Senior Housing Finance Activity: Lancaster Pollard, NorthMarq Capital

Sabra Health Care REIT Provides $4.5M Financing for Fla. Senior Living Development 

Big Rock Partners, a real estate investment management and development firm, has closed on a nine-acre land purchase from The Celebration Company, and plans to launch construction of a $60 million Class A senior living rental development within the Celebration, Fla. community in first quarter 2015.  

Sabra Health Care REIT provided Big Rock Partners with $4.5 million financing for the land transaction and anticipates providing additional financing for construction, according to Big Rock Partners’ Senior Managing Principal Richard Ackerman.  

Big Rock Partners will create Celebration’s first community offering independent living, assisted living and memory care services, with a total of 225 rental residences and an array of first class amenities, the company said in a statement.

“The senior living industry is in flux, as the economy recovers and demand rises,” Ackerman said. “Occupancy stayed relatively steady throughout the Recession, but many senior living communities built 25 or 30 years ago have not kept pace with the amenities and ambiance consumers now expect. Demand is strong nationwide for a new generation of rental alternatives to the traditional ‘buy-in’ continuing care retirement community (CCRC).”   

Completion of the development is projected for mid-2016.  

Architecture is by Perkins Eastman, an international senior living design and consulting firm. Senior living management company, Life Care Services, an LCS company, will operate and market the community. Finance advisor is Walker & Dunlop. 

“Institutional investors were not big players in the senior housing space until about two years ago,” Ackerman said. “Now, with ample capital available, they’re taking a fresh look at new rental communities that include independent and assisted living plus memory care. At the same time, Baby Boomers are driving real changes in quality, choices and flexibility of senior living environments for their parents and, in future, for themselves.” 

Big Rock Partners has a second property under contract in Palm Beach County, Fla. and is also actively pursuing other “Class A” sites, the company said.

“The community of Celebration just southwest of Orlando is a prime location for this emerging type of upscale senior living community,”  said Peter Muhlbach, Life Care Services senior vice president, director of senior living management.

Celebration is a census-designated place and a master-planned community in Osceola County, Fla., located near Walt Disney World Resort and originally developed by The Walt Disney Company.

Lancaster Pollard Refinances $68M for 11 Ind. SNFs

Founded in 1964, Miller’s Health Systems (MHS) is an employee-owned senior healthcare organization with over 30 properties throughout Indiana.

Lancaster Pollard recently assisted MHS with the refinance of 11 of those properties, all skilled nursing facilities (SNFs). The SNFs, consisting of 880 beds, all held HUD/FHA-insured mortgages that were obtained in 2002 and all carried interest rates above 5.5%. The properties also carried subordinate debt from former owners.

Lancaster Pollard advised MHS that seller notes were eligible for refinance under the HUD LEAN Program, and subsequently worked with MHS on a financial solution that consolidated both MHS’s existing HUD debt and its subordinate notes into new HUD loans, as well as provided funds for capital improvements at all 11 buildings.

The firm closed the new loans with a total loan amount of $67.8 million using the FHA Sec. 232/223(f) program in October of this year. 

MHS’s new interest rate on the debt is below 4%. In addition, the funding provided nearly $14 million for  improvements which will be used to fund state-of-the-art therapy additions at all 11 properties.

Chris Blanda, health care banker representing Indiana and Kentucky, led the transaction for Lancaster Pollard.

Lancaster Pollard Closes $34M FHA Funding for Two Md. AL, Memory Care Communities

In 2012, HHHunt was seeking long-term, non-recourse financing for two new senior housing construction projects. The first project, Spring Arbor of Fredericksburg, located in Fredericksburg, Va., is a 79-unit/90-bed assisted living and memory care community. The second, Spring Arbor of Severna Park, located in Severna Park, Md., is a 78-unit/91-bed assisted living and memory care community.  

Severna Park is HHHunt’s first Maryland assisted living and memory care community, Lancaster Pollard said in a statement.

Lancaster Pollard and HHHunt worked together to pursue the FHA Sec. 232 program to fund the new construction projects. At the time of submission, however, the FHA Sec. 232 new construction firm application queue length was in excess of 12 months.

As an alternative to waiting in the financings queue, Lancaster Pollard expedited an Early Commencement approval for the projects.  As a result, HHHunt was able to begin construction prior to HUD issuing a firm commitment.  

StellarOne Bank, now Union First Market Bank, provided the Early Commencement construction financing for Fredericksburg. M&T Bank provided the Early Commencement construction financing for Severna Park.  

The loans cover a substantial amount of the costs, thereby limiting HHHunt’s equity requirement as much as possible given the FHA Sec. 232 requirements.

By utilizing the Early Commencement process, Lancaster Pollard and HHHunt were able to expedite the  construction completion and project lease-up by 15 months. Spring Arbor of Fredericksburg was 
completely built and leasing prior to the FHA Sec. 232 loan closing.  

