The Phoenix, Arizona market has been a hotbed of senior living construction activity thanks to its rapidly growing retiree population, and a large CCRC catering to high-income residents is looking to capture part of that growth with an independent living expansion. Sagewood already has 316 independent living units, 44 assisted living units, 28 memory care units and 78 skilled nursing beds.

Demand for independent living was strong (with the IL units fully occupied in 2018), so ownership decided to build a Phase II, which included 101 more units. It was clearly the right decision, as 96% of the new IL units are already presold, with entrance fees projected to average $700,000.

Recently, the CCRC finished several other expansion projects, including a 44-unit assisted living center, 20 new memory care units, 24 IL villas, and a 40-bed skilled nursing addition. After all that activity, the owning partners, LCS and Westminster Capital, are recapitalizing with a $118.8 million senior loan provided by National Health Investors, in addition to receiving a $61.2 million construction loan for the 101-unit IL expansion project.

The senior loan has a 10-year maturity and 7.25% interest rate that escalates by 10 basis points per year after the third year of the loan. The construction loan has a five-year maturity, an 8.5% interest rate, and will be paid off with proceeds from the entrance fees. Both notes were funded from borrowings on NHI’s revolving credit facility.