HJ Sims Acts as an Advisor to Structure a Refinancing and New Capital to the BayWoods Cooperative
“This is the second refinancing of our debt that Sims has handled. I have worked with Aaron Rulnick for going on two decades and have always found him to be a trusted advisor and colleague. Brady Richardson was new to the team this go around and his diligence and guidance was indispensable. BayWoods is a stronger place today because of the Sims team. I am still amazed at the results. I would recommend them highly.”
— Frank McGovern, President & COO
Partnered Right®
BayWoods is a senior housing cooperative (“co-op”) located in Annapolis, MD. The community includes 147 independent living units with a small healthcare component comprised of 27 skilled nursing units and 20 assisted living units. BayWoods is located on the Severn River with breathtaking views of Annapolis and the sailors that charter the local waters. A long-time client of HJ Sims, BayWoods has continuously leaned on the expertise and guidance of the firm for financing solutions. In 2015, HJ Sims conducted a bank solicitation which resulted in a term sheet from a bank specializing in lending to cooperative housing models. Due to the community’s unique operating model and credit profile the aforementioned bank became the sole holder of the community’s debt. Once again in 2022, BayWoods engaged HJ Sims to capitalize on the interest rate market to realize debt service savings on the 2015 debt and establish a new lending partner to lend the capital needed for multiple renovations.
Structured Right®
BayWoods sought to capture the (then) low interest rate market in to pivot away from the current 2015 facility and refinance a $4.29mm line of credit the community used for renovations into a long-term facility. Additionally, the refinancing would allow BayWoods to release operating reserves imposed by the 2015 debt, providing capital for the renovations and other general improvements around campus. The 2015 Debt had a formal maturity date which imposed a formal defeasance for any refinancing opportunity. In addition to holding the 2015 Debt, the incumbent bank also held a PPP loan and the aforementioned line of credit.
To create an efficient financing, HJ Sims explored several structures and analyzed various scenarios for the optimal solution. Ultimately, HJ Sims created a refinancing scenario which would result in level debt service via an extended amortization on the refinancing debt. The refinancing savings and cash flow savings would allow for BayWoods to concurrently service the debt on for the renovations. After a conducting a bank solicitation, HJ Sims was able to solicit attractive terms from several institutions. BayWoods and HJ Sims settled on a solution which provided a fixed interest rate to eliminate any fluctuations in interest risk until the financing was closed.
Executed Right®
With a financing institution selected, HJ Sims negotiated a 51-day interest-rate lock with the bank from the execution of the term sheet. The hour glass had officially turned over. Immediately, HJ Sims began to work against the clock to implement the financing solution before the interest rate would reset. The financing had several components which required extensive due diligence and attention prior to closing. First, HJ Sims needed to work through the refinancing of the line of credit and the PPP loan held with the existing bank. Furthermore, HJ Sims needed to coordinate and advise upon the defeasance of the 2015 debt. The 2015 debt was securitized in a Commercial Mortgage Backed Security Pool which required an extensive amount of parties to collectively work toward the goal of refinancing the debt.
In just 48 days HJ Sims was able to form a working group, complete all due diligence, facilitate the drafting of all documentation, obtain payoff letters for a PPP loan held with the existing bank as well as the line of credit, and coordinate the defeasance of the 2015 Note.
Financed Right®
On May 3rd, with three days to spare on the interest rate lock, HJ Sims closed the transaction. The final terms of the financing included a 3.70% taxable interest rate (fixed), flexible prepayment structure, 30-year amortization, 15-year commitment, and no liquidity covenant. Additionally, the yield curve inverted which saved BayWoods approximately $1mm in financing costs associated with the defeasance process. Moreover, BayWoods was able to release over $600,000 in reserves held with the prior bank.
For more information, please contact:
Aaron Rulnick
301.424.9135
Brady Richardson
443.340.9980