Repurposing Aging Senior Living Facilities to Affordable Senior Housing

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Background

Older senior housing communities, in particular skilled nursing facilities, face numerous financial and operational challenges.  For example, combinations of changing neighborhood demographics, shifting care option preferences, the presence of newer, modern competition and constraints on third-party reimbursement have increasingly caused nursing homes to struggle to maintain healthy occupancy ratios and cash-flow.  Often, when cash-flow is tight, repairs and improvements are delayed, if done at all; senior housing property executive management and their governing boards can reasonably ask:

  • Does it make sense to invest in a component of our campus that no longer may be as relevant?
  • Is our mission as an organization being limited or compromised because of an inefficient physical plant that no longer serves the needs of residents and potential new residents?
  • Are there repurposing options for older, inefficient buildings, and if so, how can they be financed?

These questions, important to all senior housing operators, are perhaps more acute for not-for-profit, mission-based organizations, who generally operate on tighter operating budgets.  Moreover, the option of selling a building on campus to outside, third-party interests, may be counterproductive to the overall reputation of the community, as the buyer may not operate the property in a manner consistent with the original charitable mission.  With so many aging senior living facilities facing financial hardship, creative measures must be taken to avoid eventual closures and bankruptcies.

One Solution: Conversion of a Portion of a Senior Housing Community to Affordable, Low-Income Senior Housing

The way forward may be the conversion of older, less-functional components of a senior housing campus, like a skilled nursing facility, to an affordable assisted living or age-restricted multifamily housing.

Such a conversion could serve the dual purposes of: (1) expanding the mission of a not-for-profit provider whose primary operation is in the market-rate sector and (2) addressing a dramatic shortage nationwide of affordable housing, especially for lower-income seniors.

Consider that the National Low-Income Housing Coalition reports that there are 7.2 million affordable housing units needed for low-income families and individuals across the country. By re-purposing healthcare or other older buildings on campus to affordable housing or assisted living, not-for-profit sponsors can avoid closures, unwanted sales to unrelated buyers, and financial hardship.

Key Element of Affordable Housing Finance: Low – Income Housing Tax Credits (LIHTCs)

One of the major challenges to the development of affordable housing is that there is typically a large gap between the costs of the project and the amount of financing that can be supported by operational cash-flow. In many affordable transactions, the gap is filled with equity generated from the procurement of Low-Income Housing Tax Credits (LIHTCs). These credits can significantly lessen the financial burden of conversion or repurposing senior living facilities into affordable assisted living or age-restricted senior housing.

LIHTCs provide developers and owners with a significant equity contribution towards the new construction, substantial rehabilitation, refinance, or acquisition of affordable housing projects. The program is administered by the Internal Revenue Service (IRS) through State Housing Finance Agencies and local Development Agencies. LIHTCs connect investors with sponsors and developers, providing the investors with considerable tax benefits over a period of approximately 10 years in exchange for their investment into the creation or preservation of affordable housing properties.

LIHTCs are generally available under two programs: 9% credits and 4% credits. The 9% credits cover more development costs but are extremely competitive to secure and often require a sponsor to commit to a higher degree of affordability with respect to rents and income limitations of residents. Moreover, the highly competitive and limited-supply 9% credit is typically reserved for new construction without any other federal subsidies.

The 4% credits, which often are accompanied by an allocation of tax-exempt multifamily housing revenue bonds, is typically allocated on a non-competitive basis. The 4% credits are considered part of the bond allocation, and given these credits are more accessible than their 9% counterpart and are available for repurposing existing buildings, the 4% execution will likely be the more likely product available.

In a typical LIHTC transaction, the credits would produce equity that covers anywhere from about 30% – 70% of the development costs associated with repurposing existing facilities into affordable housing. The LIHTC is equity, not to be repaid by the Project Owner. The typical Project ownership structure for LIHTC transactions is a Limited Partnership or Limited Liability Corporation, with the not-for-profit sponsor serving as a general partner or managing member and the tax credit investor acting as a limited partner or member. The not-for-profit sponsor can earn a development fee in a LIHTC transaction.

Debt Structures: HUD Mortgage Insurance as a Complement to 4% Credits/Tax Exempt Bond Financing

LIHTCs provide the equity for an affordable senior housing development; however, additional sources of financing will be needed to complete the capital stack.

Three HUD-insured mortgage loans can provide a source of financing for the debt component of a LIHTC transaction: Section 221(d)(4); Section 223(f); and Section 232 (assisted living). While a modest number of affordable assisted living facilities have been financed under the Section 232 program, the vast majority of HUD transactions that involve LIHTCs occur with the Section 221(d)(4) and Section 223(f) multifamily programs. (For a detailed summary of HUD’s mortgage insurance programs, please visit www.simsmortgage.com.)

