Sims Finances Preferred Equity Investment in Start-Up Assisted Living Community
Partnered Right®
Sims was approached to provide subordinate financing for the development of The Watermark at Continental Ranch (the “Community”), a proposed 99-unit assisted living and memory care community in Marana, AZ, which is a suburb of Tucson. The Community will be owned and developed by a joint venture (the “JV Owners” or the “Developer”) between affiliates of Link Development, LLC (“Link”) and Watermark Retirement Communities, LLC, who will also operate the Community (“Watermark”). Link is an experienced developer with a strong track record; the Community will be Link’s fourth senior housing development in Arizona. Watermark is an experienced developer and operator, currently managing 40 senior housing communities in 21 states.
Structured Right®
There were two primary challenges associated with this financing:
- The subordinate financing needed to be structured in a way that met the requirements of the senior lenders and High Volatility Commercial Real Estate Regulations, while also providing sufficient returns to all investors.
- The terms of Sims’ financing had to be flexible enough to fulfill the capital needs of the client during the development period through certificate of occupancy, while providing sufficient returns for the JV Owners.
Executed Right®
Sims worked with the JV Owners to structure a preferred equity investment in the project. The preferred equity structure allowed the investment to be categorized as contributed capital on behalf of the JV Owners, meeting regulatory requirements for the senior construction lender. By securing a preferred position, the equity investment receives a quarterly priority return before any distributions are made to the JV owners, providing an attractive source of income for HJ Sims’ investors. In consideration for the preferred position, the investment was structured with a capped all-in return, providing an attractive upside to the JV owners upon repayment of the preferred equity.
Financed Right®
A new entity, LW Development Funding I, LLC (the “Sims Issuer”), was formed to issue $3.8 million of taxable bonds. The bonds were successfully sold to Sims’ high net worth accredited investors. The proceeds from the bonds were used by the Sims Issuer to fund the preferred equity investment to the JV Owners. The financing marks Sims’ third successful financing with Watermark Retirement Communities and second successful financing with Link Development.
For more information, please contact:
Jeff Sands
(203) 418-9002
Curtis King
(512) 519-5003