HJ Sims Provides $27 million in HUD PlusTM Financing for a 15 Property Nursing Portfolio Acquisition
“We immensely enjoyed partnering again with the Sims’ team; they are professionals who executed an innovative and flexible financing solution that met our capital needs.”
–Michael Zamir, Managing Principal and Co-founder, Next
Next Healthcare Capital (“Next”) is a privately held healthcare real estate investment firm specializing in the acquisition and leasing of skilled nursing facilities. Next is primarily aligned with national operators with a proven track record of operating skilled nursing facilities. Next has been an aggressive buyer of high quality skilled nursing portfolios and has accumulated a substantial portfolio across the country operated by its national tenants. The acquisition of this portfolio had an all in cost of over $200M for Next and strengthened its national footprint.
HJ Sims previously partnered with a related company of Next in 2013 providing a HUD PlusTM subordinate loan to finance the acquisition of a nursing portfolio in Florida and later partnered with Next in 2017 to recapitalize the same portfolio. HJ Sims partnered with Next again in 2018 to provide $20.7 million of subordinate HUD PlusTM financing to fund the acquisition of a portfolio of 12 skilled nursing facilities.
After Next reached an agreement to purchase a portfolio of 15 skilled nursing facilities (the “Portfolio”), it approached HJ Sims to provide subordinate financing, which along with a senior bridge loan, and an equity contribution from Next, funded the acquisition of the Portfolio. With plans to refinance the bridge loan with HUD insured debt, the acquisition provided an excellent opportunity for Next to take advantage of HJ Sims’ HUD PlusTM program. Under this program, HJ Sims’ provides subordinate financing to supplement the bridge loan, increasing leverage for the acquisition and limiting the out-of-pocket equity requirement from the borrower. The HUD PlusTM loan is designed to meet HUD’s requirements in advance of a future HUD insured refinancing, providing the borrower flexibility to repay the subordinate loan or have all or a portion of the subordinate loan to remain outstanding after the HUD take-out.
A new entity, NHG Funding III, LLC (the “Sims Issuer”), was formed to issue taxable bonds to fund the Sims Loan. HJ Sims successfully sold $27.0 million of subordinate taxable bonds through its Private Client Group to high net worth accredited investors. HJ Sims funded the subordinate HUD PlusTM loan on January 31, 2019, meeting Next’s timeline to close on the acquisition in accordance with the purchase and sale agreement with the seller.
HJ Sims was able to structure the subordinate HUD PlusTM financing to meet the needs of Next, as well as the requirements of the senior lender and a future FHA-insured refinancing. The HUD PlusTM structure maximizes leverage and carries a fixed interest rate with a 10-year term, ensuring a fixed capital structure upon a refinancing with HUD. Additionally, by structuring a portion of the loan to remain outstanding after a HUD insured refinancing, the HUD PlusTM loan allows Next to avoid potential transaction costs associated with refinancing the subordinate debt. The closing of the financing marks the third financing HJ Sims has completed for Next.
For more information on how Next Healthcare Capital was Financed Right® by HJ Sims, please contact