The Situation and Challenge
What does a senior living provider (with an excellent brand in the market) do when faced with an identified site with excellent visibility, stunning views and strong senior demographics? It should be a no-brainer to expand, but complicating the story is that the operator has two other significant projects in development. Liquidity, although adequate, is tight and debt capacity is limited because of the two projects underway. Management resources are stretched, but the thought of missing a wonderful opportunity in its core market is unbearable.
The Hamlin Solution
A joint venture with another not-for-profit operator with a like-minded culture, vision, and mission proved to be the answer. These types of affiliations take time to mature and are better conceived and executed before an opportunity arises. On the other hand, a clear and present transaction can speed the process.
In July of 2019, Wesley Homes and Presbyterian Homes and Services, through a joint venture arrangement, closed on a $98.7 million transaction for Wesley at Tehaleh located in Bonney Lake, Washington. Equity and support agreements were provided by both Wesley and PHS. The permanent financing was provided through a “draw-down” structure thereby decreasing the sizeable capitalized interest and resulting in less permanent debt and a significant savings.
The structure allows for funds to be distributed to the owners at appropriate times upon achieving and maintaining certain financial ratios. Once completed, Wesley at Tehaleh will have 136 apartments, 32 Brownstones, 42 AL and 18 memory care units. Entrance deposits and monthly service fees will drive the revenue engine. To learn more about this truly innovative financing structure please contact Hamlin Capital Advisors.
