Sims Finances Mezzanine Debt and Equity for Acquisition
HJ Sims, through an affiliate, provided $2.5 million mezzanine and equity financing to Gryphon Senior Living, LLC (“Gryphon”) to acquire a community with 56 assisted living units and 25 memory care units (the “Community”) in Macon, Georgia.
Sims was approached by Gryphon to finance the acquisition of an assisted living and memory care facility in Macon, Georgia. Sims had previously successfully financed Gryphon and its affiliated management company in connection with the acquisition of other senior housing communities.
There were several challenges associated with this financing including:
- The deal needed to be closed on a very expedited timeframe;
- The deal needed to be structured in a way that would maximize future refinancing proceeds; and
- The community being underwritten had experienced some operational challenges in the past.
Sims developed a plan to invest both subordinate debt and preferred equity to assist Gryphon in the acquisition of the community. Part of the investment was structured as subordinate debt at the property level. The reason for this is that a number of potential providers of refinancing (such as HUD) will only refinance “debt”. At the same time, a portion of the Sims investment needed to be structured as “equity” to meet the bridge lender’s requirements.
A new entity owned by Sims, Gryphon BH Funding, LLC (the “Issuer”), was formed to issue bonds. The bonds were successfully sold to its high net worth accredited investors in less than three weeks. Proceeds from the bonds were used by the Issuer to fund a subordinate loan and a preferred equity investment which, together with the senior loan and equity from Gryphon, were used to acquire the Community.
The ability of Sims to quickly underwrite the community and then implement a bifurcated debt/equity structure met the needs of Gryphon and the competing requirements of the current and future lenders. Sims was able to provide subordinate debt and preferred equity that met the needs and the requirements of Gryphon and the senior lender. This allowed the owners to avoid having to make an additional equity contribution to the transaction. The flexibility and creativity of Sims’ bankers, along with the industry knowledge of its retail investors resulted in a unique solution for Gryphon.
Creative financing solutions for acquisitions are an example of Sims using its extensive investor base to provide financing to senior housing providers. Sims excels in filling the niches that allow an owner or developer to complete a transaction by providing custom financing such as mezzanine debt or preferred equity.