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Sims Restructures and Refinances Community’s Debt

HJ Sims and Andrew Nesi became the ideal partner to assist us in our serious predicament. The relationship with Sims began with them fostering hope and presented us with a direct path to a new financing.” 

“Working for a beautiful and once financially troubled community in upstate New York, our senior management sought professional advice from experts in senior living finance. Our search quickly led us to HJ Sims.

“HJ Sims and Andrew Nesi became the ideal partner to assist us in our serious predicament.  The relationship with Sims began with them fostering hope and presented us with a direct path to a new financing.  Andrew engendered confidence for all the success we had achieved in the previous three years and how best to parlay that success into refinancing our debt.  

“Andrew approached our negotiation with an unusual combination of tenacity and patience.  He possesses an intrinsic knowledge of timing on communications between all parties.  On behalf of our organization and representing Sims, Andrew exhibited a precise balance, applying pressure without the appearance of desperation or lack of options. His guidance in how to follow through on our strategy for the best outcome was invaluable.  We were very impressed by the clear industry insights and his awareness of motivations of the financial institutions on both sides.

“If we experienced a setback, our determination was reignited by Andrew who demonstrated a perseverance and faith in the best possible outcome for our community. Ultimately he negotiated a deal that achieved our primary objectives. We are now positioned to move forward, prosper and tell a story that we can be so proud of.  Our residents have a renewed validation of their decision to invest and live with us.

“It has been a privilege to partner with Sims and the relationship, trust and advice they provided over this period will be very much missed by our entire organization.”

– Meg Cardamone, Executive Director Preswick Glen

 

Partnered Right

  • Opened in 2007 Preswick Glen is a 124 unit independent living community on the campus of Presbyterian Homes & Services in New Hartford, New York.
  • Residents may pay an Entrance Fee upon move in or opt for a monthly rental option. The community offers a wide variety of services and activities with health care available at the contiguously located Presbyterian Home.
  • Client of HJ Sims since 2014.

Structured Right

  • In 2006 Preswick Glen issued approximately $38.5 million in tax exempt bonds supported by a bank letter of credit and a construction loan with proceeds used to construct the new community.
  • Economic and real estate challenges beginning in 2008 resulted in significant operating losses and debt covenant violations. Furthermore, shortly after opening, a change in local government led to the revocation of a prior property tax agreement resulting in a more than ten-fold increase in property taxes.
  • Preswick Glen negotiated a debt restructuring in 2012 which significantly reduced the annual debt service without forgiving any debt. The agreement required the debt to be refinanced by May 2017.

Executed Right

  • Management’s dedication and commitment raised occupancy from 69% in 2010 to full occupancy today.
  • Improved financial performance created an opportunity to place $8.5 million in new tax exempt bonds with a large regional bank.
  • Existing bank agreed to forgive approximately 75% of the outstanding debt.

Financed Right®

  •  Bonds were placed for 5 year period.
  •  Initial floating rate of 2.95%

Partnered Right

Preswick Glen is a 124 unit independent living community and an integral part of the Presbyterian Homes & Services’ campus in New Hartford, New York. The community opened in 2007 and complements the assisted living, skilled nursing, rehabilitation, adult day care and affordable housing services provided elsewhere on the campus.

Residents moving into Preswick Glen have several options and  can choose to either pay a one-time Entrance Fee with several refund options and an ongoing Monthly Service Fee or opt for a rental arrangement whereby no Entrance Fee is paid but a higher Monthly Service Fee is required. There is no pre-paid or subsidized health care benefit, although residents have access to the services nearby.

Structured Right

In 2006 Preswick Glen issued $38.5 million in a combination of variable rate tax exempt bonds supported by a bank letter of credit and a taxable construction loan with the same bank. Proceeds were used to construct the new community. Initial entrance fees from residents were to be used to repay the construction loan.

The community opened in 2007 as the country was entering the Great Recession. The New Hartford, NY real estate market was especially hard hit, and the local economy began to struggle. As a result, the forecasted operating and occupancy targets were not met, which led to covenant violations.

Compounding the challenge was a revocation of Preswick Glen’s PILOT agreement when there was a turnover in local government. Preswick Glen litigated the matter for several years but ultimately agreed to accept a property tax assessment with a more than ten-fold increase in the annual tax expense. This increase cut operating income by one-third, making the existing debt load unsustainable.

In 2012 Preswick Glen negotiated a debt restructuring that apportioned the existing $32 million in debt into several tranches with tiered priority as to debt service and excess cash flow recapture. The agreement was set to expire in May 2017. 

Executed Right

HJ Sims was engaged to seek banks to refinance the debt. A tremendous effort and commitment by management dramatically improved Preswick Glen’s financial profile. Occupancy increased from 69% in 2011 to full occupancy by 2014, where it has remained. This occurred despite a local economy that has not fully recovered.

A large regional bank provided a term sheet in the spring of 2015 that reflected the operating performance of the community. Unfortunately, the repayment to the original lender was insufficient, and the offer was rejected. For the next year, management made some difficult decisions to reduce expenses further and increased cash flow accordingly. Preswick Glen was fortunate that the local bank saw the value of the community and agreed to increase its commitment.

HJ Sims negotiated with the regional bank and the original lender to secure an agreement whereby the original lender would accept $8.5 million in full satisfaction of the existing $32 million debt, representing an approximate 75% write off.

Financed Right®

On March 31, 2017 the new tax exempt bond issue closed with an initial floating interest rate of 2.95%. The local bank agreed to hold the new bonds for a five year period.

For more information on how Preswick Glen was Financed Right® by HJ Sims, please contact Andrew Nesi at (203) 418-9057 (anesi@hjsims.com).

ABOUT HJ SIMS: Established in 1935, HJ Sims is a full service investment bank specializing in structuring and underwriting senior living and long term care financings, including tax exempt and taxable bonds, mezzanine loans, equity, seed money, bank financing, and FHA-insured loans.  HJ Sims also provides financial advisory services in the areas of capital planning, restructuring and mergers & acquisitions. With over $20 billion worth of financings in senior living alone, we’re the ones to talk to. The firm is headquartered in Fairfield, Connecticut, with investment banking, private client wealth management and trading offices in Maryland, Massachusetts, Florida, Minnesota, New Jersey, Pennsylvania, Texas and Puerto Rico. Member FINRA, SIPC. HJ Sims is not affiliated with Preswick Glen. For more information, please visit: www.hjsims.com. Follow HJ Sims on Facebook, Twitter and LinkedIn. 

HJSims is an endorsed partner of LeadingAge NY Services Solutions.