Refinancing Led by HJ Sims Provides Debt Service Savings and Liquidity Relief in Anticipation of Campus Repositioning Project
“Burcham Hills has had a long-standing relationship with HJ Sims, so when it came time to consider a bond refinancing as well as a large repositioning project, we decided to partner with HJ Sims.
We all know how important it is to have a partner that you can work well with and trust, and HJ Sims has provided this level of trust time and time again. Their communication methods are excellent, and they were flexible to meet and exceed our expectations, whether through site visit presentations, e-mails or calls, and all within a very timely manner.
Ultimately, Burcham Hills’ refinancing project was a success with reduced interest rates and restructured cash flow timing allowing us to move forward with our repositioning project, which will benefit Burcham Hills for many years to come. ”
– Pam Ditri, Executive Director, Burcham Hills ~ a Life Plan Community
Burcham Hills Retirement Center II (“Burcham Hills”) is a Michigan not-for-profit corporation formed in 1989 that owns and operates a rental retirement community located in the City of East Lansing, Michigan currently consisting of (i) 164 residential units, comprised of 57 independent living units, 39 assisted living units, and 68 memory care units located in a five-story, three wing building and (ii) a 133-bed skilled nursing facility, comprised of 72 beds dually licensed as Medicaid/Medicare and 61 beds licensed as Medicare only. Since Burcham Hills was formed, HJ Sims has served as its investment banker, providing advisory services and serving as underwriter on its fixed rate bond financings for multiple financings.
HJ Sims was engaged by Burcham Hills to currently refund its outstanding Series 2007 Bonds. Due to the plans of Burcham Hills to expand its community in the near term by adding an entrance fee-based independent living offering, Burcham Hills wished to create additional cash flow flexibility in the near term during the construction period and stabilization of the planned expansion, so it was important that the new financing structure address this. In addition, HJ Sims worked with Burcham Hills to identify other financing objectives, such as lowering Burcham Hills’ cost of capital.
In order to meet the strategic financing objectives of Burcham Hills, HJ Sims recommended a fixed-rate, tax-exempt bond issue (the “Series 2018 Bonds”). To generate greater upfront savings and cash for the organization, sinking fund payments were reduced in the first few years to lower overall debt service requirements. However, it was important to be sure not to extend the prior bonds’ maturities beyond constraints set by the IRS relating to average useful life.
On July 26, 2018, Sims successfully priced a $14,015,000 issue with an arbitrage yield of 4.308%. On a net present value basis, the refunding of the Series 2007 Bonds generated over $3.6 million of savings in the first eight years of the life of the Series 2018 Bonds. This allows Burcham Hills to bolster its cash position through the anticipated construction period and stabilization of its repositioning project.
For more information on how Burcham Hills was Financed Right® by HJ Sims, please contact: