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One successful deal leads to another — financing for a major senior living project

Success is often built on the foundation of strong relationships. That’s certainly been true in developer David Kitchen.

Kitchen is president and CEO of DMK Development Group and a partner in Lexington Senior Partners LLC. The two entities are developing a state-of-the-art senior care campus at the intersection of Man ‘O War Boulevard and Nicholasville Road in Lexington, Ky. Lexington Senior Partners is an equity group that owns the property and handles financing for the project, while DMK is the developer and general contractor.

With more than 20 years in the health care housing industry, Kitchen served as executive vice president–business development for Louisville-based Trilogy Health Services prior to founding DMK Development with his brother, Michael Kitchen. David Kitchen has maintained an excellent relationship with Trilogy — the health provider operates many facilities he had a hand in building across the country.

In 2012, the partners were looking for financing for one of their first senior living projects in Lexington. They had interest from one local bank, but it was another strong relationship that brought in a new player and changed the game.

“One of our senior officers had been an acquaintance of Mike and David Kitchen, and he approached them about the opportunity,” said Tom Fangman, senior vice president with Republic Bank & Trust Company. When Republic was able to match the other bank’s terms, the Kitchens were eager to move forward because of their existing connections. (David Kitchen has also been a personal banking customer at Republic for 20-plus years.)

“We always talk about the importance of relationships and how meaningful they are, and in this case, it truly was — our relationship got us the deal,” said Fangman.

“Our experience with them was outstanding,” said David Kitchen. “It was extremely user-friendly with great customer service. We commented internally what a great process it was, and we looked forward to working with them on a future project. When this one came up, they were our first contact.”

AtlasILDMKCaseStudy-AHedits-2_06The newest endeavor for the Kitchens and their other partners is one of their largest to date, a $35 million, multi-phase project on 11 acres that consists of two structures — an 85-unit skilled nursing and assisted living facility and a separate, three-story, independent and assisted living facility. The first will be managed by Trilogy; the other will be operated by Altas Senior Living of Birmingham, Ala. Site work is currently underway on the first phase, with expected completion on the entire project in just under 18 months.

“With the baby boomers coming to an age when independent living and assisted living are starting to be important to them, this kind of project is needed,” said Fangman. “Mike and David have become very well-respected and very good at what they do. They are great clients for Republic because, first and foremost, they’re honorable men.”

With so much at stake in such a large project, the partners wanted to work with a bank that already understood their needs and the complexities a project like this one entails.

“The first deal we did with them in Lexington was a Trilogy property, so they were familiar with the inner workings of the structure and the operator, as well as the equity group put together to find financing for the project,” Kitchen said. “It wasn’t a tough decision at all. Because we had such a good experience, Republic was first on our list for this project.”

Through a standard, mini-perm construction loan, Republic is providing 100 percent of the financing for the skilled nursing/assisted living facility. Republic also entered into a participation agreement with Old National Bank to provide 27 percent of the funding for the second independent/assisted living facility, with Old National financing the remainder.

“We originally went exclusively to Republic, but as they began to understand our structure, they felt it was a good idea to partner with an outside bank,” said Kitchen. “Republic worked seamlessly throughout that process. We were very pleased with Republic introducing Old National and also with Old National getting up to speed, keeping things as smooth as possible.”
It was a hands-on, customer-centric philosophy that contributed to Republic’s successful deal in 2012, and it made the second one even easier, Kitchen said. “It was even better because they already had a good understanding of all the complexities. We really look at them as a partner in the deal because they are working with us side-by-side.”

This partnership will hopefully lead to others, Fangman said. Having a client on its rosters like the Kitchens, DMK Development and Lexington Senior Partners will help Republic gain notoriety in the Lexington market. “We have a four-bank presence there, so it’s a good reference for us to share with other businesses that we’ve were able to get this deal done. It shows off our capabilities.”

Kitchen agrees. “We’ve dealt with national and regional banks, and Republic compares very favorably, if not even better,” he said. “We like working with a local bank because they are better able to understand the market, who we are and what we do. We put a lot of value on that relationship.”

“If it’s the right fit, we would certainly love to work with them on future deals that fit within their footprint,” he added.