“HJ Sims has been a key strategic partner in our repositioning project. This project is the largest strategic initiative our community has ever undertaken and it includes multiple phases over several years. HJ Sims provided education to our team and our board along the way, helping us to understand the markets and the risks. They got to know our team well and also our project in great detail, including attendance at early design meetings. Throughout the planning stages, they presented multiple financing strategies so that we were ready to respond to varied market conditions. As we neared the end of financing plan, volatility in the markets did indeed threaten the project, but HJ Sims led the team to an early close date, resulting in a successful closing and substantial overall savings. We couldn’t be happier with HJ Sims as our financing partner!”
-Deb Reardanz, President and CEO of Clark-Lindsey
Clark-Lindsey Village (“CLV”) is a not-for-profit, single-site life plan community located in Urbana, IL adjacent to the University of Illinois and is the only Life Plan Community in the immediate market area. The community is one of only a handful of communities in the nation to have earned the designation as a “Center for Successful Aging” and continues to strive for excellence through strategic endeavors and product repositioning. HJ Sims and CLV first formed a partnership in 2020 to finance three phases of CLV’s master plan. The master plan entails a complete transformation of the existing campus through three financings over the course of just three years. In 2021, HJ Sims closed the initial phase of the master plan via a taxable line of credit to construct 8 independent living villas. In 2022, HJ Sims and CLV closed a bank/bond hybrid financing for the second phase of the master plan which refinanced all of the community’s outstanding debt (including the line of credit from the initial phase) and funded the construction of a 3-story building to contain 38 assisted living units, 26 memory care units, structured parking, as well as funding for endeavors to eliminate 72 skilled nursing beds. In 2023, the final phase of the existing master plan was ready to come to fruition. After enduring cost headwinds when crafting the design of the project, CLV worked to reinvent the new building which would mainly focus the project design on revenue-producing square footage. The project was scaled down to include an independent living building with some new (smaller) amenities, creating an operating model which relied on the new residents utilizing other amenities that the community already had in-place. The result was a 3-story independent living building encompassing 45-units of independent living which was 100% pre-sold prior to the beginning of construction; new amenities, which will be an adaptation of a recently closed skilled-nursing wing; and a new grab-and-go dining venue.
Currently, the campus offers 155 units of Independent Living; 12 units of Memory Care; as well as 77 beds dedicated to Skilled Nursing and Rehab. After the second phase and third phases of the master plan are complete, the campus will offer 200 units of Independent Living; 38 units of Assisted Living; 26 units of Memory Care; and 45 bed dedicated to Skilled Nursing as well as Rehab.
In 2022, during the financing process associated with the second phase of the master plan, HJ Sims solicited banks for financing proposals to fund both the second phase as well as the third phase of the master plan. A banking partner was identified and selected with the mutual understanding that the bank had enough capacity to fund the subsequent Phase 3, independent-living expansion. Fast forward to March of 2023. Several banks had already shuttered and credit standards tightened. On March 10, 2023 Silicon Valley Bank endured a historic collapse, for a bank of that size, and sent shockwaves through the capital markets as well as the banking sector. HJ Sims was in the middle of structuring the plan of finance for CLV, when suddenly the bank market shriveled and previously eager-to-lend institutions were cautious to deploy any new capital. The banking partner for the financing had retreated – once again, HJ Sims had to craft a creative solution to bring the client’s project to life.
With bank options eliminated, the feasibility of the project was hinging on a draw-down vehicle which would lower capitalized interest. CLV wanted to execute a GMP approximately 4-months before construction would begin to lock-in material costs, so the organization would benefit if the they could deploy loan proceeds months after closing. HJ Sims prides itself on having a deep tool box which includes relationships with institutions as well as alternative capital providers, which allowed the plan of finance to successfully pivot to an alternative capital provider that still produced a draw-down benefit. The plan of finance would now be entirely executed with fixed-rate draw-down bonds, placed with a single investor. This vehicle would allow CLV to incrementally draw construction funds on a quarterly basis, while fixing the interest rate at each draw. The end result was a product which could be drawn down, but would lock-in current interest rates and mitigate future interest rate increases.
With a new capital partner in-place and a debt vehicle that would benefit the feasibility of the project, HJ Sims continued to advocate on behalf of CLV. HJ Sims negotiated even more favorable financing terms to further bolster the project’s viability. The plan of finance, with the new capital partner, contemplated two tranches of debt: a tranche of debt which would be repaid by 80% of the initial entrance fees associated with the new project; and a tranche of long-term debt to be serviced by the community over time. HJ Sims was able to strike a deal which allowed both tranches of debt to be interest-only through the respective maturity dates. Noting that the interest-only period would have no principal repayment, HJ Sims also introduced a third tranche of debt. The third tranche of debt would be $3,000,000 of long-term debt which could be repaid at any time; though, also did not require principal repayment. This third tranche of debt allowed CLV the flexibility to paydown debt and reduce the overall outstanding principal of the long-term debt (not repaid by entrance fees) when the commitment from the capital provider matured.
With a plan of finance structured, the working group formed for the financing continued to press on. Coming off of the heels of the Silicon Valley Collapse, there continued to be market turmoil spilling over into the capital markets which added further pressure to interest rates. Furthermore, economic indicators continued to influence the Federal Reserve in its decision to increase the Federal Funds rate in the fight against runaway inflation – in summary, the interest rate market was rapidly climbing and continued to deteriorate the viability of the project.
The financing was further complicated with the fact that phase two of the master plan was not yet completed. The new capital provider was going to be secured with a first lien on the campus mortgage, and a clean mortgage was needed to close the financing. A collective effort by HJ Sims, CLV, and the working group successfully navigated these issues to allow the financing to close on time. Simultaneously, the summer doldrums eased some of the market volatility and interest rates steadied as the financing came to a close.
On July 27th, just 60 days after the introduction of the new capital provider, the financing closed with an initial draw on two of the three tranches. The final terms of the financing included three tranches of debt, two of which closed with an initial interest rate of 6.27% for the entrance fee debt and 6.50% for the long-term debt. All of the debt will be interest only through the commitment, paired with a 5-year optional redemption feature, 30-year amortization, and a flexible prepayment option for $3,000,000 of the long-term debt. The commitment from the capital provider was $45,000,000 in total, which will be drawn over the course of 21-months via four draws. Overall, CLV was able to successfully realize the final phase of its master plan with a financing structure that allowed a draw-down feature and a combatted future interest rate risk, enhancing the financial viability of the project – a structure that is truly Financed Right.
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