Richfield Living (December 2023)

HJ Sims Represents Richfield Living in Divestiture

“I have worked with HJ Sims on this project and on projects in the past.  They are excellent to work with. They brought solutions to the table, worked diligently with me and my staff and assisted through a complicated sale.”

Mary Clements, Richfield Living CFO

Partnered Right®

Richfield Living (Richfield) was a not-for-profit senior living organization that operated two communities in Salem and Roanoke, Virginia. The Salem campus contains all levels of care, including 173 independent living units, 120 assisted living units, 39 memory care units, and 112 skilled nursing beds. The Roanoke campus contains 116 skilled nursing beds.

In 2019, Richfield began a multi-phase expansion and repositioning project. The first phase added independent living units to its Salem campus, as well as completely replacing and significantly downsizing its existing skilled nursing facility. The second phase began in early 2020, prior to the onset of the COVID-19 pandemic, with the addition of a stand-alone skilled nursing facility in nearby Roanoke. Just after the 2020 bonds were issued, the pandemic hit and stalled construction at both projects. After months of delays, Richfield was able to resume construction and ultimately complete both sets of projects. However, the facilities opened during an environment that saw reduced demand for senior living communities (especially for skilled nursing facilities) and increased labor costs due to staffing shortages. This new environment, coupled with the delays in construction, led to a “perfect storm” of events that made it difficult for Richfield to fill their new units and maintain a high operating margin.

The reduced demand and increased costs began to inhibit Richfield’s ability to pay debt service on the bonds issued in 2019 and 2020. When Richfield began to miss covenants, the bondholders requested that a forbearance agreement be put in place to set up targets to improve financial performance. Concurrently with setting up the agreement, the bondholders asked Richfield to hire a broker to begin soliciting bids for either a divestiture or an affiliation in the event Richfield could not improve financial performance to repay debt service on the bonds.

Richfield solicited multiple proposals and ultimately selected HJ Sims to serve as broker and advisor due to our extensive network of for-profit and not-for-profit buyers.

Structured Right®

Sims began the solicitation process by preparing a list of potential buyers and affiliation partners, including both not-for-profit and for-profit organizations. In addition to the target list, Sims drafted a Confidential Information Memorandum (CIM), teaser, and prepared a data room to summarize and explain the acquisition opportunity. Once the list and marketing materials were approved by Richfield and the bondholders, Sims began reaching out to the potential buyers. Richfield received several competitive first round LOIs. During the solicitation process, it became clear that a bifurcation of the bidding process may generate the highest sales proceeds. Certain for-profit and not-for-profit buyers were only interested in the independent living and assisted living components of the organization, while some for-profit buyers were only interested in the skilled nursing component. This bifurcation resulted in bidders partnering to submit LOIs for certain components of the organization to generate the highest and best price.

From the first round LOIs, Richfield and the bondholders selected the most competitive bids to conduct site visits. Sims also prepared analyses of each LOI for management, the Board, and the bondholders to discuss opportunities to improve each bid. Once the final Bids were received, Sims worked with the key stakeholders to determine the selected bidder. After final negotiations, Richfield selected a joint proposal from two for-profit organizations: one organization would own/operate the independent living and assisted living, while the other would own/operate the skilled nursing. Richfield and the joint bidders executed the final LOI in the late fall of 2022. Shortly thereafter, the due diligence process began and Sims worked closely with other members of the Richfield team to fulfill information requests and coordinate the closing process.

As the due diligence process unfolded, the sale began to face challenges with the joint bidders. First, the bidders had concerns with the legal documents in the sale that would make it difficult to close the transaction. Second, while the sale process was underway in late 2022, the capital markets were beginning to tighten considerably as the Federal Reserve increased interest rates at a rapid pace. The increase in rates and general decline in available capital made it difficult for buyers to find financing. The joint bidders were not immune to these issues and were forced to lower their purchase price in an effort to secure financing. Ultimately, the concerns with the legal documents and the lowered purchase price forced Richfield to re-bid out the opportunity in early 2023.

Richfield requested updated bids and received several strong offers. From the bids, Richfield selected another joint proposal. Unlike the previous proposal, this offer had one buyer purchasing the Salem campus, while the other would purchase the Roanoke campus. Further, the purchaser of the Salem campus was a not-for-profit organization local to the area. Richfield entered into a new LOI with the buyers and moved forward with the due diligence process.  

The capital markets continued to tighten further as the Federal Reserve increased interest rates. The market worsened in the wake of the Silicon Valley Bank collapse, which further reduced the availability of capital to fund acquisitions. Due to the challenging bank market, the not-for-profit provider revised their proposal to assume a portion of Richfield’s existing debt. This structure would eliminate the need for third party financing and improve the execution risk of the sale. After several weeks of negotiations, Richfield and its bondholders agreed to the new proposal.

Executed Right®

Over the summer, Richfield, the buyers, and the bondholders worked to document the sale and receive the necessary state and local government approvals. As part of the approval process, Richfield and the bondholders utilized a trust instruction proceeding (TIP) to allow a portion of the debt to be written off without needing to go through a bankruptcy proceeding, which is a costly and time-consuming process. The TIP process requires a higher bar for creditor approval in comparison to a bankruptcy.

Financed Right®

With the approvals in place, Richfield was able to complete the closing in two phases. The Salem campus closed on October 1, while the Roanoke campus closed two months later on December 1.

For more information, please contact:

Aaron Rulnick


David Saustad


Testimonials may not be representative of the experience of other clients. Past performance is no guarantee of future results