The HUD 221(d)(4) program is the most likely option to accomplish the goals of a senior living sponsor to repurpose to affordable housing when the cost to renovate the property is higher than $40,000 per unit. This program is used for new construction and substantial rehabilitation and combines construction and permanent financing into one mortgage with an amortization and term of up to 40 years. Interest rates for the 221(d)(4) loans are currently in the low 3% range. The industry-best 40-year amortization lowers debt service payments, enhancing the feasibility of the Project.

Section 223(f) can be used when the cost of the renovation is less than $40,000 per unit. This program features a maximum 35-year amortization and current interest rates in the range of 2.50%. Both Section 221(d)(4) and Section 223(f) have .25% annual mortgage insurance premiums for affordable projects. These premiums are payable on the unpaid principal balance throughout the life of the loan.

A HUD-insured loan typically complements the tax-exempt bond financing that is needed “up front” to qualify for the 4% LIHTCs. That is because bond proceeds must be disbursed to pay project costs. However, the tax-exempt bonds are of limited duration, typically maturing after the rehabilitation is completed and the project is placed into service. The HUD-insured loan becomes the long-term financing after the bonds are redeemed post-rehabilitation.

LIHTC transactions often need additional sources of funding beyond the equity and tax-exempt bond/HUD debt. This funding can come from a variety of sources such as state grants or supplemental financing programs, Federal Community Development Block Grants (CDBG), HOME funds and deferred development fees.

Are LIHTCs for You?

The LIHTC process is complex and involves significant administrative and reporting activities once the project is placed into service; however, if utilized properly, tax-credits can be a uniquely beneficial tool to preserve or create affordable assisted living or age-restricted housing. This process is further complicated if the converted units are part of an existing building financed with taxable or tax-exempt debt under a Master Trust Indenture (MTI). While it’s not impossible to layer tax-credit debt into the existing capital stack, additional legal and advisory work would need to be done to determine the correct path forward.

Due to the highly complex nature of these transactions, LIHTC consultants are typically used to assist with the tax credit application and ensure IRS compliance issues are followed. Not-for-profit sponsors without LIHTC experience may partner with an experienced developer, who becomes part of the ownership structure, albeit in a limited control setting.

Sims Mortgage Funding, Inc. (SMF) would perform the upfront screening of the transaction from the LIHTC and HUD-insured loan perspectives, and would coordinate with our parent company, HJ Sims, on the identification of tax-exempt bond issuing agencies with access to 4% credits and the selection of the agency most suitable for the sponsor’s needs. Moreover, we may be able to recommend specific LIHTC developers, consultants and attorneys based on the sponsor’s geographic location. Finally, SMF would help the provider identify legal help to ensure the new debt works with the existing MTI debt on the campus.

For more information, please contact Johnny Sears 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.

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HJ Sims successfully Positions SearStone for Accretive Phase II

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July 22, 2020

CONTACT: Tara Perkins, AVP Marketing Communications | 203-418-9049 | [email protected]
HJ Sims successfully Positions SearStone for Accretive Phase II

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce a June 30 closed financing in the amount of $6.6 million for Samaritan Housing, Inc. d/b/a SearStone Retirement Community (SearStone), a life plan community located in Cary, NC. SearStone consists of 131 independent living apartments, 38 independent living estate homes, 14 assisted living units and 25 skilled nursing beds. The assisted living and skilled nursing services are offered at the Brittany Place Healthcare Center (Brittany Place).

Sims financed the first phase of SearStone with a $117.5 million non-rated fixed rate bond issue in June 2012 and an expansion of the Healthcare Center in 2016 with an $8 million issue. Sims provided the original seed capital, and the funds to advance refund the 2012 issue, and provided a portion of the pre-development capital for the Phase II expansion in 2017. Given the growing demand for independent living units, planning commenced for a Phase II expansion project and pre-development costs were funded with $5.5 million of proceeds from the Series 2017B Bonds. Phase II should double the size of SearStone and is projected to be financially accretive; additional pre-development capital was needed. Phase II is known as the Highview at SearStone and contemplates the addition of 152 independent living units, 28 assisted living units (14 specialized memory care units) and 24 skilled nursing suites. New dining venues, along with additional common and green spaces will be also provided.

Sims successfully underwrote $4.6 million of tax-exempt bonds and $2.0 million of taxable bonds to provide supplemental pre-development capital for Phase II, scheduled for financing in early 2022.The financing was completed as one of the first non-rated senior living financings placed in the bond market since COVID-19, and provided close to $6 million of expendable proceeds, that combined with remaining funds from the Series 2017B Bonds and $1 million+ in borrower equity, will fund predevelopment costs associated with the Phase II.

With Sims’ leadership and the collaborative work of SearsStone’s senior management team, Board, Management Company (Retirement Living Associates), Developer (Greenbrier) and the financing working group, SearStone successfully completed the financing and obtained bondholder consent to issue the proposed debt; secured sufficient pre-development capital to pursue Phase II; and provided covenant relief and maintained sufficient operating, financial and strategic flexibility to implement the future expansion to optimize its campus.

“SearStone has once again benefitted from the superb leadership of Aaron Rulnick and the Sims team. Our financing would have been challenging in any environment, but we were facing a tight time-frame in a market shut-down by COVID. Sims worked tirelessly and creatively to overcome obstacles, and we are so pleased with the result. SearStone can continue to pursue the Highview Expansion project, which will right-size and optimize our campus, with the financial resources and flexibility we need to be successful,” said Stan Brading, President, Samaritan Housing Foundation, Inc.

Financed Right® Solutions: Aaron Rulnick: 203-418-9008 | [email protected] or Tom Bowden:-804-398-8577 | [email protected].

HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm, headquartered in Fairfield, CT, with nationwide locations. www.hjsims.com. Investments involve risk, including loss of principal. This is not an offer to sell or buy any investment. Testimonials may not be representative of another client’s experience. Past performance is no guarantee of future results. Member FINRA, SIPC. Facebook, LinkedIn, Instagram Twitter.

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Encore on the Lake

HJ Sims completes innovative dual bank senior – supplemental debt financing for Encore on the Lake. This new middle market independent living campus is a planned 80-unit Independent Living Community to be constructed on a 6.8 acre site in North Strabane Township, Washington County, PA.

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Searstone

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HJ Sims successfully completes $6.6 million of Tax-exempt and Taxable Revenue Bonds to position Samaritan Housing Foundation, Inc., d/b/a Searstone Retirement Community, a life plan community located in Cary, NC, for accretive Phase II.

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Advance Refundings

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Consider Supporting the Reinstatement of Advance Refundings

Advance refundings are a critical tool to help state and local governments and 501(c)(3) organizations lower their debt costs. 

Nearly three years ago, advance refundings were eliminated as part of the Tax Cuts and Jobs Act of 2017. At the time, the assumption was that the borrowers of tax-exempt bonds used to finance advance refundings would access the taxable bond market if an advance refunding was necessary. While taxable advance refunding volume has increased over the past two years, non-rated borrowers and smaller advance refundings have been essentially locked out of the taxable bond market.  

Taxable municipal bond investors are not as prolific as tax-exempt municipal bond investors. The taxable muni market tends to focus more strongly on rated credits with considerable size. This leaves non-rated conduit borrowers, especially non-rated 501(c)(3) institutions like rural hospitals, universities and senior living communities at risk because they do not have access to the same markets to refinance higher coupon debt.

On July 1, 2020, eight bipartisan senators came together to introduce the LOCAL Infrastructure Act that reinstates advance refundings as a critical tool to help state and local governments and 501(c)(3) organizations lower their debt costs. Senators Roger Wicker (R-MS), Debbie Stabenow (D-MI), Michael Bennet (D-CO), Shelley Moore Capito (R-W.Va.), John Barrasso (R-WY), Bob Menendez (D-NJ), Jerry Moran (R-KS), and Tom Carper (D-DE) cosponsored the legislation. There is also legislation in the House that includes the reinstatement of advanced refundings. In light of this, we believe that now may be the best time to restore advance refundings.

How Can You Take Action

Write a letter to your U.S. senator appealing for their help to restore advance refundings through the Senate Finance Committee bill. Help the eight senators who have already come together to co-sponsor the LOCAL Infrasturcture Act.

The draft letter below is written from the perspective of a board member or officer at a non-profit senior living community.

Letter Text

Greetings,

I am a constituent of the Senator and the [_________________] of [____________________], a senior living community in the Senator’s state. I understand a bipartisan group of senators led by Mr. Wicker of Mississippi recently introduced the LOCAL Infrastructure Act, which would restore advance refunding bonds, and I would like to encourage the Senator to consider the legislation and assist in its passage in the Senate.

Use of tax-exempt advance refunding bonds has not only saved state and local governments billions of dollars, but it has also provided 501(c)(3) senior living communities similar to ours the opportunity to refinance our debt and restructure covenants in the past. If advance refundings were to be restored, it would allow more comprehensive services, including infrastructure projects and enhancements to senior living communities, to be completed at a lower cost. This tool would provide an opportunity for 501(c)(3) senior living communities as well as state and local governments to recover faster from the effects of the COVID-19 pandemic and to efficiently access low interest rates to provide essential facilities and services to your constituents.

As a result of the COVID-19 pandemic, many senior living communities, state and local governments and other obligors of tax-exempt bonds are experiencing dire financial situations, and some are having difficulty paying scheduled principal and interest on their outstanding debt. It would greatly benefit such entities to be able to refinance their debt at today’s interest rates that are often lower than the interest rates payable on outstanding debt, which often was issued years ago. While there has been a surge of taxable municipal bond issuance to advance refund debt in recent months, the investors in those bonds will typically purchase transactions of considerable size and with high investment grade ratings. This leaves the super-majority of senior living communities without a viable option to refinance debt at a time when the Federal government has brought bank lending rates down to less than 0.25% and municipal bond indices are hovering around all-time lows. Many senior living communities that have debt that would be beneficial to refinance today issued that debt between 2011 and 2015 where the municipal bond index was 2-3% higher than where it is today. This could save senior living communities millions of dollars, benefitting your constituents.

