HJ Sims and JLL Execute on $473 Million of Bonds to Finance the Largest Non-Profit Single-Site Rental Senior Living Deal in History
“Collaborating with the HJ Sims and JLL teams provided the optimal solution to capitalize our project. As our first experience with HJ Sims and with this type of financing, we could not be more pleased with the outcome. HJ Sims was able to provide valuable advice and direction throughout the process. We certainly look forward to extending the relationship with HJ Sims and to more deals in the future.”
– Patrick McGonigle, CEO, Harbert South Bay Partners
“The P3 board is thrilled to be part of the James project. This project helps address the growing need for quality seniors housing in our country, which is woefully underserved. This project significantly benefited from the expertise and tenacity of HJ Sims and JLL. Complex projects require driven and talented teams. We are so fortunate to work with such dedicated professionals.”
– Kim Wyatt, Executive Director, P3 Foundation, Inc.
Partnered Right®
P3 Foundation, Inc. (“P3”) is a non-profit organization established in 2017 to support community development, expand healthcare, housing and educational facilities, and collaborate with local government entities to ease the development burdens they may face. Harbert South Bay Partners (“HSB”) is a Dallas-based seniors housing developer with over 80 projects completed, and has traditionally capitalized their projects under a for-profit ownership structure. With the assistance of JLL Capital Markets (“JLL”), HSB sought capital to finance the 350-unit rental senior living project located in Irvine, CA to be known as The James. Due to market-driven constraints in raising sufficient debt and equity for a project of this size, JLL collaborated with HJ Sims and helped the stakeholders explore alternative financing solutions which included a non-profit ownership structure with the right partner. JLL made the introduction to P3, who had been selectively looking to enter and strategically support the senior living space due to the need for quality seniors housing. Ultimately, P3 Irvine SL Holdings, LLC (the “Borrower”) was formed, a special purpose entity created by P3 to own The James.
The collaborative effort of JLL and HJ Sims was instrumental in structuring and completing the transaction. In addition, the unique and long-time experience of financing both non-profit and for-profit senior living communities, positioned JLL and HJ Sims for success in executing on this transformational financing.
The James will consist of 350 total units with 210 independent living units, 110 assisted living units, and 30 memory care units in two buildings across 3 acres and up to 8-stories. The community will also feature a substantial amount of high-end amenity spaces, including multiple dining venues, two theaters, a spa, wellness gym, an art studio, and outdoor courtyards.
Structured Right®
For a project of this size, aligning the interests of the parties involved is critical to incentivize the team to work towards a successful outcome. This is accomplished at The James in several ways
• Interested parties participated in purchasing subordinate bonds in unique structures that best supported the project
• Alignment of interests to the project and bond investors with the structuring, timing, and subordination of various fees
• Liquidity support agreements
The collective goal is to ensure that The James is not only successfully completed and stabilized, but also that debt coverage and liquidity generated are sufficient to be able to fund certain fees.
Overall, the unique, thought-out structure provided not only a successful path forward for all parties involved but also contributed to an oversubscription of the bonds.
Executed Right®
Recognizing that the rental start-up and associated economics are rare in the municipal bond universe, it was critical to provide additional support related to the overall viability of the project. With JLL providing capital markets data and analytics, also for-profit knowledge and experience and HJ Sims drawing on both its for-profit and non-profit financing experience, the team provided a pathway to identifying the financial efficiency of the project.
A proof-of-concept community recently opened by the development team provided a live case study for prospective investors to help validate the assumptions included in the feasibility study and financial forecast. In addition, this real-world example provided a full perspective of the expertise of the team in developing and operating this type of high-end community.
While site visits are less frequent in today’s market, the team hosted a series of visits to the future site of The James and surrounding market area as well as in-person tours of the proof-of-concept existing community. Prospective investors were able to see for themselves the quality which The James will closely resemble, the strength of the market, and the deep expertise of the full project team on display.
Financed Right®
On November 26, 2024 Sims closed on the $473.0 million financing, including serving as sole manager for $455.0 million of senior tax-exempt and taxable bonds underwritten by Sims and $18.0 million of tax-exempt subordinate debt. An active marketing process led to participation by 27 institutional investors, with three institutions placing orders for over $100 million each, with the deal being nearly 2x’s oversubscribed. The yields on the senior tax-exempt bonds ranged from 5.70% for the 10-year maturity to 6.55% for the 35-year maturity. The senior bonds will be optionally callable in 7 years at a 103% premium, providing for flexibility to refinance shortly after The James is filled and stabilized.
With the metrics of an aging demographic and limited new supply of senior living communities, the financing of The James introduces a unique capitalization strategy for senior living development projects. The overall execution by HJ Sims and JLL creates a transformational template for non-profit borrowers and for-profit developers and operators to help meet that growing demand of seniors housing across the country.
For more information, please contact:
Aaron Rulnick
203.856.1835
Brady Johnson
949.558.8297
Nick Roberts
469.371.3946