Sims Radius I

sims raises equity for nursing home acquisition

Herbert J. Sims & Co., Inc., through an affiliate, provided equity to finance the purchase of a 132-bed skilled nursing facility in East Providence, Rhode Island (the “Facility”).

the challenge

Sims was approached by Radius Management Services (“Radius”), a health-care management firm based in Wakefield, Massachusetts, to help finance the acquisition of the Facility.

The challenges were: (1) understanding Radius’ business plan to improve an existing nursing home with consistently high occupancy and strong management; (2) structuring the investment to provide the flexibility needed by Radius, which required that the real estate be acquired in one entity and the personal property in another; and (3) working within the financial restraints of the senior lender, which would not allow for subordinate debt.

the solution

Sims’ creative approach allowed Radius to raise the required equity to close on the acquisition of the Facility, while also providing Radius with a buyout opportunity of Sims’ investment. This structure provided the senior lender with its required equity and Radius with a financing that has debt features. Sims understood the value that the new management would bring to this transaction.

the implementation

Sims raised the needed capital through a private placement to its high net worth client base. The Sims financing was attractive to Radius for several reasons: (1) Sims’ expertise in structuring complex equity financings for senior living projects; (2) Sims’ ability to provide a majority of the equity; and (3) Sims’ creation of a purchase option on its interest, allowing Radius to buy out Sims’ investment.

the result

The equity provided by Sims, together with the equity provided by Radius, satisfied the loan-to-value requirements of the senior lender. Sims’ creativity and flexibility enabled it to finance a modest-sized transaction with great efficiency.