Four Innovative Financing Strategies for Life Plan Communities to Create Operational Cashflow during COVID-19

With how unpredictable the last year has been, it would be foolish to believe that we can reasonably predict what will happen in the next five years as it relates to Life Plan Community financing and capital markets as a whole.

However, we have learned in recent months that communities can implement innovative financing tactics to create operational cashflow in this current market situation. Here are some thoughts, considerations and possible opportunities for your organization.

Read more insights from Melissa Messina, SVP, HJ Sims, in the Love & Company Blog.

How to Do It… Borrow in a Pandemic

Owner-operators will soon be confronting thorny financial questions as they emerge from the fog of the pandemic. How should skilled facilities prioritize spending? As one banker observed, the capital markets for skilled nursing may not have returned to where they were before COVID-19, but both debt and equity are available for operators who can prove their clinical expertise.

Read more in this McKnight’s article featuring insight from HJ Sims’ Curtis King.

LeadingAge MN Institute and EXPO

Virtual Meeting

Session Date & Time: Tuesday, May 18, 2021 from 10:45am-11:45am CT.

Thought Leadership and Educational Session:

COVID-19 Sentiment Report: Leveraging Data to Adapt Operations, Enhance Resident & Staff Experience, & Improve Marketing & Sales

Embracing Our New Reality: Rethinking Our Business Model in a Post-COVID World, A Leadership Roundtable Discussion

The Senior Living COVID-19 Sentiment Report surveyed over 4,000 current and prospective senior living community residents to assess their thoughts and feelings at the beginning of and during the COVID-19 pandemic. Since the survey results were first reported in 2020, senior living communities have identified lessons learned. This session explores the results to learn from residents, prospects and staff about their experience living through this Pandemic and how the industry can rethink our business models and adapt our operations to a post-pandemic reality in the hopes of increasing the perception of safety, security and peace of mind.

Learning Objectives:

  1. Understand the need to rethink the way your organization operates and discover ways to adapt in the new evolving reality.
  2. Learn strategies to position your organization for success in a post-coronavirus world.
  3. Hear from a multidisciplinary panel of experts representing operations, development, design, marketing and finance.

Featured Speakers:

  • Lynn Daly, Executive Vice President, HJ Sims
  • Margaret Yu, Director of Client Experience, RLPS
  • Victoria Vega, Senior Vice President of Operations, Unidine Corporation
  • Susan Farr, VP of Business Development & Marketing
  • Brian Pangle, President & CEO, Clark Retirement Communities
  • Moderated by: Dana Wollschlager, Partner & Practice Leader, Plante Moran Living Forward

Contacts:

REQUEST INFORMATION ON THIS PRESENTATION

As we continue to experience fluctuations in our capital markets, HJ Sims is committed to Tracking the COVID-19 Impact.

Learn More

HUD’s Three-Year Waiver – One Year Later

Sims Mortgage Funding, Inc.

by Anthony Luzzi

It has been slightly over one year since HUD waived its “three-year requirement” for multifamily projects to be eligible for mortgage insurance under the Section 223(f) refinancing and acquisition program.  Prior to that, a multifamily property could not benefit from obtaining a 223(f) loan until it was in service for three years, an eternity, especially when current rates for HUD-insured loans have been at historically low levels.  Developers unwilling to wait three years have typically used HUD’s Section 221(d)(4) program to finance new projects. 

However, the three-year waiver has given multifamily developers an opportunity to finance new projects with the best of both worlds – short-term bank financing for construction followed by a HUD take-out once the project has reached a modest level of stabilization.  How modest?  HUD will accept an application for 223(f) mortgage insurance after the property has reached one month of 1.176 debt service coverage and will close on the loan after three consecutive months at that same coverage has been achieved.  

However, developers considering bank financing for multifamily construction instead of a 221(d)(4) loan, then using a 223(f) loan to take out the bank debt should consider the advantages and disadvantages of that approach.

The Advantages:

  • The time to complete the bank financing will be shorter, enabling construction to start sooner.
  • Davis-Bacon “prevailing” wages for construction will not be required with a bank loan.
  • The construction contract and architect agreement can be structured with more flexibility.
  • The bank’s application will be less complicated and esoteric.

The Disadvantages:

  • Bank loan-to-cost ratios are lower, which means more equity will be needed to complete a bank deal. Some of this additional equity can be recovered with the 223(f) loan, as cash-outs at 80% loan-to-value underwriting are permitted.
  • Banks require recourse and personal guarantees.
  • There is interest rate risk on the 223(f) loan since it will not close until after construction is completed and there has been at least three months of stabilized debt service coverage.
  • Construction lending by banks has been somewhat curtailed during the COVID-19 pandemic.

