sims raises $46,000,000 to recapitalize and acquire an interest in a joint venture with sunrise senior living

introduction

Herbert J. Sims Investments, LLC (“HJSI”) raised $46,000,000 of equity and senior debt for a joint venture (the “Joint Venture”) between HJSI and Sunrise Senior Living Investments, Inc., an affiliate of Sunrise Senior Living, Inc. (“Sunrise”). The Joint Venture owns two senior living communities (the “Projects”) located in Crestwood, New York and Upper St. Clair, Pennsylvania.

opportunity

Sims was approached by Sunrise with an opportunity to acquire an ownership interest in an existing joint venture and to recapitalize two senior living communities. The Projects were owned by a joint venture between a Sunrise entity and a third-party investor and are currently being managed by Sunrise. The Projects included in the transaction were Sunrise at Crestwood, a 79-unit assisted living and Alzheimer’s care facility, and Sunrise of Upper St. Clair, a 73-unit assisted living and Alzheimer’s care facility.

challenges

The challenges were: (1) agreeing to terms with a third-party investor who still had expectations of a higher valuation due to market conditions before the credit crisis; (2) maximizing the amount of senior debt to minimize the overall equity requirement; (3) agreeing to a long-term management agreement with Sunrise; and (4) ability to close on the investment in a short period of time despite the liquidity crunch in today’s market.

solution

The solution required both the use of Herbert J. Sims & Co., Inc.’s extensive accredited investor base to fund its equity contribution and negotiation and placement of senior debt through Freddie Mac, which provided a low fixed-rate loan for the senior debt. HJSI created a single-purpose entity, which was capitalized by Herbert J. Sims & Co.’s placement of taxable bonds to its high-net-worth client base. HJSI then made an equity investment in the Joint Venture. The funds raised by Sims, together with capital invested by Sunrise, were used to pay off the existing lender and Sunrise’s previous partner.

Sims’ structure was attractive to Sunrise for several reasons: (1) since the investment is made directly by a HJSI-controlled entity, the Joint Venture benefited from Herbert & Co.’s extensive high-net-worth client base without having to communicate with a number of third-party investors; (2) HJSI was able to be the majority owner of the Joint Venture, while allowing Sunrise to remain as the managing member with a day-to-day control; (3) Sunrise has a long-term management agreement with the Joint Venture; and (4) the transaction was completed, locked in a 5-year, fixed rate during a turbulent time in the market and closed on an aggressive timeline.

result

The equity contribution by HJSI allowed the Joint Venture to close the acquisitions. The equity provided by Sims and Sunrise satisfied the requirements of Freddie Mac.