by commercial banks and the capability to draw down the loan over time.
Upon determining the plan of finance, HJ Sims and Asbury began a bank solicitation process to generate competitive terms and a low cost of capital. Asbury hosted multiple banks at an in-person site visit and received three competitive term sheets. Truist Bank, Asbury’s existing banking partner, provided the most competitive terms. HJ Sims worked with Asbury to improve the original terms from a 12-year bank commitment to a 15-year commitment, which eliminated a potential balloon payment.
Executed Right®
Chandler Estate Acquisition
The key items of importance to Asbury in identifying a bank partner for Chandler Estate were minimizing any balloon at the end of the loan term, identifying a partner that would be interested in financing a potential independent living expansion, and forgoing any requirement for a guaranty or other support from the existing Asbury entities. Asbury’s reputation in Pennsylvania elicited a number of interested parties, and HJ Sims was ultimately able to procure a proposal for a loan that exceeded all of Asbury’s criteria. HJ Sims also served as a swap advisor to Asbury in connection with the swap that accompanied the Chandler Estate loan facility. To accommodate a period of transition, the ultimate loan had a one-year interest only period followed by 19 years of amortization to maturity with a single bank call option at the fifteenth anniversary of the loan closing.
2022 Capital Improvement Financing
Shortly after selecting a banking partner, HJ Sims organized the working group and kicked-off the documentation and due diligence process. HJ Sims also served as swap advisor to Asbury to assist with executing the swap. To allow for a draw-down period, the swap would begin two years after closing. Based on discussions with Asbury, HJ Sims structured the swap to hedge 90% of the bank loan. Sims structured the unhedged (variable) portion for the final 12 months of the loan’s amortization so that Asbury could prepay a portion of the loan without paying potential swap termination fees.
Financed Right®
Chandler Estate Acquisition
On November 15, 2021, the Chandler Estate acquisition loan closed, refinancing a portion of the purchase price of the community. Simultaneously, Chandler Estate executed a fifteen year swap with an all-in rate of 3.751%. The loan is fully amortizing and matures in 2041, and the bank has a one-time call option on November 15, 2036. HJ Sims was able to successfully negotiate terms that included no required support from any of the existing Asbury entities and that permitted additional debt in an amount estimated to finance the potential independent living expansion subject to the satisfaction of certain historic and pro forma financial ratio tests.
2022 Capital Improvement Financing
On July 26, 2022, Asbury and Truist closed on the $18 million draw-down bank loan. To limit interest rate risk Asbury entered into a forward starting swap with an all-in rate of 3.456% that would begin two years from closing. The loan will remain in a variable-rate mode during the first two years of the loan to allow Asbury to benefit from the draw-down structure.
For more information, please contact:
Aaron Rulnick
203.418.9008
Melissa Messina
203.418.9015