We recently assisted a prospective client evaluate these options for a market-rate multifamily development in Florida and would be pleased to do the same for you.  What was his decision? For more information, please contact Anthony Luzzi at [email protected].

Sims Mortgage Funding, Inc., a wholly owned subsidiary of HJ Sims, originates, underwrites, and funds loans for Healthcare, Multifamily and Hospital projects. We have completed over $2 billion in HUD-insured transactions and are an approved LEAN (healthcare) and MAP (multifamily) lender.

LeadingAge NY Annual Conference & EXPO

Virtual Conference and EXPO 

A virtual conference experience that brings together all who work in skilled nursing, adult care, assisted living, home care, PACE/managed long term care, senior housing or community service environments, vendors of services and products beneficial to providers of long term care. Attendees will be able to connect in a forum that provides high-quality programming and the latest information from industry experts.

Round Table Date & Time: Tuesday, May 25, 2021 from 9am-10am.

Thought Leadership and Round Table Discussion:

Financing Strategies to Create Operational Cashflow During Times of COVID-19

Join our interactive conversation centering around the changes affecting tax-exempt advance refundings as part of the tax code enacted with the Tax Cuts and Jobs Act. Our round table discussion will allow attendees to share individual experiences, best practices, insights, and expertise in a small group as well as learn from industry peers. 

Featured Speaker & Moderator:

Conference Contacts:

REQUEST More INFORMATION

As we continue to experience fluctuations in our capital markets, HJ Sims is committed to Tracking the COVID-19 Impact.

Learn More

HJ Sims arranges $4M PACE financing for StoneCreek

HJ Sims completed a $3.8 million retroactive Property Assessed Clean Energy (PACE) financing package on behalf of StoneCreek Real Estate Partners and Civitas Senior Living, for StoneCreek Littleton, a 92-unit assisted living and memory care facility in Littleton, Colorado that opened in January 2020. Please read more in Senior Housing News.

LeadingAge MD/DC Joint Conference

Virtual Event: 

A conference “journey forward” created for leaders to connect in a forum where you can discuss the tough moments from the last year, hear ideas that can transform your organization, and make sure you and your teams are ready for the next wave of innovation in the aging services field. 

Session Date & Time: June 3, 2021 from 12pm-12:45pm.

Thought Leadership and Educational Session:

One Doesn’t Have to Be the Loneliest Number: How Single-Site LPCs Can Continue to Thrive

Melissa Messina conducts a high-level discussion of strategic planning for single site communities that do not involve merger and acquisition opportunities. Two single site life plan communities in Maryland – Broadmead, which is located in the rolling hills of Cockeysville, and Edenwald, which is more urban in Towson, will be featured providing in-depth experience and insights. One  LPC is situated in a more suburban/rural setting and one in a more urban setting – and will discuss their experience as the premier senior living providers in the area. In particular, an assessment of the key factors from an operational, financial, and leadership perspective that have converged and allowed the communities to cultivate their reputations for resident service and to thrive from a financial perspective, including commentary around advantages the communities have relative to larger, multi-site organizations. In addition, instead of conveying the fruits of those successes to a parent organization, the communities will discuss how they have been able to leverage their successes to continue improving their ability to respond to the needs of its current and future residents, with recent expansion activity. 

Learning Objectives:

  1. Discuss the key factors, emphasizing those with the greatest degree of transferability and those unique to single-site providers, that financially-sound single-site LPCs share.
  2. Provide insight into the approach to strategic planning of the communities, and how their status as a single-site provider adds to their overall flexibility with respect to decision-making.
  3. Learn from commentary regarding how strategic planning, specifically for the unique challenges that single-site providers face, has been and may in the future be affected as the world continues to emerge from the pandemic.

Featured Speakers:

  • Melissa Messina, Senior Vice President, HJ Sims
  • Mark Beggs, President and CEO, Edenwald

  • Robin Somers, President and CEO, Broadmead

Contacts:

REQUEST INFORMATION ON THIS PRESENTATION

As we continue to experience fluctuations in our capital markets, HJ Sims is committed to Tracking the COVID-19 Impact.

Learn More

HJ Sims Partners with StoneCreek Real Estate Partners to Facilitate $3.8 million in Retroactive PACE Financing

FOR IMMEDIATE RELEASE

CONTACT: Tara Perkins, AVP | 203-418-9049 | [email protected]

HJ Sims Partners with StoneCreek Real Estate Partners to Facilitate $3.8 million in Retroactive PACE Financing

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce a successful April 2021 Retroactive Property Assessed Clean Energy (PACE) financing in the amount of $3.8 million for StoneCreek Real Estate Partners (StoneCreek).