The construction of Spring Arbor of Severna Park was about 40% complete the FHA loan closed. This not only prevented HHHunt from wasting time waiting in the queue, but it also allowed for substantial savings on construction costs and interest payments. 

The successful closings of the two FHA Sec. 232 loans, $14.1 million for Fredericksburg and $20.3 
million for Severna Park, funded all the construction and soft costs as well as the land sale purchase.

The loans are non-recourse, carry 40-year terms and low fixed interest rates.

In addition, Lancaster Pollard obtained reductions in ongoing reserve requirements, allowing HHHunt to achieve perpetual savings, the firm said.

Tom Gale, based out of Lancaster Pollard’s Philadelphia office, led the transaction.

HHHunt is a provider and active developer of assisted living, Alzheimer’s and memory care, as well as multifamily projects throughout the mid-Atlantic region. In addition, HHHunt has land development and homebuilding operations in Virginia and North Carolina.  

Lancaster Pollard Refinances $22.5M for Ind. CCRC and Mich. IL

Lancaster Pollard refinanced outstanding tax-exempt bond debt for Christian Ministries, Inc., a 501(c)(3) nonprofit, acting on behalf of its subsidiaries Golden Years Homestead, Inc., a 207-unit continuing care retirement community (CCRC) located in Fort Wayne, Ind. and Great Lakes Christian Homes, a 148-unit independent living facility in Holt, Mich.

The outstanding debt was about $22.5MM, and consisted of Series 2011 tax-exempt, variable rate refunding revenue bonds (Series 2011).

To hedge that debt back in 2008, Christian Financings Ministries, Inc. entered into two interest rate swaps. The bonds were held by a regional bank with an original hold period set to expire in the next few years.

Lancaster Pollard proposed several options to Christian Ministries, Inc. to refund the debt including various tax-exempt bonds and agency (HUD) mortgage structures. Ultimately, the organization chose tax-exempt, privately placed bonds in order to simplify the refinancing, save money, extend the bank holder’s commitment, and preserve the swaps, Lancaster Pollard said in a statement.

The new structure will save nearly $180,000 in debt service annually for 10 years.

The financing was led by vice president Chris Blanda.

NorthMarq Capital Refinances $6M for Iowa AL, Memory Care Community 

NorthMarq Capital’s Omaha-based regional office arranged the $5.76 million refinance of Silvercrest-Garner Farms, a 62-unit assisted living and memory care facility located in Davenport, Iowa.

The transaction was structured with a 35-year term and 35-year amortization schedule.

Northmarq arranged the HUD loan for the borrower through its affiliate AmeriSphere Multifamily Finance LLC. 

Jason Kinnison, senior vice president of NorthMarq Capital’s Omaha-based regional office, led the refinance.

Cain Brothers Arranges $71M Tax-Exempt Bonds for Calif. Senior Living Refinancing 

Cain Brothers served as sole manager in connection with the issuance of $71,345,000 in unrated tax-exempt bonds for 899 Charleston, doing business as Moldaw Residences. The proceeds were used to refinance $74 million of Moldaw’s Series 2007 VRDBs that were still outstanding from the original bank construction financing.

The original $166 million Series 2007 Bonds funded the construction and development of Moldaw’s 193-unit continuing care retirement community in Palo Alto, Calif. Ninety-two million dollars of the Series 2007 bonds were repaid from initial entrance fees and capital campaign receipts.

In addition to retiring Moldaw’s remaining construction debt, Series 2014 proceeds will partially repay subordinated debt owed to the Jewish Home Foundation and the Jewish Home of San Francisco.

Moldaw is part of the Taube Koret Campus for Jewish Life, a 8+-acre, innovative, mixed-use, intergenerational campus that also includes the Oshman Family Jewish Community Center and offices for other nonprofits.

Co-location with the Oshman Family Jewish Community Center gives Moldaw residents access to fitness, educational, and cultural amenities that are also used by children, young adults, families, and other older adults from the surrounding neighborhoods.

The concept for Moldaw was originally developed by the Jewish Home of San Francisco, and Moldaw continues its affiliation to the Home through the Jewish Senior Living Group.

As Moldaw’s investment banker and development advisor, Cain Brothers worked with the Home in Moldaw’s earliest planning, which eventually led to separate tax-exempt bond issues for both Moldaw and OFJCC in 2007. 

Successful completion of the 2014 refinancing puts Moldaw in a stable financial structure, Cain Brothers said in a statement.

Though the issue was unrated, Cain Brothers was able to attract broad institutional interest by highlighting Moldaw’s strong fundamentals including strong sponsorship, unique location, and a deep market for a very special retirement destination, the firm said.

For the 30-year component the yield was 5.20%, a 213 basis point spread over the AAA benchmark. The all-in interest cost, including closing expenses, for the overall bond issue is about 5.33%. 

Written by Cassandra Dowell