Sims Partners with Birchwood Healthcare Partners to Finance Acquisition of Post-Acute Community
Partnered Right®
Birchwood Healthcare Partners (“Birchwood”) is a health care real estate private equity firm based in Chicago. Birchwood focuses on investing in senior housing and post-acute healthcare services through a vertically integrated approach, through its various investment platforms and 5V+ seniors healthcare fund. Sims previously partnered with Birchwood to provide subordinate financing to fund the acquisition of a portfolio of properties and home health agency as part of its Oklahoma Post-Acute Platform strategy.
Structured Right®
Birchwood identified a Community in Iowa as an acquisition target as part of its Midwest post-acute platform strategy. The healthcare community was developed in 2016 and benefitted from a high skilled mix as the newest option in the market. However, the Community’s financial performance was challenged by a number of factors, including inconsistent occupancy and reimbursement rates lagging behind inflationary and wage related expense pressures. As result, Birchwood negotiated an attractive purchase price relative to the Community’s original cost basis. Birchwood identified several opportunities to improve performance at the Community, and after reaching an agreement to purchase the community, began working with the seller to implement several of the performance improvement initiatives.
Over the course of the acquisition, several of the initiatives began to yield positive results, which coupled with significant Medicaid rate increase in Iowa, led to dramatic improvement in financial performance of the community, ultimately leading to an increase in the underlying value relative to the agreed upon purchase price. Sims proposed a subordinate mezzanine loan to supplement a first mortgage loan to provide a high-leverage acquisition solution to take advantage of the improved performance of the Community, limiting the required equity needed to closing.
Executed Right®
HJ Sims provided a subordinated mezzanine loan which, together with the first mortgage loan, and equity funding from Birchwood, funded the acquisition. Through an affiliate of HJ Sims Investments, LLC (“HJSI”), Sims sold securities through its Private Client Group to fund the subordinate, mezzanine loan. The loan was structured with interest only payments over the entire 3-year term at a fixed interest rate, limiting debt service expense and interest rate risk. Birchwood also purchased an interest rate cap to limit interest rate risk on the first mortgage loan while still retaining the possibility of a lighter interest obligation if the current high-rate environment subsides. Birchwood intends to refinance the Community with permanent HUD financing upon stabilization.
Financed Right®
The customized financing solution was structured to help Birchwood with its capital plans and investment strategy. By utilizing additional leverage for a now performing asset, Birchwood is able to allocate capital to other investment opportunities.
HJ Sims excels in providing customized debt and equity capital for senior living providers utilizing a variety of direct financing solutions including equity, preferred equity, mezzanine debt, and high leverage first mortgage loans, tailored to meet the unique financing needs of valued partners.
The financing marks Sims’ second successful closing with the Birchwood.
For more information, please contact:
Curtis King
512.519.5003
Brett Edwards
512.519.5001