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Presbyterian Homes & Services

Hamlin Capital Advisors, LLC (“HCA”) is pleased to announce the closing of a $400 million “FlexCap” financing program for Presbyterian Homes and Services (“PHS”), headquartered in St. Paul, MN. The first tranche under the FlexCap facility was used to fund $49.7 million of draw-down, permanent financing for its Apple Valley senior housing community (“Apple Valley”) a new, start-up PHS community located in the suburbs of Minneapolis.

The Situation

PHS is one of the largest and fastest growing non-profit senior living providers in the country, with 43 senior living communities and home and community services that reach over 25,000 older adults in Wisconsin, Minnesota, and Iowa. PHS has a strategic plan that involves adding 37 new communities over the next 15 years but needed a financing structure that would facilitate that plan. Historically, each of its communities has been financed on a stand-alone basis. The inefficiencies tied to financing each development separately led to the formation of FlexCap.

The Hamlin Solution

Under FlexCap, each new PHS community may be funded in stages, with capital being provided just-in-time to minimize the inefficiencies of borrowing money to pay interest during the construction and fill-up period. Additionally, origination costs are minimized as uniform program documents and financing participants are used across many similar financings.

Once projects are constructed and stabilized, the bonds can stay outstanding for a 30-year period at the borrower’s sole discretion. Or, if a more efficient form of capital is identified, PHS can refinance that portion of the program using highly favorable repayment provisions. Any amounts refinanced may be recycled into the “Flex Cap” program for funding additional new communities.

Simply put, the Flex Cap program combines the stability of a 30-year commitment with flexibility of a traditional bank construction loan, and financing capacity that can be recycled over and over.

The financing of Apple Valley marks the beginning of a unique financing program in the not-for-profit senior living industry, that will allow PHS to further its Mission by achieving its growth goals over the next 15 years with highly-efficient and stable capital.