HJ Sims Partners with Lutheran Senior Services to Finance Campus Expansion and Other Capital Improvements While Preserving Future Entrance Fees to Refund Higher Coupon Bonds
“LSS chose HJ Sims for it most recent financing which included the funding for a major Independent Living expansion for us, but also included funding for some additional projects. While the short-term goal was to fund the construction of our expansion, the longer-term goal was to provide additional capital in the future that would allow us to refinance bonds not yet callable that have higher interest rates than the current market. We had an aggressive time table that was carried off with no issues. The team we worked with, headed by Aaron Rulnick and Melissa Messina, was extremely professional and evaluated our existing documents thoroughly and provided meaningful insight and helped position us for future financings as well. The sales effort resulted in strong demand for our bonds and we were very pleased with the results.”
– Paul Ogier, Chief Financial Officer, Lutheran Senior Services
Partnered Right®
Lutheran Senior Services (“LSS”) is a non-profit parent company that, together with its subordinate entities, owns and operates the following 17 communities in Illinois and Missouri, all of which are managed by LSS: Breeze Park, Concordia Village, Dunn Road Manor, Halls Ferry Manor, Heisinger Bluffs, Hilltop Manor, Laclede Groves, Lenoir Woods, Lutheran Hillside Village, Mackenzie Place, Meramec Bluffs, Mason Pointe, Meridian Village, Richmond Terrace, Rose Hill House, St. Joseph Bluffs and Westfield Manor. Through their system, they provide independent living, affordable housing, assisted living, assisted living memory care, skilled nursing care centers, skilled memory care, and short stay rehabilitation services.
Structured Right®
HJ Sims was engaged by LSS to underwrite the financing of an expansion to the Mason Pointe community as well as additional planned capital improvements at other communities in the LSS network. As part of its initial review Sims identified certain existing outstanding bonds that were bearing interest above current market rates and a strategy to repay those bonds on a current basis to reduce the overall interest cost to LSS. Sims and LSS worked closely together to devise a plan of finance that would have a relatively short maximum term (23 years) while providing a level debt service platform and maximizing the application of anticipated future initial entrance fee inflows from the Mason Pointe project to repay higher-rate bonds. Furthermore, the existing master trust indenture preceded the advent of entrance fee principal redemption bonds; thus the entrance fee principal redemption bonds needed to be structured as long-term balloon indebtedness with redemptions from entrance fees and a mandatory call within 3 years if they had not fully been paid with entrance fees at that time.
Executed Right®
In order to meet the strategic financing objectives of LSS, the structure proposed by HJ Sims included utilizing a smaller portion of the entrance fee pool to repay bonds allowing LSS to take advantage of relatively historically low interest rates for their longer-term debt, call provisions that took into account the impact of the elimination of advanced refunding bonds, and a longer term entrance fee bond that was callable if not fully repaid within 3 years to accommodate nuances of the existing LSS master trust indenture. Execution on the structure also required facilitating the ratings confirmation process with Fitch.
Financed Right®
On January 25, 2019, Sims successfully priced and subsequently closed on February 25, 2019, the aggregate $92,370,000 Fitch BBB rated fixed-rate bond financing. The LSS bonds were widely distributed, and the implemented financing structure allows LSS to achieve its objectives of minimizing overall interest expense while preserve a portion of projected initial entrance fee inflows to repay interest rate indebtedness in the future.
For more information on how Lutheran Senior Services was Financed Right® by HJ Sims, please contact:
Aaron Rulnick
(301) 424-9135
Melissa Messina
(203) 418-9015
Patrick Mallen
(203) 418-9009