These advance refundings could even allow senior living communities to defer debt service in the near term to respond to cash flow issues as a result of the pandemic. As communities’ existing debt is often paid with healthcare revenues and other revenues received from residents, these streams have been interrupted as some communities have been hard hit by COVID-19 infection and others have locked down all ability for new residents to move-in.

If you would like more information on how advance refundings could benefit senior living communities in general, please do not hesitate to connect with an HJ Sims Investment Banker at [email protected]. HJ Sims is a privately-owned investment bank that was founded in the midst of the Great Depression and was the first investment bank to finance a senior living community with tax-exempt bonds after the advent of Medicare in 1965.

We believe strongly that the reinstatement of advance refundings would be a tool that could provide significant savings to the senior living industry at a time when providers need all of their tools available to provide low cost care to the most vulnerable population. We encourage you to consider supporting this bipartisan effort to help state and local governments and 501(c)(3)s like ours.

Thank you.

Senate Finance Committee Members

State
Party
Senator
Website
CO
D
Michael Bennet
Already a cosponsor, but would help to support ARs. https://www.bennet.senate.gov/public/index.cfm/write-to-michael
DE
D
Thomas Carper
Already a cosponsor, but would help to support ARs. https://www.carper.senate.gov/public/index.cfm/email-senator-carper
IA
R
Chuck Grassley
https://grassley.senate.gov/constituents/questions-and-comments
ID
R
Mike Crapo
https://www.crapo.senate.gov/contact/email-me
IN
R
Todd Young
https://www.young.senate.gov/contact/email-todd
KS
R
Pat Roberts
Already a cosponsor, but would help to support ARs. https://www.roberts.senate.gov/public/index.cfm/emailpat
LA
R
Bill Cassidy
Contact
MD
D
Ben Cardin
https://www.cardin.senate.gov/contact/email-ben
MI
D
Debbie Stabenow
Already a cosponsor, but would help to support ARs. https://www.stabenow.senate.gov/contact
MT
R
Steve Daines
https://www.daines.senate.gov/connect/email-steve
NC
R
Richard Burr
https://www.burr.senate.gov/contact/email
NE
R
Ben Sasse
https://www.sasse.senate.gov/public/index.cfm/email-ben
NH
D
Maggie Hassan
https://www.hassan.senate.gov/contact/email
NJ
D
Robert Menendez
Already a cosponsor, but would help to support ARs. https://www.menendez.senate.gov/contact
NV
D
Catherine Cortez Masto
Contact
OH
R
Rob Portman
https://www.portman.senate.gov/meet/contact
OH
D
Sherrod Brown
https://www.brown.senate.gov/contact/email
OK
R
James Lankford
Home
OR
D
Ron Wyden
https://www.wyden.senate.gov/contact/email-ron
PA
R
Patrick Toomey
https://www.toomey.senate.gov/?p=contact
PA
D
Robert Casey, Jr.
https://www.casey.senate.gov/contact
RI
D
Sheldon Whitehouse
Email Sheldon
SC
R
Tim Scott
Email Senator Scott
SD
R
John Thune
https://www.thune.senate.gov/public/index.cfm/contact
TX
R
John Cornyn
https://www.cornyn.senate.gov/contact
VA
D
Mark Warner
https://www.warner.senate.gov/public/index.cfm/contact
WA
D
Maria Cantwell
https://www.cantwell.senate.gov/contact/email/form
WY
R
Michael Enzi
Already a cosponsor, but would help to support ARs. https://www.enzi.senate.gov/public/index.cfm/e-mail-senator-enzi

HJ Sims 2020 Late Winter Conference Recap

Thank you!

On behalf of the entire HJ Sims Investment Banking team, we want to thank you for attending the 17th Annual HJ Sims Late Winter Conference at the InterContinenal San Diego in San Diego, California. We at HJ Sims are proud of our commitment to furthering conversation about financing methods & operating strategies in the Senior Living Industry. Bringing together a dynamic group of speakers from Non-Profit and Proprietary Senior Living Providers, as well as outside experts with thought-provoking views, it is our goal to have provided profound insight and an invaluable forum for exchanging ideas and information.

We also recognize that our conference was one of the last in-person events that was fortunate to take place. We appreciate those who attended, and we look forward to when we can get together in-person again.

Post-Conference Follow-Up

Our Conference Recap provides comprehensive coverage of the many sessions and event highlights from the 2020 HJ Sims Late Winter Conference.

Highlights include:

  • Keynote speakers from outside the senior living industry who shared valuable ideas from fields like Canyon Ranch® – the leader in luxury health and wellness introduced a potential new concept for senior living communities; Dr. Matthew Lieberman, a dedicated researcher on cognitive social neuroscience where we explored research indicating that we need to be connected socially to be physically and psychologically healthy; and Dr. Robert Genetski, an economist who led a discussion of the current financial markets where we explored principles vital to economic and political freedom.
  • Informal and memorable activities to bolster connection and conversation, included a glorious morning on the waters of San Diego Harbor for sailors and fishing enthusiasts; golfing at the world-renowned Torrey Pines; tasting a sample of San Diego’s best brewery and distillery products; and sharing an incredible evening with friends and a few new animal pals at the famed San Diego Zoo.
  • Educational sessions that covered topics such as: acute and post-acute care, medical and recreational cannabis, serving middle-income seniors, strategies to avoid moving from a stressed to distressed financial or operational situation, and a new approach to incorporating wellness in senior living.

In case you missed it, below are the details from our 17th Annual HJ Sims Late Winter Conference.

Agenda
Schedule and activities
Roster of conference speakers and their biographies

We invite you to watch the highlights of our conference in a recap video that features all the best parts of our conference. We also invite you to view the many beautiful photos from our conference.

Peruse the photo gallery and video montage below, and visit the HJ Sims Facebook, Instagram, LinkedIn or Twitter pages.

Taco Tuesday Dinner and Reception – LWC2020

San Diego Zoo Reception

Network Breaks

Corporate Social Responsibility: Gift of Life

The Gift of Life (GOL) team was thrilled to provide an update about the strong partnership between HJ Sims and GOL during the last two years, which has helped to promote the registry and subsequently add new donors, as well as supported numerous efforts to advance the GOL mission.

For more information on HJ Sims’ CSR program and Gift of Life, please visit: www.hjsims.com/servingourcommunitites.

Save the Date

Please save the date for next year, the 18th Annual Sims Late Winter Conference at the Sarasota Hyatt Regency, Sarasota, Florida. While we are still grappling with how we will hold our annual conference, rest assured, we will hold one… more to follow. Stay tuned, and stay healthy.

Thanks again!

Voralto Living

Voralto Living, along with its affiliates (“Voralto”), is a 42-year-old best in class senior living owner, operator, and developer whose leadership team has a combined 120+ years of experience in the senior living industry.

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MRC Manalapan

HJ Sims secures financing for start-up assisted living and memory care community in unique for-profit/not-for-profit collaboration. MRC Manalapan is a newly formed for-profit senior living developer, consisting of two principals, including LV Development.

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HJ Sims Expands Investment Banking Team to West Coast and Midwest; Grows Private Client Team in Florida and Puerto Rico

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FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the addition of two senior bankers as the firm expands with the opening of new offices in the Midwest and on the west coast.

Lynn Daly joins Sims as Executive Vice President in its new Chicago location with 30+ years of experience working with non-profit organizations in financing. Daly was acting head of Senior Living Investment Banking at BB&T Capital Markets, where she managed BB&T’s senior living relationships in the Midwest, facilitating financings of $1.3+ billion. Prior to BB&T Capital Markets, Daly spearheaded the Catholic Initiative within senior living investment banking for Ziegler, and served as Head of Allied Irish Bank’s Midwest region. Daly earned a BS in economics from Kalamazoo College, and an MBA from Northwestern University’s Kellogg Graduate School of Management.

“We are so thrilled to welcome Lynn Daly to the HJ Sims family. Lynn is a well-respected and nationally recognized thought leader in the senior living sector and the perfect leader to grow our presence in the Midwest and to work with our team as we continue to expand throughout the US. Lynn’s extensive experience as both a senior commercial and investment banker, along with her integrity, deep knowledge, and client-centered approach, are vital characteristics and values that will guide our clients and business partners through these challenging times,” said Aaron Rulnick, Managing Principal, Sims.

Brady Johnson joins Sims as Senior Vice President in its new west coast office, in Orange County, CA. Previously with Hunt Real Estate Capital, Johnson was responsible for real estate debt originations for seniors housing and healthcare properties. He helped establish the firm’s seniors housing real estate lending platform, including a proprietary bridge loan program and expansion of the firm’s agency and HUD financing capabilities. Johnson closed the firm’s first Fannie Mae seniors housing loan, followed by its first seniors housing Freddie Mac loan. Prior to joining Hunt, Johnson served as Director of Seniors Housing & Healthcare at RED Capital Group, and served with GE Capital in various commercial finance roles. Johnson earned an MBA from Thunderbird School of Global Management and Bachelor’s degrees (Economics and Spanish) from the University of Utah.

“We are excited to welcome Brady Johnson to the Sims family. Brady will help establish our west coast presence serving for-profit and non-profit senior living clients. Brady’s broad experience in FHA, Fannie Mae, Freddie Mac, mezzanine and senior housing finance, and his focus on achieving the best solutions for his clients make him a great asset,” said Jeffrey Sands, Managing Principal, Sims.

In late 2019, Sims expanded its Private Client team, adding an office in Jupiter, FL, housing a three-person advisory team, as well as a senior partner of Sims Energy. HJ Sims’ Puerto Rico private client office moved its Guaynabo headquarters to a larger space in Metro Office Park. The spacious quarters enable the team to better host clients, while the expansion reinforces Sims’ established presence and growth on the island.

