We know that the lending market has slowed considerably, and has been perhaps the main reason for M&A coming to a crawl, but just a week after arranging a bank bond refinance for a CCRC client, Ziegler has arranged another one for a CCRC in Texas, resulting in a total of more than $150 million in proceeds across the two transactions. That’s an impressive sum these days.
Most recently, Ziegler refinanced Westminster, a not-for-profit entrance-fee CCRC in Austin, Texas. Founded in 1972, Westminster has grown over the years to include 327 independent living units, 22 assisted living units, 30 memory care units and 55 skilled nursing beds on a 9.3-acre campus. Life Care Services (LCS) has operated the property since 1981 and will also provide development services for the upcoming addition. That project will include a new five-story building containing 43 independent living, 38 memory care and 36 assisted living units, plus additional dining, parking and amenity areas.
Westminster will also add another five-story building that will be constructed complete with a wellness center, a fitness center, PT/OT space, salon, clinic, 15 spaces of underground parking and 18 new independent living units. Finally, Westminster will renovate a third building that includes a dining room, lobby, therapy space, assisted living units, memory care units and also fitness/craft rooms that will be converted to pool locker rooms.
So, to finance the project costs, fund capitalized interest thru March 2023 and refinance an outstanding line of credit, Ziegler helped arrange the debt. The team, led by Brandon Powell, initiated a bank solicitation search in December 2019 and was able to obtain commitment terms from multiple sources.
Westminster originally only wanted to use bank capital for a $47 million series of short-term debt, which would be retired with entrance fees. Truist had offered a commitment to finance the entire project with both short-term and long-term debt, but Westminster selected another bank to provide the short-term debt and had plans to finance the rest of the project with long-term, fixed-rate bonds, given the low fixed interest rate environment at the time.
Then came COVID, and fixed rates rose to the point that Ziegler recommended that Westminster reconsider the 100% bank financing offer from Truist. So, Truist made just a few minor adjustments to the original term sheet and agreed.
The series totals $110.875 million in bonds, split between $63.875 in long-term bonds with a 30-year amortization and a $47 million short-term loan to be retired with entrance fees. The bonds come with a 12-year commitment period with a 30-year amortization at a rate of one-month LIBOR + 1.46%. Westminster also implemented a forward-starting interest rate swap on the long-term bonds at 2.324% for the 10-year period ended June 1, 2032. Additional debt will be limited to $3 million until the short-term loan is repaid.
