A week does not go by without another announcement about either a refinance of a not-for-profit CCRC or a new financing with the proceeds being used to expand or renovate, and even new, ground-up CCRC developments. Expand, during the worst pandemic in 100 years when seniors housing occupancy is plummeting? That’s what we said.
In our first transaction, Cain Brothers had been working with Whitestone: A Masonic and Eastern Community since 2007, when several areas of need were identified to make the community more competitive. It opened its doors in 1913 and is the oldest CCRC in North Carolina. It has been managed by Life Care Services, which together with Cain Brothers and LCS Development, worked out a plan to truly bring the community into the 21st century.
First, it lacked assisted living units, which for the past 20 years has really been a must. Second, its independent living apartments were on the small side, averaging 739 square feet with only 22% of them having two bedrooms. Finally, at the skilled nursing center, fewer than 22% of the rooms were private, even though 66% of the admits were from outside the community.
So, with $73.295 million of new funds in hand as a result of a Cain Brothers financing, they are adding 67 new IL apartments, which will increase the average size to 1,115 square feet and 37% will now be two-bedrooms. They will be adding 24 new assisted living units and renovating the nursing center so that 45% of the rooms will be private.
The pandemic stalled the pre-sales, but Cain Brothers was able to go to market with just 52% pre-sales at the time of pricing. The largest tranche, at $60.1 million, was 3.5x oversubscribed with a 35-year yield of 4.56%. The financing, excluding the renovation to the nursing center, comes to about $800,000 per unit for the new IL and AL units. We are getting very pricey these days, so those units better sell quickly. Joe Mulligan and James Conahan of Cain Brothers led the way.
Then, Ziegler arranged $47.9 million in tax-exempt bonds for a not-for-profit CCRC in Kalamazoo, Michigan to add a four-story/60-unit independent living building. Currently, its campus features 86 IL, 49 assisted living and memory care units and 90 skilled nursing beds. The new building will also feature a new dining venue with commercial kitchen, bar area, living room, library and outdoor terraces. The bonds consist of three tranches of fixed-rate debt, with the first totaling $32.1 million maturing in 2055, the second totaling $6.6 million and the third totaling $9.2 million, which will be repaid with entrance fees from the new project.
