Herbert J. Sims & Co., Inc. - Sunrise Senior Living

ALTERNATIVE INVESTMENTS

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Sunrise Senior Living

Sims Recapitalizes an Affiliate of Sunrise

Sunrise at Fox Chapel - Cheswick, PA

HJ Sims Investments, LLC (“HJSI”) raised $10,620,000 of equity, mezzanine debt and senior debt for a recapitalization of Sunrise Senior Living Investments, Inc., an affiliate of Sunrise Senior Living, Inc. (“Sunrise”) for two senior living communities (the “Projects”) in the greater Pittsburgh, Pennsylvania area. Sunrise is one of the nation's largest providers of senior living services, employing more than 40,000 people. As of December 31, 2006, Sunrise operated 440 communities in the United States, Canada, Germany and the United Kingdom, with a combined capacity for more than 52,000 residents.

Opportunity

Sims was approached by Sunrise with an opportunity to form a partnership to recapitalize two (2) senior living communities. The Projects were owned by a Sunrise entity and are currently being managed by Sunrise. The Projects included in the transaction were Sunrise of Fox Chapel, a 46-unit Alzheimer’s care facility, and Sunrise of Cranberry, a 60-unit assisted living community.

Challenges

The challenges were: (1) agreeing to a long-term management agreement with Sunrise; (2) creating a capital structure which achieved Sunrise’s objectives; (3) maximizing the amount of subordinate debt that could be supported by the Projects; and (4) ability to close on the investment by May 15th.

Solution

Sunrise at Cranberry - Mars, PA

The solution required first, the use of Herbert J. Sims & Co., Inc.’s extensive accredited investor base to fund equity and mezzanine debt and second, negotiation and placement of senior debt with a traditional lender. 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 and subordinate mezzanine loan to 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 financing benefited from Herbert J. Sims & Co.’s extensive high-networth client base without having to communicate with a number of third-party investors; (2) Sunrise remained as the managing member with day-to-day control and a long-term management agreement; and (3) the transaction was completed and closed on an aggressive timeline.

Result

The equity and subordinate debt contribution by HJSI recapitalized the facilities and satisfied the senior lender’s requirements.

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