HJ Sims Closes Financings for Lenbrook, MRC Manalapan; Partners with Voralto for Acquisition

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

HJ Sims Closes Financings for Lenbrook, MRC Manalapan; Partners with Voralto for Acquisition

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the successful closing of three transactions.

Lenbrook, a life plan community in Atlanta, GA, pursued financing for its recent Kingsboro at Lenbrook expansion. After a successful 2016 refinancing and a 2018 pre-development financing, Lenbrook again retained Sims to manage the financing process for the $107 million project. A priority  of Lenbrook’s was to maximize the ability to deleverage the debt of the financing without penalty. The entrance fee debt was maximized and the long-term debt amortized while permitting early repayment from turnover entrance fees.

 Sims coordinated a request for proposals to gauge interest in both the entrance fee and long-term debt. Due to the COVID-19 impact on bond markets and conduit bond issuers, Sims coordinated with the board and management of Lenbrook to pivot the transaction from tax-exempt financing consisting of bank short-term debt and long-term fixed rate bonds to taxable all-bank financing while closing early and achieving Lenbrook’s goal of maximizing deleveraging while maintaining flexibility. Fitch assigned a BBB- rating with stable outlook.

In Monmouth County, New Jersey, MRC Manalapan (MRC) is developing an assisted living and memory care community. MRC principals (and LV Development) collaborated with Springpoint Senior Living (Springpoint) to arrange the project and contracted with Springpoint to operate the community (Springpoint at Manalapan) under a long-term lease. Sims was engaged to implement debt financing supplemented by equity provided by the MRC principals.

Following a Sims-led solicitation, Peoples United Bank was selected to provide $14.3 million of taxable senior debt financing, incorporating a construction/mini-perm structure with a five-year balloon maturity. The loan includes tiered-interest rate pricing with reductions in loan credit spread following progression from construction, opening and stabilization. Primary security includes a revenue pledge and property mortgage. Supplemental security includes dual guarantees provided by the MRC principals and succeeded at completion by a limited tenant guaranty. Sims, Peoples and the financing team worked diligently with the MRC principals to secure final approvals, successfully closing in mid-May 2020.   

Established in 1977 and headquartered in Houston and Dallas, TX, Voralto is a 42-year-old senior housing owner/operator with a combined 120+ years of experience in the senior housing industry. Committed to growing the company through strategic acquisitions and new developments, Voralto currently owns/operates 8 assets totaling 590 beds in TX and GA. Sims was approached by Voralto to provide equity for the acquisition of an assisted living and memory care community in northern TX. Voralto’s business plan included the implementation of operational changes.

Sims formed a joint venture with Voralto to acquire the community. Sims’ equity provided liquidity to overcome any short-term performance issues resulting from COVID-19 and time to implement the business plan.

Scheduled to close in March, Sims and Voralto overcame challenges from COVID-19. Drawing from expertise of its bankers and investors, Sims underwrote Voralto’s business plan and provided a customized solution.

Financed Right®:

Non-profit: Aaron Rulnick: [email protected] | For-profit: Jeff Sands: [email protected]

HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm, headquartered in Fairfield, CT, with nationwide locations. www.hjsims.com. Investments involve risk, including loss of principal. This is not an offer to sell or buy any investment. Past performance is no guarantee of future results. Member FINRA, SIPC. HJ Sims is not affiliated with Lenbrook, MRC Manalapan, Voralto Funding I. Facebook, LinkedIn, Instagram Twitter.

Lenbrook

Lenbrook is an existing life plan community which consists of 350 independent living residences located in two adjoining towers, the Brookhaven Tower and the Lenox Tower, and is located in Atlanta, Georgia.

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HJ Sims Expands Investment Banking Team to West Coast, Midwest; Grows Private Client Team in Florida, Puerto Rico

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

HJ Sims Expands Investment Banking Team to West Coast and Midwest; Grows Private Client Team in Florida and Puerto Rico 

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce the addition of two senior bankers as the firm expands with the opening of new offices in the Midwest and on the west coast. 

Lynn Daly joins Sims as Executive Vice President in its new Chicago location with 30+ years of experience working with non–profit organizations in financing. Daly was acting head of Senior Living Investment Banking at BB&T Capital Markets, where she managed BB&T’s senior living relationships in the Midwest, facilitating financings of $1.3+ billion. Prior to BB&T Capital Markets, Daly spearheaded the Catholic Initiative within senior living investment banking for Ziegler, and served as Head of Allied Irish Bank’s Midwest region. Daly earned a BS in economics from Kalamazoo College, and an MBA from Northwestern University’s Kellogg Graduate School of Management.  

“We are so thrilled to welcome Lynn Daly to the HJ Sims family. Lynn is a well-respected and nationally recognized thought leader in the senior living sector and the perfect leader to grow our presence in the Midwest and to work with our team as we continue to expand throughout the US. Lynn’s extensive experience as both a senior commercial and investment banker, along with her integrity, deep knowledge, and client-centered approach, are vital characteristics and values that will guide our clients and business partners through these challenging times,” said Aaron Rulnick, Managing Principal, Sims. 

