Sims Finances $18 Million in Taxable, Corporate Bonds for Nursing Homes’ Acquisition
Sims was approached by affiliates of the Borrower to provide financing in connection with the acquisition of a Portfolio of seven skilled nursing facilities. The seven property Portfolio is comprised of 900 beds and will be leased by a strong skilled nursing operator. Sims successfully layered $18 million of mezzanine debt over a senior loan provided by a national bank.
There were several challenges associated with this financing:
- The debt needed to be structured in a way that met stringent requirements of the Senior 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.
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 in a timely fashion. Sims’ ability to be flexible resulted in a successful acquisition allowing the client to continue to grow its portfolio. At the closing, the client said “it was the smoothest closing they had ever experienced.”
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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