Interest rates are on the rise, as Janet Yellen moves to end an era of unprecedented stimulative monetary police. With that shift likely coming, borrowers will look to take advantage of low interest rates now. That was clearly on the mind of the owners of a 150-acre not-for-profit CCRC in northeast Ohio, who worked with HJ Sims to arrange a $32 million debt modification. Opened in 1989 in the town of Hudson (Akron/Cleveland MSA), the community features 225 independent living units, 66 IL villas, 59 assisted living units and 75 skilled nursing beds, in addition to a host of amenities like three on-site restaurants, a pub, fitness/aquatic center, three stocked fishing lakes and a three-hole practice golf course. It was originally affiliated with Humility of Mary Health Care Corporation, which joined Catholic Health Partners (CHP) in 1997. CHP then divested the community, among others, in 2013, and the community is now independently owned and operated.
To fund the 2013 acquisition, the acquirer used senior bank debt (both taxable and tax-exempt) from Citizens Bank and subordinated tax-exempt bond debt. But HJ Sims identified the potential for either a refinance or rate modification. So, the team of Jim Bodine and Mack Welch arranged a rate modification of the borrower’s taxable debt (comprised of two series) of approximately $32 million. That reduced the all-in interest rate and fixed the rate on the larger portion of the taxable debt. HJ Sims also extended the credit commitment from Citizens Bank for 10 years through 2026.
HJ Sims didn’t stop there, closing a similar transaction for a not-for-profit CCRC in Davidsville, Pennsylvania. Sims approached the community’s existing lenders, First Commonwealth Bank and Somerset Trust, to either refinance or modify the 2008 bank financing and the 1998 bonds, in addition to funding some needed capital projects. With an aversion to variable rates, the community terminated the existing interest rate swap and entered into new swaps to modify the 2008 financing. HJ Sims also refinanced the 1998 bonds and arranged new financing for the community’s capital needs.
