HJ Sims Successfully Completes Refinancing that Streamlines Capital Structure, Provides Funds for Community Improvement While Reducing Annual Debt Service
“For the fourth year in a row, Andrew Nesi and the entire Sims team demonstrated their expertise in senior living finance and more than reaffirmed their value as a long-standing strategic partner to both Crane’s Mill and Lutheran Social Ministries of New Jersey. Sims has been a valuable partner since Crane’s Mill’s beginning in the 1990s, and capitalized on that familiarity to create a refinancing of all existing debt that generated annual debt savings for the community while including additional borrowing for renovations. As this was Crane’s Mill’s first public debt offering in more than ten years, we were very pleased with an outcome that exceeded the initial terms, and which put in place a much cleaner, more streamlined debt structure that will benefit the community for years to come. Their willingness to support us throughout this process, especially in meeting a management-imposed year-end deadline in a very short timeframe, proved once again that Sims continues to be the right partner for Lutheran Social Ministries of New Jersey and our communities.”
– Jennifer Cripps, Chief Financial Officer, Lutheran Social Ministries of New Jersey
Crane’s Mill of West Caldwell (“Crane’s Mill” or the “Community”) is a Life Plan community located on 48 acres in West Caldwell, New Jersey (approximately 20 miles west of New York City). Lutheran Social Ministries of New Jersey (“LSMNJ”) is the sole corporate member of Crane’s Mill and traces its roots to 1904. LSMNJ owns and/or manages 19 facilities throughout NJ including seven senior housing projects and two nursing homes totaling 710 independent living units and 254 nursing beds. In addition, LSMNJ owns and/or manages six affordable and special needs facilities throughout NJ. HJ Sims has a long-standing relationship with Crane’s Mill, serving as its investment banker since the initial financing to construct the community in 1998.
The purpose of the financing was to (i) refund two series of public bonds, as well as two series of bank placed bonds, (ii) generate debt service savings, (iii) monetize a portion of the savings to fund $5 million for further community capital improvements, and (iv) unify the financial covenants and reporting requirements under one agreement. Due to rising interest rates since the bank debt was incurred in 2015, Crane’s Mill was able to realize a gain of $176,500 by terminating the underlying interest rate swap while incurring no prepayment penalty. Despite the increase in indebtedness, the financial strength of Crane’s Mill and improved metrics led to a BBB+ (Positive) rating from Fitch on the new issue.
Due to strong investor interest, HJ Sims was able to shorten the order period and lower the bond yields from initial expectations. The yield on the bond maturing in 2049 was 4.375%. Nearly $2 million in bonds were purchased by individual investors. Overall Maximum Annual Debt Service declined by approximately $200,000 (taking into account $5 million in new debt), resulting in an improved pro-forma debt service coverage ratio of 1.98 (vs. 1.84) and a revenue only coverage 1.06 (vs 0.96). Also, the pro-forma Days Cash on Hand increased to 633 from 627 as a result of the transaction.
The new $41.255 million bond issue closed on December 21, 2018. With HJ Sims’ leadership in collaboration with LSMNJ management, Crane’s Mill successfully realized its goals of reduced debt service while providing for additional funds for community improvements.
For more information on how Crane’s Mill was Financed Right® by HJ Sims, please contact: