Integrating Innovative Financing Strategies for Future Flexibility February 25, 2015 Table of Contents I. Speaker Introductions II.
Download ReportTranscript Integrating Innovative Financing Strategies for Future Flexibility February 25, 2015 Table of Contents I. Speaker Introductions II.
Slide 1
Integrating Innovative Financing
Strategies for Future Flexibility
February 25, 2015
1
Slide 2
Table of Contents
I.
Speaker Introductions
II. Setting the Stage
III. Case Studies
Slide 3
Moderator
James Bodine, Executive Vice President
HJ Sims
Speakers
David Laffey, Senior Vice President, Director of Capital Markets
LCS
Jimmy Taylor, Jr., Chief Operating Officer
Omega Communities
Jeffrey Sands, Managing Principal/General Counsel
HJ Sims
Slide 4
David Laffey, Senior Vice President,
Director of Capital Markets
LCS
Slide 5
Timber Ridge at Talus, Issaquah, Washington
5
Slide 6
Refinancing and Expansion Financing- Timber Ridge
• Overview
− Timber Ridge is a for-profit Lifecare CCRC situated on 9.5 acres at the base of
Cougar Mountain in Issaquah, WA
− Phase I of the community consists of 184 ILU’s (98% occupied) and a 36 bed
Health center
− LEED Certified Silver
− Ph II to add an additional 145 ILU’s (84% pre-sold), 9 additional SNF beds, 14
Assisted Living Units and a 12 unit Memory Care
− $28 MM of existing debt on Ph I
•
Partnership Structure
− Third JV between LCS/Westminster Funds. 85% Westminster/15% LCS
− Partnership spans over a decade
− Includes 8 separate Joint Ventures
− +$30 MM of partnership equity invested
6
Slide 7
Refinancing and Expansion Financing- Timber Ridge
• Opportunity
− Refinance PHI debt, $28 MM, and source expansion financing for PH II, $126.5
MM, for a total project financing of $154.5 MM
• Continue very high resident satisfaction and excellent reputation
• Cater to market demand
• Challenges
− Market liquidity
− Refinancing of existing debt and provision for expansion financing
− Closed end fund as a partner with a stated maturity date. Dovetail debt
maturity/community stabilization with fund maturity
− Bank market support albeit heavy guarantees, incremental equity (+$30 MM
invested) and modified loan amount
− Need to combine Multiple Sources of Financing
− Continued resident satisfaction
7
Slide 8
Refinancing and Expansion Financing- Timber Ridge
• Solutions & Results
− Solicited Capital Markets interest across the spectrum of participants including
Banks, Institutional Investors, Taxable bond funds and REIT’s
− Financing
• Parallel-processed financing solicitations
• Dovetailed loan maturity with Fund maturity
• $154.5 MM of total senior financing provided entirely by NHI
− $90 MM to be repaid from entrance fees from PH II, approximate 80%
occupancy, with $60 MM of permanent debt
− Limited guarantees
− Purchase Option to NHI upon stabilization
− Dovetailed Fund maturity with Purchase Option
8
Slide 9
Trillium Woods, Plymouth, Minnesota
9
Slide 10
Start-Up Financing – Trillium Woods
• New LifeCare community to be built in Plymouth, MN
− Situated on 46 acres of land
• Phase I to include 209 ILU (gross entry fees of +$116,000,000) and a 44 –
bed Health center
• Total Phase I project cost of $161,400,000
Opportunity
- Occupancy of Primary Market Entrance fee product nearly 100% occupied
• Limited Lifecare options
• Net market penetration rate of 5.8%
10
Slide 11
Start-Up Financing Trillium Woods
• Challenges
− $161,400,000 Capital Cost Budget
• Limited market liquidity
− Review all capital alternatives including Bank financing, bond financing,
private placement, senior & subordinate debt
− New competition to come on stream
− Construction cost escalations
11
Slide 12
Start-up Financing Trillium Woods
• Solutions & Results
− Financing
• Parallel-processed financing solicitation of commercial banks, institutional
taxable bond funds, hedge funds and family offices
• Secured senior debt commitments from commercial lenders for $70 MM,
representing a repayment to those lenders upon achievement of a 65% initial
occupancy
• Secured parity debt of $28 MM from the family office of the owner of the
construction company. Represents full debt repayment upon achievement of
85% initial occupancy
• Partnership owns the project free and clear of all debt at 85% occupancy
• Projected debt capacity upon repayment of debt of +$60 MM, which will be
accessed for PH II funding
12
Slide 13
Jimmy Taylor, Chief Operating Officer
Omega Communities
Slide 14
Omega Communities – The Fountains of Hope
• OMEGA CAPITAL/OMEGA COMMUNITIES
− Multifaceted Financial Firm
• Senior Housing; Venture Capital; Real Estate; High Net Worth Insurance
− “Senior Living With a Mission”
• SYNOPSIS
− 140 Bed Assisted Living and Memory Care Facility
• Bill Sims adjusted 110 bed assisted living and memory care facility
• Ingress/Egress issues and site accessibility (Sarasota I-75 Visibility)
• Drove Jeff Sands to 6 competing facilities and counted turns
• Began structuring financing in June 2014
• Broke ground in October 2014 and closed financing in November
• OPPORTUNITY
− Expand Southwest Florida I-75 Footprint
• North Port; Sarasota; Fort Myers; Others
• Partner with 5,000+ member church also responsible for 13 other churches
• Largest indoor shopping mall built in US in last decade
• Adjacent to Lakewood Ranch – 5th Best Subdivision in US in 2013
14
Slide 15
Omega Communities – The Fountains of Hope
• CHALLENGES
− William B. Sims, Managing Principal; HJ Sims
• Ingress/Egress
• Slightly ahead of our time? Major connector announced in January
• Impending competition
• MITIGATING FACTORS – THE OMEGA TEAM
− Life Care Services and The LCS Family of Companies
• 24 month cooperative relationship prior to launch
• LCS Development serves as Project Manager during construction
• Serves as Operating Partner/Manager
• Investment in project/provided operating backstop (First Ever)
− Core Construction/Gilbane Building Company
• Combined $3 billion bonding capacity
• Senior housing experience/overall expertise and reputation
• Quality; Controls; Professionalism; Relationship; Balance Sheet
15
Slide 16
Omega Communities – The Fountains of Hope
• MITIGATING FACTORS (Continued)
− CliftonLarsonAllen
• Sue Bunevich served as single point of contact
• Specific expertise and flexibility to adapt to our unique model
• Market Study and Feasibility Study integrity
− Legal Counsel
• David Williams of Butler Snow
• Bob Gang and Bruce Giles-Klein of Greenberg Traurig
• Ty Roofner, Brian Watson and Alina Arbuthnot of Burr Forman
• 7 Additional Firms
• SOLUTIONS AND RESULTS
− Creative and Complex Financing Structure
• Use of 142(d) revenue bonds (tax free)
• Use of taxable bonds for greater financing flexibility
• Mezzanine financing by new partner Brevet Capital
• Letter of credit vs. cash for certain reserves
• Land value contribution reduces loan to overall cost
• Draw down bond allocation/reduced debt service reserve
16
Slide 17
Omega Communities – The Fountains of Hope
• FINAL CAPITAL STACK
− Single Purchaser for Tax Free Bonds ($20.15 Million)
• Also willing to purchase taxable tail ($1.45 Million)
• HJ Sims introduction; Sims also had backup plans
• Accommodating terms (flexibility, rate, call, etc.)
• Letter of credit vs. cash for certain reserves
− Equity – Mezz – Land – Senior Tax Free – Senior Taxable – EB5
• $2.7 million land contribution and $750,000 letter of credit
• $4 million of Mezz funding by Brevet Capital
• $20.15 million of tax free bonds purchased by single institutional investor
• $1.45 million of taxable bonds purchased by same investor
• EB-5 raise to cover Mezz and letter of credit retirement within 18 months
• OMEGANOMICS (Be Careful What You Wish For)
− Scalable and Reproducible Senior Housing Model
• Brevet committed to 9 additional senior living projects with Omega
• Brevet also invested working capital into Omega Communities
• Brevet Investment Fund emphasizes use of EB-5 funding
• Previous bond purchasers interested in participating again, among others
• Omega expects to close 3-4 projects in 2015 (Fort Myers and Atlanta)
17
Slide 18
Jim Bodine, Executive Vice President
HJ Sims
Slide 19
Acquisition & Recapitalization Financing – Laurel Lake
Retirement Community
• Synopsis
− Strong performing 425 unit/bed Single Site Not-for-Profit
CCRC in Hudson, OH
• Opened 1989 & Affiliated in 1997 with Catholic
Health Partners
− CHP divestiture of LLRC (and selected senior
living facilities) in 2013
• Opportunity
− Consolidate ownership/operation by incumbent
Management via Acquisition
• Continuity of successful operation, high resident
satisfaction and excellent reputation in the
community
− Continued investment in services, programs
and facilities to maintain strong position
19
Slide 20
Acquisition & Recapitalization Financing – Laurel Lake
Retirement Community
• Challenges
−
Two-Step Acquisition Bid-to-Financing Process
• Coordination of Multiple Constituents of Sponsor (Board, Management,
Residents)
• Competitive Bid Process and Short Timeline
• Establishing Bidding Credibility with Parent (CHP)
−
Highly Leveraged Transaction
• Finance Purchase Price, Working Capital & Reserves
• Limited Sponsor Equity
20
Slide 21
Acquisition & Recapitalization Financing – Laurel Lake
Retirement Community
• Challenges (Continued)
− Acquisition of Independent Living Units (“First Use” Tax Code Limitations)
• Requiring Equity…or Taxable Financing
− Need to Combine Multiple Sources of Financing
• Bank & Bond Debt (Taxable & Tax-Exempt)
• Senior & Subordinate Debt
• Solutions & Results
− Acquisition
• Integrating iterative financial forecasting and debt capacity analysis to
formulate purchase price
• Modeling multiple financing/capital structure scenarios including bank and
bond debt on senior/subordinate bases
• Established credibility with Seller (and Advisors) and selected as Winning
Bidder
21
Slide 22
Acquisition & Recapitalization Financing – Laurel Lake
Retirement Community
• Solutions & Results (Continued)
− Financing
• Parallel-processed financing solicitation of commercial banks (senior debt)
and institutional & retail investors (subordinate debt)
• Secured senior debt commitments from commercial banks and indications of
interest for subordinate debt
• Successfully navigated integration of security, covenant and default/remedy
provisions between senior and subordinate debt
• Solidified investor interest in subordinate debt, combining retail and
institutional participation
• $50 million total financing
− $36 million senior taxable bank debt (adjustable/variable rate)
− $9.5 million senior tax-exempt bank debt (adjustable/variable rate)
− $2 million subordinate tax-exempt bonds (fixed rate)
− $2.7 million subordinate tax-exempt bonds (adjustable rate)
− 5.42% blended “all-in” financing cost
22
Slide 23
Jeffrey Sands, Principal/General Counsel
HJ Sims
Slide 24
Sims Case Study – Athena Acquisition VI, LLC
SIMS RAISES $7.8 MILLION OF PREFERRED EQUITY FOR ACQUISITION
OF A PORTFOLIO OF 6 NURSING HOMES IN MASSACHUSETTES
Herbert J. Sims & Co., Inc., (“Sims”) through an affiliate, provided $7.8 million
of preferred equity to finance the acquisition of a portfolio of 5 skilled nursing
facilities in Massachusetts comprised of 705 skilled nursing beds and one
leasehold interest with 21 skilled nursing beds (the “Portfolio”) by Athena Health
Care Associates Inc. (“Athena”).
24
Slide 25
Sims Case Study – Athena Acquisition VI, LLC
Background
•
Sims was approached by Athena, a successful long-term care operator in New
England with locations in Connecticut, Massachusetts and Rhode Island, to finance
the acquisition of a portfolio of 5 skilled nursing facilities and one leasehold interest
in Massachusetts comprised of 726 beds.
•
The plan of finance included a first mortgage loan, preferred equity, seller’s not an
equity from Athena’s principals.
Challenges
•
There were several challenges associated with this financing including:
− Closing within 30 days
− Providing a high-leverage financing equal to 95% of appraised value
− Meeting very strict Senior Lender requirements on the form of our investment
− Avoiding certain regulatory restrictions
− Anticipating a possible future HUD refinancing
25
Slide 26
Sims Case Study – Athena Acquisition VI, LLC
Specific Structuring Challenges
• Senior Lender
− Prohibition on any subordinate debt
− Limitations distributions
− Limitations on change of ownership
• High Leverage Issue
− Bad appraisal
• Regulatory Restrictions
− Licensure not conducive to investment partnerships with multiple owners
• Anticipated HUD Refinancing
− Need to structure so as to have argument that investment is eligible for HUD
refinancing
• Time Constraint
26
Slide 27
Structure of Athena Transaction
HJ Sims Investments, LLC
100%
Limited
Guaranty from
Athena
Athena Member
Athena Acquisition VI, LLC
(Issuer)
Athena Equity
Class A Equity
Athena Landlord MA III
LLC
Athena Health Care
Systems MA III LLC
100% Equity
5 Realty Companies
Taxable Bonds
($12.275M)
100% Equity
Lease
s
Senior Debt
($68.750M)
6 Operating Companies
27
Slide 28
Sims Case Study – Athena Acquisition VI, LLC
Result
• Sims was able to provide preferred equity that met the needs and the requirements of
both Athena and the Senior Lender.
• The expertise and creativity of Sims’ bankers, along with the flexibility and industry
knowledge of its retail investors resulted in a unique solution for Athena.
• Preferred equity investments with excellent owners such as Athena are the latest
example of Sims using its extensive investor base to provide financing to senior
housing providers.
• Sims excels in filling the niches that allow an owner or developer to complete a
transaction by providing creative financing such as preferred equity or mezzanine debt.
28
Slide 29
THANK YOU
29
Slide 30
Comments/
Questions?
30
Integrating Innovative Financing
Strategies for Future Flexibility
February 25, 2015
1
Slide 2
Table of Contents
I.
Speaker Introductions
II. Setting the Stage
III. Case Studies
Slide 3
Moderator
James Bodine, Executive Vice President
HJ Sims
Speakers
David Laffey, Senior Vice President, Director of Capital Markets
LCS
Jimmy Taylor, Jr., Chief Operating Officer
Omega Communities
Jeffrey Sands, Managing Principal/General Counsel
HJ Sims
Slide 4
David Laffey, Senior Vice President,
Director of Capital Markets
LCS
Slide 5
Timber Ridge at Talus, Issaquah, Washington
5
Slide 6
Refinancing and Expansion Financing- Timber Ridge
• Overview
− Timber Ridge is a for-profit Lifecare CCRC situated on 9.5 acres at the base of
Cougar Mountain in Issaquah, WA
− Phase I of the community consists of 184 ILU’s (98% occupied) and a 36 bed
Health center
− LEED Certified Silver
− Ph II to add an additional 145 ILU’s (84% pre-sold), 9 additional SNF beds, 14
Assisted Living Units and a 12 unit Memory Care
− $28 MM of existing debt on Ph I
•
Partnership Structure
− Third JV between LCS/Westminster Funds. 85% Westminster/15% LCS
− Partnership spans over a decade
− Includes 8 separate Joint Ventures
− +$30 MM of partnership equity invested
6
Slide 7
Refinancing and Expansion Financing- Timber Ridge
• Opportunity
− Refinance PHI debt, $28 MM, and source expansion financing for PH II, $126.5
MM, for a total project financing of $154.5 MM
• Continue very high resident satisfaction and excellent reputation
• Cater to market demand
• Challenges
− Market liquidity
− Refinancing of existing debt and provision for expansion financing
− Closed end fund as a partner with a stated maturity date. Dovetail debt
maturity/community stabilization with fund maturity
− Bank market support albeit heavy guarantees, incremental equity (+$30 MM
invested) and modified loan amount
− Need to combine Multiple Sources of Financing
− Continued resident satisfaction
7
Slide 8
Refinancing and Expansion Financing- Timber Ridge
• Solutions & Results
− Solicited Capital Markets interest across the spectrum of participants including
Banks, Institutional Investors, Taxable bond funds and REIT’s
− Financing
• Parallel-processed financing solicitations
• Dovetailed loan maturity with Fund maturity
• $154.5 MM of total senior financing provided entirely by NHI
− $90 MM to be repaid from entrance fees from PH II, approximate 80%
occupancy, with $60 MM of permanent debt
− Limited guarantees
− Purchase Option to NHI upon stabilization
− Dovetailed Fund maturity with Purchase Option
8
Slide 9
Trillium Woods, Plymouth, Minnesota
9
Slide 10
Start-Up Financing – Trillium Woods
• New LifeCare community to be built in Plymouth, MN
− Situated on 46 acres of land
• Phase I to include 209 ILU (gross entry fees of +$116,000,000) and a 44 –
bed Health center
• Total Phase I project cost of $161,400,000
Opportunity
- Occupancy of Primary Market Entrance fee product nearly 100% occupied
• Limited Lifecare options
• Net market penetration rate of 5.8%
10
Slide 11
Start-Up Financing Trillium Woods
• Challenges
− $161,400,000 Capital Cost Budget
• Limited market liquidity
− Review all capital alternatives including Bank financing, bond financing,
private placement, senior & subordinate debt
− New competition to come on stream
− Construction cost escalations
11
Slide 12
Start-up Financing Trillium Woods
• Solutions & Results
− Financing
• Parallel-processed financing solicitation of commercial banks, institutional
taxable bond funds, hedge funds and family offices
• Secured senior debt commitments from commercial lenders for $70 MM,
representing a repayment to those lenders upon achievement of a 65% initial
occupancy
• Secured parity debt of $28 MM from the family office of the owner of the
construction company. Represents full debt repayment upon achievement of
85% initial occupancy
• Partnership owns the project free and clear of all debt at 85% occupancy
• Projected debt capacity upon repayment of debt of +$60 MM, which will be
accessed for PH II funding
12
Slide 13
Jimmy Taylor, Chief Operating Officer
Omega Communities
Slide 14
Omega Communities – The Fountains of Hope
• OMEGA CAPITAL/OMEGA COMMUNITIES
− Multifaceted Financial Firm
• Senior Housing; Venture Capital; Real Estate; High Net Worth Insurance
− “Senior Living With a Mission”
• SYNOPSIS
− 140 Bed Assisted Living and Memory Care Facility
• Bill Sims adjusted 110 bed assisted living and memory care facility
• Ingress/Egress issues and site accessibility (Sarasota I-75 Visibility)
• Drove Jeff Sands to 6 competing facilities and counted turns
• Began structuring financing in June 2014
• Broke ground in October 2014 and closed financing in November
• OPPORTUNITY
− Expand Southwest Florida I-75 Footprint
• North Port; Sarasota; Fort Myers; Others
• Partner with 5,000+ member church also responsible for 13 other churches
• Largest indoor shopping mall built in US in last decade
• Adjacent to Lakewood Ranch – 5th Best Subdivision in US in 2013
14
Slide 15
Omega Communities – The Fountains of Hope
• CHALLENGES
− William B. Sims, Managing Principal; HJ Sims
• Ingress/Egress
• Slightly ahead of our time? Major connector announced in January
• Impending competition
• MITIGATING FACTORS – THE OMEGA TEAM
− Life Care Services and The LCS Family of Companies
• 24 month cooperative relationship prior to launch
• LCS Development serves as Project Manager during construction
• Serves as Operating Partner/Manager
• Investment in project/provided operating backstop (First Ever)
− Core Construction/Gilbane Building Company
• Combined $3 billion bonding capacity
• Senior housing experience/overall expertise and reputation
• Quality; Controls; Professionalism; Relationship; Balance Sheet
15
Slide 16
Omega Communities – The Fountains of Hope
• MITIGATING FACTORS (Continued)
− CliftonLarsonAllen
• Sue Bunevich served as single point of contact
• Specific expertise and flexibility to adapt to our unique model
• Market Study and Feasibility Study integrity
− Legal Counsel
• David Williams of Butler Snow
• Bob Gang and Bruce Giles-Klein of Greenberg Traurig
• Ty Roofner, Brian Watson and Alina Arbuthnot of Burr Forman
• 7 Additional Firms
• SOLUTIONS AND RESULTS
− Creative and Complex Financing Structure
• Use of 142(d) revenue bonds (tax free)
• Use of taxable bonds for greater financing flexibility
• Mezzanine financing by new partner Brevet Capital
• Letter of credit vs. cash for certain reserves
• Land value contribution reduces loan to overall cost
• Draw down bond allocation/reduced debt service reserve
16
Slide 17
Omega Communities – The Fountains of Hope
• FINAL CAPITAL STACK
− Single Purchaser for Tax Free Bonds ($20.15 Million)
• Also willing to purchase taxable tail ($1.45 Million)
• HJ Sims introduction; Sims also had backup plans
• Accommodating terms (flexibility, rate, call, etc.)
• Letter of credit vs. cash for certain reserves
− Equity – Mezz – Land – Senior Tax Free – Senior Taxable – EB5
• $2.7 million land contribution and $750,000 letter of credit
• $4 million of Mezz funding by Brevet Capital
• $20.15 million of tax free bonds purchased by single institutional investor
• $1.45 million of taxable bonds purchased by same investor
• EB-5 raise to cover Mezz and letter of credit retirement within 18 months
• OMEGANOMICS (Be Careful What You Wish For)
− Scalable and Reproducible Senior Housing Model
• Brevet committed to 9 additional senior living projects with Omega
• Brevet also invested working capital into Omega Communities
• Brevet Investment Fund emphasizes use of EB-5 funding
• Previous bond purchasers interested in participating again, among others
• Omega expects to close 3-4 projects in 2015 (Fort Myers and Atlanta)
17
Slide 18
Jim Bodine, Executive Vice President
HJ Sims
Slide 19
Acquisition & Recapitalization Financing – Laurel Lake
Retirement Community
• Synopsis
− Strong performing 425 unit/bed Single Site Not-for-Profit
CCRC in Hudson, OH
• Opened 1989 & Affiliated in 1997 with Catholic
Health Partners
− CHP divestiture of LLRC (and selected senior
living facilities) in 2013
• Opportunity
− Consolidate ownership/operation by incumbent
Management via Acquisition
• Continuity of successful operation, high resident
satisfaction and excellent reputation in the
community
− Continued investment in services, programs
and facilities to maintain strong position
19
Slide 20
Acquisition & Recapitalization Financing – Laurel Lake
Retirement Community
• Challenges
−
Two-Step Acquisition Bid-to-Financing Process
• Coordination of Multiple Constituents of Sponsor (Board, Management,
Residents)
• Competitive Bid Process and Short Timeline
• Establishing Bidding Credibility with Parent (CHP)
−
Highly Leveraged Transaction
• Finance Purchase Price, Working Capital & Reserves
• Limited Sponsor Equity
20
Slide 21
Acquisition & Recapitalization Financing – Laurel Lake
Retirement Community
• Challenges (Continued)
− Acquisition of Independent Living Units (“First Use” Tax Code Limitations)
• Requiring Equity…or Taxable Financing
− Need to Combine Multiple Sources of Financing
• Bank & Bond Debt (Taxable & Tax-Exempt)
• Senior & Subordinate Debt
• Solutions & Results
− Acquisition
• Integrating iterative financial forecasting and debt capacity analysis to
formulate purchase price
• Modeling multiple financing/capital structure scenarios including bank and
bond debt on senior/subordinate bases
• Established credibility with Seller (and Advisors) and selected as Winning
Bidder
21
Slide 22
Acquisition & Recapitalization Financing – Laurel Lake