StoneCreek, a Dallas based developer, is a collaboration of professionals with 50+ years of combined experience in the operations, development and ownership of successful senior living communities in TX, CO and AZ. The operator, Civitas Senior Living (Civitas), is a Fort Worth, TX based for-profit owner/operator of senior living communities in TX, FL, OK, NM, KY and AZ. Founded in 2012, Civitas has 100+ corporate employees and manages 45+ senior living communities.

The StoneCreek Littleton development is new construction of a 92-unit senior housing community with 70 assisted living units and 22 memory care units. The community opened in January of 2020 and provides local access to quality senior housing and care in the Littleton area of Denver. With occupancy and operational challenges related to the COVID-19 pandemic, StoneCreek was exploring alternative capital sources to provide additional operational leverage when Sims proposed exploring retroactive PACE financing.

PACE is a Public/Private partnership that allows property owners to finance projects through voluntary assessments placed on the property by a state economic development agency. The program finances 100% of the energy efficiency, renewable energy, water conservation, resilience improvements and the related costs for construction and renovations/retrofits up to about 20% of the property’s appraised value. The financing is collected with regular local real estate taxes and assessment payments are amortized at a fixed-rate over the useful life of the project (15-25 years). The PACE program is typically considered an alternative source of financing to mezzanine debt where interest rates average between 12%-15%. In many states, PACE is allowed to be applied retroactively post-certificate of occupancy for qualified costs for a determinate amount of time.

Sims coordinated with StoneCreek, Civitas, the PACE loan provider and the Colorado PACE Authority for approval for PACE financing from the senior construction lender. Despite the atypical nature of the program, the financing team satisfied the concerns of the senior construction lender while also navigating the various regulatory challenges associated with multi-party financings.

StoneCreek, with the guidance of Sims, was able to borrow $3.8 million in PACE financing at 5.85% to finance necessary operating expenses related to an early 2020 opening and the ensuing impact of the Pandemic.

Financed Right® Solutions— James Rester: 901.652.7378 | [email protected], Curtis King: 603.219.3158 | [email protected] or Ryan Snow: 843.870.4081 | [email protected].

ABOUT HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm. Headquartered in Fairfield, CT, Sims has nationwide investment banking, private wealth management and trading locations. Member FINRA, SIPC. Testimonials may not be representative of another client’s experience. Past performance is no guarantee of future results.  Facebook, LinkedIn, Twitter,  Instagram.

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StoneCreek at Littleton (April 2021)

HJ Sims Partners with StoneCreek Real Estate Partners and Civitas Senior Living to facilitate $3.8 million in Retroactive PACE Financing. The StoneCreek of Littleton development is a new construction, 92-unit senior housing community that includes 70 assisted living units and 22 memory care units providing local access to quality senior housing and care in the Littleton area of Denver, Colorado.

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Why Small Businesses Matter: HJ Sims

HJ Sims ‘ Managing Principal, Bil Sims, was recently interviewed by the Fairfield Hamlethub. In the article, he discusses HJ Sims’ history, investment banking, bond and wealth management expertise. Read more.

What Do the Suez Canal and HUD Multifamily Mortgage Insurance Have in Common

Sims Mortgage Funding, Inc.

by Anthony Luzzi

At first glance, that is an odd pairing, but stay with us, please.

The Suez Canal has recently been prominent in the news when a container ship became stuck, blocking the Canal and creating a massive logjam of ships at both ends.

There has been unprecedented demand for HUD’s multifamily mortgage insurance, creating logjams of applications waiting in queues across the five Regional Centers.

Demand has been fueled by historic low interest rates, notwithstanding their recent spike; more favorable loan-to-value, loan-to-cost, and debt service coverage ratios than conventional sources; non-recourse provisions that are a rarity elsewhere in the capital markets; and long-term (up to 40 years), fully amortizing structures.

In addition, there has been an increase in the popularity of the Section 223(f) refinance program since HUD eliminated the three-year rule last March that required a property to be in service for that long before it was eligible. (Special note to healthcare facility owners and operators: a similar waiver to the three-year rule may be in the offing under the LEAN program. Stay tuned for more details.)

HUD has taken several positive steps to address the situation, ensuring transparency and consistency to the application process.

First, they have established a fairly uniform screening protocol for applications before they are placed into the queue. Once an application is screened for deficiencies, a lender has five business days to respond; if the response is acceptable, the application is formally placed into the queue.

