HJ Sims Comes Full Circle, Closing $10.6 Million Life Co. Loan After Providing Unique Bridge Loan
A regional owner, operator of senior housing communities (the “Borrower”), with over 16 years of experience, partnered with HJ Sims to successfully complete a recent refinance for an assisted living and memory care community (the “Community”) located in the Southwest. The $10.6MM refinance, marks a unique conclusion to a two-year Plan of Finance. The Borrower partnered with Sims in 2021 to close on the acquisition of the value-add, pre-stabilized Community, with Sims providing the B Tranche of the First Mortgage Loan serving as a high-leverage bridge to permanent financing.
Since the acquisition, and with a focus on quality of care in a comfortable environment for the community’s residents, the Borrower successfully refreshed the building, slightly raised monthly rental rates while also increasing census to over 95% occupancy.
Sims was involved every step of the way to determine how best to structure the refinance at stabilization and when to pursue permanent or long-term financing in a fluctuating capital market. Over several months, Sims evaluated, analyzed and presented various options for permanent financing. Overall, terms from a life insurance company were selected, which included, non-recourse, fixed interest rate financing, at 70% loan-to-value, with a five-year term, including 24 months of interest only, followed by a 30-year amortization.
With increased expenses and labor costs felt industry-wide, combined with an ever-changing interest rate environment, the options for permanent debt to refinance out the entire high-leverage bridge loan were becoming more and more constrained nearly by the day. Sims persistently managed the Plan of Finance from acquisition to refinance by analyzing and presenting several scenarios in evaluating economic and timing targets for refinancing with permanent debt and long-term capital options. The ultimate variables in the final execution included loan proceeds that were not only successful to cover the cost to close and completely pay off the existing First Mortgage Loan, but also to allow for an equity cash out. In addition, terms were negotiated to include the ability to pay off the loan with no penalty any time after 18 months, giving the Borrower maximal operating flexibility, while minimizing prepayment and interest rate risk.
HJ Sims excels in providing customized debt and equity capital for senior living providers utilizing a variety of direct financing solutions including equity, preferred equity, mezzanine debt, and high leverage first mortgage loans, as well as strategic advisory services, tailored to meet the unique financing needs of valued partners.
From beginning to end and every which way in between, Sims is known for persistently finding not just a solution but the right solution for every client engagement no matter the time or effort it might take. This is one example of the commitment HJ Sims puts forth into each and every relationship with no expiration date included.
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