Retirement Community
• Solutions & Results (Continued)
− Financing
• Parallel-processed financing solicitation of commercial banks (senior debt)
and institutional & retail investors (subordinate debt)
• Secured senior debt commitments from commercial banks and indications of
interest for subordinate debt
• Successfully navigated integration of security, covenant and default/remedy
provisions between senior and subordinate debt
• Solidified investor interest in subordinate debt, combining retail and
institutional participation
• $50 million total financing
− $36 million senior taxable bank debt (adjustable/variable rate)
− $9.5 million senior tax-exempt bank debt (adjustable/variable rate)
− $2 million subordinate tax-exempt bonds (fixed rate)
− $2.7 million subordinate tax-exempt bonds (adjustable rate)
− 5.42% blended “all-in” financing cost
22
Slide 23
Jeffrey Sands, Principal/General Counsel
HJ Sims
Slide 24
Sims Case Study – Athena Acquisition VI, LLC
SIMS RAISES $7.8 MILLION OF PREFERRED EQUITY FOR ACQUISITION
OF A PORTFOLIO OF 6 NURSING HOMES IN MASSACHUSETTES
Herbert J. Sims & Co., Inc., (“Sims”) through an affiliate, provided $7.8 million
of preferred equity to finance the acquisition of a portfolio of 5 skilled nursing
facilities in Massachusetts comprised of 705 skilled nursing beds and one
leasehold interest with 21 skilled nursing beds (the “Portfolio”) by Athena Health
Care Associates Inc. (“Athena”).
24
Slide 25
Sims Case Study – Athena Acquisition VI, LLC
Background
•
Sims was approached by Athena, a successful long-term care operator in New
England with locations in Connecticut, Massachusetts and Rhode Island, to finance
the acquisition of a portfolio of 5 skilled nursing facilities and one leasehold interest
in Massachusetts comprised of 726 beds.
•
The plan of finance included a first mortgage loan, preferred equity, seller’s not an
equity from Athena’s principals.
Challenges
•
There were several challenges associated with this financing including:
− Closing within 30 days
− Providing a high-leverage financing equal to 95% of appraised value
− Meeting very strict Senior Lender requirements on the form of our investment
− Avoiding certain regulatory restrictions
− Anticipating a possible future HUD refinancing
25
Slide 26
Sims Case Study – Athena Acquisition VI, LLC
Specific Structuring Challenges
• Senior Lender
− Prohibition on any subordinate debt
− Limitations distributions
− Limitations on change of ownership
• High Leverage Issue
− Bad appraisal
• Regulatory Restrictions
− Licensure not conducive to investment partnerships with multiple owners
• Anticipated HUD Refinancing
− Need to structure so as to have argument that investment is eligible for HUD
refinancing
• Time Constraint
26
Slide 27
Structure of Athena Transaction
HJ Sims Investments, LLC
100%
Limited
Guaranty from
Athena
Athena Member
Athena Acquisition VI, LLC
(Issuer)
Athena Equity
Class A Equity
Athena Landlord MA III
LLC
Athena Health Care
Systems MA III LLC
100% Equity
5 Realty Companies
Taxable Bonds
($12.275M)
100% Equity
Lease
s
Senior Debt
($68.750M)
6 Operating Companies
27
Slide 28
Sims Case Study – Athena Acquisition VI, LLC
Result
• Sims was able to provide preferred equity that met the needs and the requirements of
both Athena and the Senior Lender.
• The expertise and creativity of Sims’ bankers, along with the flexibility and industry
knowledge of its retail investors resulted in a unique solution for Athena.
• Preferred equity investments with excellent owners such as Athena are the latest
example of Sims using its extensive investor base to provide financing to senior
housing providers.
• Sims excels in filling the niches that allow an owner or developer to complete a
transaction by providing creative financing such as preferred equity or mezzanine debt.
28
Slide 29
THANK YOU
29
Slide 30
Comments/
Questions?
30