Second, once the application is in the queue, it is given a targeted date to be assigned to a HUD underwriter. The queue is generally updated weekly, so lenders and borrowers can track the progress of their deal and manage expectations along the way.

Third, HUD has revised loan priorities for assignment in the queue. They now are:

  1. Low Income Housing Tax Credit (LIHTC) deals for new construction.
  2. LIHTC deals involving new credits.
  3. Opportunity Zone transactions with a qualified investment fund.
  4. Second-stage applications involving new construction.
  5. Other affordable or broadly affordable transactions.

Applications that do not meet the priorities are assigned on a first-in, first-out basis.

The new priorities took effect on March 18. We have seen immediate benefits as one of our applications became a Priority 4 and moved up to the top of the queue, gaining about three weeks in the schedule.

For more information, please contact Anthony Luzzi at [email protected].

Sims Mortgage Funding, Inc. originates, underwrites, and funds loans for Healthcare, Multifamily and Hospital projects. We have completed over $2 billion in HUD-insured transactions and are an approved LEAN (healthcare) and MAP (multifamily) lender.

HJ Sims Partners with Gurwin Healthcare System to Finance New Community with 55% Pre-sales

FOR IMMEDIATE RELEASE

CONTACT: Tara Perkins, AVP | 203-418-9049 | [email protected]

HJ Sims Partners with Gurwin Healthcare System to Finance New Community with 55% Pre-sales

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the successful closing in March 2021 of a $102.1 million financing for Fountaingate Gardens, an independent living community to be located in Commack, NY.

The Gurwin Healthcare System has been providing healthcare services to Long Island residents since 1988, through the Gurwin Jewish Nursing and Rehabilitation Center and the Fay J. Lindner Assisted Living Residences.  Gurwin Jewish Healthcare Foundation acquired land adjacent Fay J. Lindner Residences with the goal of completing the continuum of care through development of an independent living community to be known as Fountaingate Gardens. Working with Eventus Strategic Partners and Perkins Eastman, Fountaingate Gardens will initially add 129 independent living apartments and offer various services/amenities to its residents. Healthcare services will be provided at the Gurwin facilities contiguous to the community.

The Foundation donated $4 million to cover early expenses and loaned nearly $16 million for pre-development capital. It also donated the 10.5-acre site, appraised at $4.675 million. Total development costs, including the tax-exempt bonds, is approximately $113.8 million. The Foundation has committed $25.5 million to the project, providing confidence to investors and enabling the bonds to be issued with only 55% of the independent living units reserved with deposits from future residents.

The Foundation agreed to an Entrance Fee Guaranty Agreement, whereby it would advance up to $2.85 million, equal the entrance fees on six independent living units, in the event occupancy did not meet expectations upon opening. It also committed $10 million in the form of a Liquidity Support Agreement.

The $102,115,000 tax-exempt bond issue was divided into two short-term Entrance Fee Principal Redemption BondsTM series and a long-term bond series. The Series 2021C bonds ($31,000,000) will be repaid when occupancy reaches 48%. The Series 2021B bonds ($32,500,000) will be repaid when occupancy reaches 86%, expected to occur in 2023. The Series 2021A ($38,615,000) has a final maturity of 2056.

Sims closed on the Series 2021 Bonds with $10.5 million of the issue purchased by Sims’ Private Wealth Management clients and the remainder purchased by 28 institutional firms. The yield on the Series C bonds is 3.125%, the yield on the Series B bonds is 4.125% and the yield on the Series A bonds maturing in 2056 is 5.375%, demonstrating demand for the project and strength of the Gurwin name in the local market.

“With tremendous support from the Sims’ team, we successfully secured bond financing for Fountaingate, Gurwin Health’s new independent living community. Despite the challenges we faced the past year, with the impact of the pandemic, Sims found creative solutions, with a firm determination to bring this project to completion. Sims not only serves as a lender; they are a model for senior housing and development. They embrace the same goals that we have as a healthcare provider: caring, quality and excellence. Thank you, Sims for all you have done to help secure the future for our community,” said Stuart Almer, CEO, Gurwin Healthcare System.

Financed Right® Solutions—Andrew Nesi: 203.418.9057 |  [email protected]

 

ABOUT HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm. Headquartered in Fairfield, CT, Sims has nationwide investment banking, private wealth management and trading locations. Member FINRA, SIPC. Testimonials may not be representative of another client’s experience. Past performance is no guarantee of future results.  Facebook, LinkedIn, Twitter,  Instagram.

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