After opening in 2020, Sapphire Lakes at Naples, LLC (“The Company”) experienced severe challenges with marketing and census fill-up due to the COVID-19 pandemic. In addition to the pandemic, Naples also experienced substantial senior housing development in 2020 and 2021, which increased competition and suppressed rental rates. Noting the low census, and sitting behind a C-PACE loan, the senior lender did not want to renew the loan and leveraged a guaranty from ownership to demand pay off of its outstanding loan, whether through a sale, new lender and/or further additional infusions from ownership. After conducting a sale process in 2023, which resulted in compressed values due to cap rate trends, SC&H decided to pivot and identify alternative sources of capital to refinance the outstanding debt held with the senior lender.
Acting as a structuring agent and advisor, SC&H facilitated a lender solicitation. The exhaustive marketing process included traditional lenders, non-regulated lenders, and alternative credit funds. As a result of the solicitation process, SC&H sourced term sheets for the incumbent bank and ownership to consider. SC&H then leveraged the term sheets and values from the previous sale process to negotiate with the senior lender. SC&H also referred an operational consultant, who tailored a plan for the community to reposition units and build census. Ultimately, SC&H was able to restructure the senior note, which provided our client with time to build census and stabilize operations. The restructured loan also provides the senior lender with the opportunity for upside recovery (depending on future market factors) and a reduced overall guaranty liability for ownership.
