(Reprinted with permission from the St. Louis Business Journal. Alteration or further reproduction is strictly prohibited. ©2016 St. Louis Business Journal, 815 Olive Street, Suite 100, St. Louis, MO 63101. View original here.)
BY ANGELA MUELLER
Lutheran Senior Services is planning to build a 140-unit independent living apartment facility on its Mason Pointe campus, a key part of its plan to turnaround the former The Cedars at Town & Country facility, which LSS bought and rebranded earlier this year.
LSS is in the initial planning stages for the apartment building, which Chief Financial Officer Paul Ogier said could have a price tag “somewhere in the neighborhood of $50 million,” and does not plan to break ground until 2018. The senior services provider is targeting a 2020 completion date for the facility.
A current $97.7 million bond offering from LSS includes about $3.5 million in funding earmarked for the initial development process of the planned apartment building, as well as funds for ongoing renovations to the existing Mason Pointe facilities.
The majority of the money from the new bond offering — more than $60 million — will be used to refinance existing debt, according to the bond document filing with the Health and Educational Facilities Authority of the State of Missouri. Besides the money pegged for the Mason Pointe project, the rest of the $36 million from the bond sale will be used to fund ongoing improvements at LSS’s Lenoir Woods senior community in Columbia, Missouri. LSS is constructing 79 independent living apartments on the campus, with an expected completion date of June 2017. LSS also is planning to build the second phase of a replacement care center on the campus that would include a 32-bed short-stay rehab unit, 32 skilled nursing beds, 24 assisted living memory care apartments and additional common space. Construction on that project is expected to begin in November.
Ogier said he expects to price the bonds and get commitments by the last week of September.
LSS purchased the 230-bed The Cedars senior living community, now Mason Pointe, from Cedars Properties LLC in February. Local nonprofit Jewish Center for Aged developed the $60 million Cedars facility as The Cedars at the JCA in 2003, but defaulted on its mortgage. Lehman Brothers Holdings bought the debt from the U.S. Department of Housing and Urban Development in 2007, and a Lehman affiliate took ownership of the facility in 2010 and then sold it to Cedars Properties LLC in 2012.
Following its acquisition of the property, LSS moved the rehabilitation services it previously operated on the Mercy St. Louis hospital campus to Mason Pointe, which is located at 13190 S. Outer 40 Road.
LSS has since been working to turn around operations at the struggling facility, which, under the previous owner, had been operating at significantly less than its operating capacity with 55 percent of its beds occupied by Medicaid residents, according to the bond documents. LSS is projecting a combined operating loss of about $8 million in 2016 for both the Mason Pointe facility and the former rehab facility it operated at Mercy, but the organization is hoping to reduce the facility’s operating loss to $1.2 million by 2019 through steps such as the recent opening of a 30-bed private pay skilled nursing wing, increasing its short-stay rehab occupancy and a planned expansion of the assisted living area from 10 to 20 apartments. LSS also hopes to decrease the percentage of Medicaid residents at the facility, although Ogier emphasized that no current residents would be asked to leave.
The planned construction of the independent apartment facility is “expected to have the greatest impact on the financial performance” of Mason Pointe, and the campus is expected to operate without a loss by 2020, according to the bond document.