Brady Johnson joins Sims as Senior Vice President in its new west coast office, in Orange County, CA. Previously with Hunt Real Estate Capital, Johnson was responsible for real estate debt originations for seniors housing and healthcare properties. He helped establish the firm’s seniors housing real estate lending platform, including a proprietary bridge loan program and expansion of the firm’s agency and HUD financing capabilities. Johnson closed the firm’s first Fannie Mae seniors housing loan, followed by its first seniors housing Freddie Mac loan. Prior to joining Hunt, Johnson served as Director of Seniors Housing & Healthcare at RED Capital Group, and served with GE Capital in various commercial finance roles. Johnson earned an MBA from Thunderbird School of Global Management and Bachelor’s degrees (Economics and Spanish) from the University of Utah.  

“We are excited to welcome Brady Johnson to the Sims family. Brady will help establish our west coast presence serving for-profit and non-profit senior living clients. Brady’s broad experience in FHA, Fannie Mae, Freddie Mac, mezzanine and senior housing finance, and his focus on achieving the best solutions for his clients make him a great asset,” said Jeffrey Sands, Managing Principal, Sims. 

In late 2019, Sims expanded its Private Client team, adding an office in Jupiter, FL, housing a three-person advisory team, as well as a senior partner of Sims Energy. HJ Sims’ Puerto Rico private client office moved its Guaynabo headquarters to a larger space in Metro Office Park. The spacious quarters enable the team to better host clients, while the expansion reinforces Sims’ established presence and growth on the island. 

HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm, headquartered in Fairfield, CT, with nationwide locations. www.hjsims.com. Investments involve risk, including loss of principal. This is not an offer to sell or buy any investment. Past performance is no guarantee of future results. Member FINRA, SIPC. Facebook, LinkedIn, Instagram Twitter. 

Generations at Shalom Park

Generations at Shalom Park represents a collaboration between Shalom Park, a culturally Jewish mixed-use development in the Charlotte, North Carolina metro area, and Aldersgate Life Plan Services, Inc., a well-established Charlotte-based non-profit Methodist organization currently operating an existing life plan community and home care agency.

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Gift of Life: Recap from 17th Annual Late Winter Conference

Gift of Life (GOL) joined our 17th Annual HJ Sims Late Winter Conference February 25-27 in San Diego. GOL was represented by Alicia Lorio, a leader of their Young Professionals Committee in Orange County; and GOL blood stem cell donor, Alec Nadelle.

Alicia shared GOL’s history and spoke about the importance of growing the GOL stem cell registry to give second chances to those afflicted by blood and bone cancer. Before introducing Alec, Alicia shared how individuals can get involved with GOL and increase the number of those within the registry by encouraging individuals to swab their community and swab at their workplace.

Next, Alec shared his experience with GOL. He donated blood stem cells in November 2012 to a (then 71-year-old) woman battling a fast-moving form of Leukemia. The presentation left attendees feeling truly moved.

The team was excited to share an update about the amazing CSR partnership that HJ Sims and GOL have shared during the last two years.

From running fundraising drives to sponsoring the Steps for Life events to helping underwrite equipment for a
new state-of-the-art Stem Cell Collection Center located in Boca Raton, HJ Sims continues to be honored to support GOL and their mission to cure blood cancer through marrow and stem cell donations. GOL has facilitated nearly 3,600 transplants since its inception.

For more information, visit www.giftoflife.org

Asbury Communities

Asbury Communities Partners with HJ Sims again to Streamline its Capital Structure with its Pennsylvania and Maryland Obligated Groups

“Asbury Communities once again chose HJ Sims to represent us for a refinancing in Pennsylvania and Maryland for our callable debt. The Sims team was able offer solutions for both refinancings that exceeded our expectations. One of the refinancings was a public deal that came to the market at a difficult time. Sims presented a strategy that worked better than anticipated, and we were able to refinance our debt on superior terms. I would highly recommend working with Sims as they listened to our objectives, formulated a great plan, and executed on it. We couldn’t be happier with the results.”
– Andrew Jeanneret, Chief Financial Officer, Asbury Communities, Inc.

For more information on how Asbury’s Maryland and Pennsylvania Obligated Groups, please contact:

Aaron Rulnick

(301) 424-9135

Melissa Messina

(203) 418-9015

Asbury Bethany Village – Mechanicsburg, Pennsylvania
Asbury Methodist Village – Gaithersburg, Maryland

Partnered Right®

Asbury Communities, Inc. (“Asbury”), owns and operates life plan communities in Pennsylvania, Maryland, and Tennessee, as well as HUD Section 202 senior housing buildings, a foundation, and a for-profit technology consulting firm. All of the facilities that are included in its Pennsylvania and Maryland Obligated Groups are owned and operated by Asbury Atlantic, Inc. (“Atlantic”), a wholly-owned subsidiary of Asbury Communities.

