HJ Sims closed a small loan for a seniors housing community in Kansas City, Missouri, and provided ownership with about $61,000 in annual debt service savings as a result. The 81-unit community caters to low-income seniors and was in need of some repairs. Also, real estate taxes had recently been imposed on the property, meaning that ownership had to buoy its finances (which was fixed by the Section 8 revenue) quickly in order to maintain a 1.05x debt service coverage that was required for not-for-profit borrowers.
So, HJ Sims arranged a $3.237 million loan through HUD, which extended the community’s debt maturity by 12 years. With the funds, ownership was also able to replace electrical panels in resident rooms before closing (another requirement brought on by insufficient capital reserves). In the end, the community successfully appealed its real estate tax assessment, and those debt service savings went into an annual deposit for future capital improvement needs. This was the fifth HUD deal Sims has closed for the community’s manager, Community Realty Management, and puts the property on better financial footing for the years ahead.
This closing follows Sims Mortgage Funding’s $107.4 million bond financing closed for the not-for-profit Presbyterian Retirement Communities (PRC) to refinance a CCRC in St. Augustine, Florida. PRC acquired the property out of bankruptcy in October 2017 for $27.5 million, or $123,300 per unit/bed. Built in 2001, the community includes 157 independent living units, 36 assisted living units and 30 private pay skilled nursing beds, with occupancy around 85% at the time of the sale. PRC instituted a turnaround program which clearly paid off as the company sought a refinance of its existing bonds and funding for some upcoming capital projects.
So, Sims structured long-term taxable and tax-exempt bonds, achieving a blended true interest cost of 3.87%. Sims also helped to eliminate interest rate risk and LIBOR exposure and enabled PRC to borrow $50 million at a fixed rate for the upcoming expansion projects.