Carroll Lutheran Village (September 2022)

HJ Sims Acts as an Advisor to Place Long-Term Fixed Rate Cinderella Refinancing and Capital Expenditures Credit Facilities

“Once again, HJ Sims assisted Carroll Lutheran Village in executing a transformational financing. Over the years, our organization has deeply valued the partnership with Sims. The culmination of the firm’s expertise, guidance, and advice assisted in accomplishing a financing which will completely refurbish our independent living products. A special thank you to Aaron Rulnick, Melissa Messina and Brady Richardson for their tireless efforts in assisting Carroll Lutheran Village.”

– Steve Powell, VP of Finance and Technology

Partnered Right®

Carroll Lutheran Village (“CLV”) is a life plan community located outside of Westminster, MD. The community (post-renovation) will include 381 independent living units, 50 assisted living units, and a healthcare center comprised of 103 skilled nursing beds. A long-time client of HJ Sims, CLV has utilized the advice and expertise of the firm for financing solutions dating back to 2004. In 2014, HJ Sims underwrote and publicly sold fixed-rate bonds to refinance the community’s outstanding long-term debt. Once again in 2022, CLV engaged HJ Sims to source capital to refund the Series 2014 Bonds and renovate the majority of the community’s independent living apartments. The strategic capital plan would capture debt service savings and allow for CLV to resell the updated apartments at higher entrance fees, helping bolster the community’s occupancy and liquidity position. HJ Sims also financed the construction of CLV’s sister community, Lutheran Village at Miller’s Grant in 2014. Both communities are managed by the parent organization, Lutheran Social Ministries of Maryland.

Structured Right®

CLV sought to create a flexible financing structure which would allow the organization to obtain savings and mitigate financial covenants during the construction of the new project. First, HJ Sims crafted a matched-maturity Cinderella financing which would immediately establish debt service savings. The savings could be used for 1) the renovations; 2) debt service on the project debt to renovate the independent living apartments; or 3) other strategic endeavors. The refinancing was the ballast to help the organization increase its debt capacity for the project financing.

The project financing would supplement an equity contribution from CLV’s parent organization. In total, the independent living renovations would cost approximately $20mm. CLV would provide $10mm of capital for the project in the form of equity, leaving a gap of approximately $10mm. The original strategy was to fund $5mm from CLV’s balance sheet with the remaining $5mm to be borrowed via a loan. After a conducting a widely circulated bank solicitation, HJ Sims was able to procure attractive terms from several institutions. CLV 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. HJ Sims then negotiated an additional $5mm in borrowing from the identified lender, which would total $10mm in financing toward the project to be combined with the $10mm equity contribution and fully fund the project at closing.

Executed Right®

It was important to CLV that the project financing minimize interest expense while maximizing repayment flexibility. HJ Sims was able to procure a draw-down tax-exempt fixed rate loan for the project financing and also worked with the lender to structure flexibility in repayment notwithstanding the fixed rate nature of the loan. Ultimately, HJ Sims was able to negotiate a prepayment structure for both loans, which would allow the borrower to prepay the loans without a premium so long as the prepayment came from a source other than a refinancing. The new-money repayment structure would further allow the borrower to apply prepayments to its upcoming principal payments in order of maturity. This was important to CLV as it expected to receive substantial replacement entrance fees from the newly renovated units and wanted to utilize the entrance fees to prepay the loan. This created a hybrid-entrance fee loan that had a 12-year term, as opposed to shorter terms often structured for similar facilities.

Due to the rising interest rate environment, CLV felt it was important to partner with a lender that provided a fixed rate of interest that was locked at the time the term sheet was executed in lieu of proceeding with a floating rate of interest to be fixed via swap at closing. In essence, the rate lock negotiated by HJ Sims was provided for 86 days at no cost to CLV. During that same time frame, the swap curve increased by approximately 50 basis points (0.50%). HJ Sims guided the working group during the height of summer through real estate due diligence, the issuer approval process, documentation and closing in under 90 days.

Financed Right®

The financing was able to successfully close on September 9, 2022. The final terms of the financing included a 4.25% taxable interest rate (Cinderella) and a 3.36% tax-exempt interest rate, flexible prepayment structure, 12-year commitment, and no covenant testing for two years. The blended cost of capital for the $51.34mm loan is 3.54% (swap rates moved over 50 bps during the rate-lock period). CLV is poised to save $7,224,280 through the bank’s commitment and will recognize $3,150,363 of those savings in the first two years of the loan.

For more information, please contact:

Aaron Rulnick


Melissa Messina


Brady Richardson


Testimonials may not be representative of the experience of other clients. Past performance is no guarantee of future results