Pennsylvania Obligated Group

Asbury’s Pennsylvania Obligated Group (the “Pennsylvania Obligated Group”) consists of two communities – Bethany Village Retirement Center (“Bethany Village”) located in Mechanicsburg, Cumberland County, Pennsylvania and Springhill (“Springhill”) located in Erie, Pennsylvania, both life plan communities (LPCs). Bethany Village consists of two campuses with an aggregate of 400 independent living units, 100 assisted living units and a 69-bed skilled nursing center and related amenities. Springhill has 158 independent living units, 35 personal care units and an 80-bed skilled nursing facility.

Maryland Obligated Group

Asbury’s Maryland Obligated Group (the “Maryland Obligated Group”) consists of two communities – Asbury Methodist Village (“AMV”), a LPC located in Gaithersburg, Montgomery County, Maryland, and Asbury Solomons Island (“Solomons”), a LPC located in Solomons, Calvert County, Maryland. AMV provides a continuum of living through 826 independent living apartments, courtyard homes and villas, 133 assisted living suites and 257 comprehensive care beds located in a health care unit that includes a post-acute care unit and a memory support special care unit. Solomons has 300 independent living apartments and cottages, 24 assisted living suites and a health care center containing 48 licensed skilled and intermediate nursing care beds.

Sims recently served as underwriter to Asbury in 2018 for its Maryland Obligated Group’s Series 2018 Bonds; a financing that provided $7.5 million of new money bonds for capital expenditures, while also achieving over $8.3 million in net present value savings for the Maryland Obligated Group.

Structured Right®

Pennsylvania Obligated Group

In the summer of 2019, HJ Sims was engaged again by Asbury Communities to facilitate the refinancing of the Pennsylvania Obligated Group’s outstanding Series 2010 Bonds and the Maryland Obligated Group’s outstanding Series 2009B Bonds. Asbury Communities also sought Sims’ partnership in modifying the support agreement between Asbury Communities and the Pennsylvania Obligated Group and restating their existing Master Trust Indenture to align it with the modernized terms from the Maryland Obligated Group’s Series 2018 Refunding Bonds. Sims served as Underwriter of the Series 2018 Bonds, and worked closely again with management of Asbury to facilitate their objectives of minimizing overall interest expense while attaining level debt service and maximum flexibility

Maryland Obligated Group

For the Maryland Obligated Group, Sims facilitated a request for proposals process to select a bank partner and negotiated a tax-exempt bank loan used to refinance the Series 2009B Bonds, and finance $5,000,000 in capital expenditures reimbursements made by Maryland Obligated Group in the ordinary course of business.

Executed Right®

Pennsylvania Obligated Group

In order to meet the strategic financing objectives of Asbury, Sims suggested a short-term forward commitment to reduce or eliminate the effects of negative arbitrage from a current refunding occurring within 90 days of an optional redemption date. Sims priced the Pennsylvania Obligated Group’s Series 2019 Bonds on November 7, 2019, and set closing on December 31, 2019 to eliminate negative arbitrage through the first optional redemption date of the Series 2009B bonds on January 1, 2020. By doing so, the Pennsylvania Obligated Group avoided nearly $600,000 of negative arbitrage between the pricing date and closing date, reduced the overall borrowing, and maximized savings. The structure for the Pennsylvania Obligated Group also included semi-annual sinking fund installments, call provisions that took into account the impact of the elimination of advanced refunding bonds, and restated the underlying master trust indenture documentation and support agreements.

Maryland Obligated Group

As part of the Maryland Obligated Group’s bank financing negotiations, Sims was able to procure a 4 year, fully amortizing loan matching the maturity of the Series 2009B Bonds at a swap rate of 2.226% and a 7 year, fully amortizing loan for the reimbursement of capital expenditures at a swap rate of 2.309%. This financing also effectively defeased the final series of bonds that had been issued under the Maryland Obligated Group’s original operating support agreement, opening the door for the complete elimination of the operating support agreement if the Maryland Obligated Group wanted to do so.

Financed Right®

Pennsylvania Obligated Group

For the Pennsylvania Obligated Group, the aggregate $59,480,000 Series 2019 Bonds are projected to generate nearly $850,000 of debt service savings annually through 2041 and over $1.2 million annually from 2042 to 2045 for an aggregate net present value savings of $15 million over the life of the bonds.

Maryland Obligated Group

For the Maryland Obligated Group, notwithstanding the $5 million additional funds borrowed, the financing resulted in a mere approximate $20,000 increase in maximum annual debt service and achieved Maryland Obligated Group’s goals. The implemented financing structure allows Asbury to achieve its objectives of minimizing overall interest expense while sustaining and improving debt service coverage metrics and providing maximum flexibility.

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For more information on how Asbury’s Maryland and Pennsylvania Obligated Groups were Financed Right® by HJ Sims, please contact:

Aaron Rulnick

(301) 424-9135

Melissa Messina

(203) 418-9015

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