Sims Refinances New Rental Senior Living Community
Provident Village at Canton (the “Community”) is a new senior living community that consists of 55 assisted living units and 25 memory care units located in Canton, Georgia. The Community is owned and managed by affiliates of Provident Resources Group (“Provident”) and commenced construction in July 2014. The Community opened in May 2016 and was approximately 23% occupied after 4 months of operations at the time the mailing of the Preliminary Official Statement.
Provident is a 501(c)(3) charitable nonprofit corporation formed in 1999 that is committed to the development, ownership and operation of facilities across the country that serve to advance education, lessen the burdens of government, promote healthcare, meet the needs of the elderly and relieve the underprivileged through the provision of safe, decent and affordable housing. Provident, headquartered in Baton Rouge, Louisiana, employs professional management while taking a unified approach to the delivery of services.
Since 1999, Provident has raised approximately $1.6 billion in capital for its charitable projects, including student housing, senior housing, affordable rental housing and correctional housing.
HJ Sims was approached by Provident to refinance its Series 2014 bonds and assist with creating a financing solution to fund certain construction cost overruns and additional working capital needs due to the 9 month construction delay. Sims worked with prospective bondholders during the sale process to develop strategies that would:
- Reduce the Community’s overall cost of capital and annual debt service and provide working capital for initial operating losses;
- Provide a reimbursement of cost overruns due to the construction delay; and,
- Provide more attractive financial covenants and a manageable long-term financing structure.
Through receiving feedback from both prospective institutional investors and accredited investors, HJ Sims created a tranche of both senior and subordinate bonds to provide an attractive leverage structure that would provide an overall lower cost of capital to Provident. In addition, Provident and its affiliates provided liquidity support to the Community in the event of any delays in the lease-up of units to reach stabilized occupancy. Provident and its affiliates also received a reimbursement for a portion of the capital that was advanced to cover the cost overruns and opening delays of the Community.
HJ Sims successfully closed on the $16,060,000 tax-exempt and taxable senior bonds and $1,500,000 tax-exempt subordinate bonds on February 21, 2017. The 2017 bonds were priced with a 7-year call option providing greater flexibility to call or refinance the bonds prior to a standard 10-year call option. Additionally, the new bond issue provides more flexible financial covenants and reporting requirements. The bond issue allowed the Community to lower its cost of capital from over 9% to a blended yield of 6.95%.
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