Sims’ Speed in Providing Mezzanine Financing
Sims was approached by affiliates of the Borrower to provide financing in connection with the acquisition of a skilled nursing facility. The facility is comprised of 120 skilled nursing beds and 7 independent living beds and will be leased by the Borrower to an experienced skilled nursing operator. The Borrower was under considerable time pressure. Using its “HUD Plus” program, Sims successfully provided a mezzanine loan totaling $2.0 million to complete the acquisition.
There were several challenges associated with this financing:
- The debt needed to be structured in a way that met the very demanding requirements of the Senior Lender and the Accounts Receivable (AR) Lender;
- Sims had to underwrite the operator’s anticipated operational improvements to both revenue and expense line items and substantiate all adjustments.
- The terms of Sims’ mezzanine financing had to be flexible enough to allow for a potential refinancing with HUD in the future.
- The project experienced some regulatory delay that made the time deadlines very tight.
A new entity 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 the Borrower. 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 the Borrower as well as those of the Senior Lender and AR Lender in a timely fashion. Sims’ ability to meet a tight deadline and be flexible resulted in a successful acquisition, allowing the client to continue to grow its portfolio.
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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