Family business improves senior care in smaller communities
SBA 504 financing is a good fit for residential senior care facilities
For Dinesh and Sonia Sawhney, senior care is a new twist on the family business.
“We approach the market from a real estate perspective,” Dinesh said. “It’s probably not a common path – from shopping centers to a hotel to high-level memory care facilities for seniors with dementia – but there is a need in our market for assisted living, so that’s where the opportunities are.”
Dinesh’s daughter Sonia now owns and oversees the operations of two memory care facilities in Contra Costa County, California. “We started with Oakwood Senior Home in Vallejo in 2012,” she said. “The property had eight residents and we did a complete renovation and expansion, relicensing the facility for 30 beds.”
The family then started a smaller, 6-bed facility in nearby Concord, which is also undergoing renovation for expansion. “Despite the aging population and need for senior care facilities,” Dinesh said, “there aren’t too many lenders willing to finance independent facilities. TMC’s SBA 504 program had a low down payment that helped us maximize leverage, and Kurt helped us find the right lender.”
The Florence Senior Home had a total project cost of $900,000, $480,000 for the purchase of the property and $420,000 in improvements, furnishings and fees. The SBA 504 portion of the financing was 35 percent: $315,000 at 4.31%, fixed for 20 years. The borrower put down $135,000 (15%), and Exchange Bank provided a $450,000 (50%) first mortgage.
“Through the SBA 504 loan program, we’re able to help independent assisted living facility owners like the Sawhneys buy and improve properties,” Kurt Chambiss, TMC senior vice president, said. “Not only do owners benefit with better return on their investment, but the whole community benefits from added access to services.”
The Sawhneys have since sold Oakwood and purchased Hillcrest Memory Care Living in Antioch, near Lake Alhambra. The 49-bed facility is currently being renovated into a 90-bed facility. The Hillcrest total project cost is just over $4 million, including $2.75 million for the facility purchase and $1.4 million in improvements, etc. The SBA 504 authorization is for just under $1.5 million (35%) with a down payment of $630,000 (15%) and a TransPacific National Bank first mortgage for just under $2.1 million (50%).
“Without TMC and the SBA 504 program we could not have bought these properties, let alone improve them,” Dinesh said. “It really makes a difference for our family business to be able to get the capital we need to expand in these under-served areas.”