Fox Hill Village

sims secures land loan and terminates ground lease for fox hill village

Founded in 1987, Fox Hill Village (“FHV”) is a 352-unit (of which 27 are designated as assisted living) continuing care retirement community located in Westwood, Massachusetts. The community operates under a cooperative ownership structure, whereby residents buy a share of FHV stock which grants interest in a specific unit. Residents then pay monthly fees until the share is resold.

Clark House, a 70-bed nursing home, is also located on-site. Clark House is owned by Fox Hill Village Partnership, the original sponsor of the project. Residents have the right of admission to Clark House and receive a discount on the semi-private rate. Clark House is paid directly for care, as Fox Hill Village has no obligation to provide nursing services.

Fox Hill Village - Westwood, MA

land purchase and ground lease termination

Fox Hill Village is located on an 80-acre parcel of land, which it occupied pursuant to a Ground Lease Agreement with Fox Hill Village Partnership. The Ground Lease extended through December 2089 and contained provisions for escalation in the annual ground rent. FHV sought to terminate the Ground Lease Agreement and fix its land cost by purchasing the 80-acre parcel.

challenge

As a cooperative CCRC, FHV was not eligible for tax-exempt financing. Consequently, Sims and FHV had to find an attractive source of taxable financing. Furthermore, since residents received 90% of the sales price of resold units, FHV’s cash flow structure only included a combination of the monthly fees and 10% of the sales price of resold units.

solution

Sims worked closely with FHV’s experienced and knowledgeable board in developing a bidding process which included an insurance company and a bank. During discussions with prospective lenders, Sims highlighted FHV’s healthy cash balance and lack of debt. As a result, Sims obtained a $15.5 million taxable 10-year term loan. The loan included a rate lock of 5.33%. Sims also helped negotiate flexible debt service coverage and liquidity covenants.

As further conditions to the land purchase and loan, FHV provided a ground lease to the Clark House owners (Fox Hill Village Partnership) and obtained a long-term agreement with Clark House for the provision of nursing services to Fox Hill Village residents.