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SMF Closes $22.8 Million HUD Lean Portfolio Transaction

Sims Mortgage Funding recently closed $22,836,000 in HUD-insured loans under the Lean program that enabled a major New England health care provider to repay a bank loan it incurred in connection with its acquisition in 2011 of two nursing homes located in Rhode Island.

The 2011 purchase by Athena Health Care of Farmington, Connecticut was financed with a $20,356,000 bank loan and $4,800,000 in preferred equity issued by HJ Sims. Although the bank loan was scheduled to mature in March 2019, it was imperative for Athena to retire the debt as soon as possible; the bank’s total outstanding loans to the company would likely constrain its future lending activities. Therefore, by reducing its indebtedness with the bank, Athena’s future borrowing capacity with this lender would be increased.

Waterview Villa

Waterview Villa

The HUD loans, insured under the Section 232/232(f) program, covered a portfolio of two skilled nursing facilities totaling 262 beds located in Providence and East Providence. The loans were underwritten at an 80% loan to value and have 35 year fully-amortizing terms. The average debt service coverage on the portfolio was approximately 2.77. Initial deposits to the reserve fund for replacements averaged $1,333 per bed, and annual deposits averaged $700 per bed.

Summit Commons

Summit Commons

Although each loan was underwritten separately, the facilities were incorporated into a Master Lease structure. However, pursuant to the client’s request, Sims was able to ensure that HUD kept the Rhode Island transactions separate from Athena’s three other HUD Master Leases for properties in Massachusetts and Rhode Island. In addition, the transaction included a $5 million working capital line of credit for both properties collateralized by their governmental accounts receivable.

The Athena Rhode Island portfolio constituted the fifth and sixth HUD-insured loans Sims Mortgage Funding has closed for Athena since October 2013. For additional information about the Athena portfolio transaction contact us.