The Dealmakers Forum: Senior Care Financing News

Love Funding appears to have ended 2011 and started 2012 with a bang with more than $44 million of new HUD financings.  In the largest, Bruce Gerhart and Robert Smallwood arranged five loans totaling $19.9 million for a portfolio of assisted living facilities in Michigan owned in part by Reenders Inc. (three of them) and in partnership with Leisure Living Management for the other two.  The refinancing lowered the annual debt service by more than $250,000 and extended the maturity on two of the loans back to 35 years.  Gerhart and Smallwood also arranged $4.76 million in HUD financing for a 74-bed skilled nursing facility in Ohio on behalf of Olmsted Manor Properties.  Smallwood also closed on a $2.81 million HUD refinancing for a 72-bed assisted living facility in Michigan that will generate $28,500 in annual debt service savings and allowed the borrower to pay off a 6% prepayment penalty.  The owners manage six assisted living properties in Ohio and Michigan.  Brian Robertson of Love Funding arranged two loans for Rosemont Assisted Living Communities for a 92-unit community in Texas ($6.64 million loan) and a 40-unit community in Louisiana ($2.4 million). Chad Ricks closed on a refinancing of a 70-bed assisted living community in Idaho on behalf of Ashley Manor, LLC, which owns and operates several communities in Idaho and Oregon.  The new $4.34 million loan is for 35 years and will save the borrower more than $28,000 in annual debt service.  Finally, Robyn Cunningham closed on a $3.72 million loan for a 111-bed skilled nursing facility in Jerseyville, Illinois.   

Quintin Harris out of Lancaster Pollard’s Kansas office closed on a $4.7 million refinancing with a 35-year term for a 69-bed skilled nursing facility in Iowa.  Because of the low leverage involved, Lancaster Pollard was able to receive a firm commitment in only five business days and it took just 35 days from the receipt of the firm commitment to closing.  Steve Kennedy of Lancaster’s Columbus, Ohio office closed on a $4.07 million HUD loan on a small campus that includes 71 skilled nursing beds and eight independent living units in Illinois.  It is one of 16 senior living facilities in the Midwest owned and operated by not-for-profit Christian Homes, Inc.

In some agency business, KeyBank Real Estate recently closed on a $132 million Freddie Mac financing for Spectrum Retirement Communities, LLC.  Each loan was for seven years and had a variable rate.  The loans included two in Colorado for a 213-unit community that opened in 2009 and includes IL, AL and Alzheimer’s care ($39.8 million) and a 129-unit IL community that also opened in 2009 ($20.7 million).  Two other loans were for communities in Kansas, including a 222-unit IL and AL community that opened in 2008 ($35.4 million) and a 124-unit IL community that opened in 2009 ($14.9 million).  The fifth community is in Missouri and has 132 units and opened in 2008 ($21.2 million).  In case you did not notice, all five of these opened during the Great Recession, all five have “non-need-driven” independent living units and all five appeared to have filled up, otherwise Freddie Mac would not be financing them.  Well done, Spectrum.  Separately, Grandbridge Real Estate Capital closed on an $8.4 million Freddie Mac refinancing for a 64-unit assisted living community in Anderson, South Carolina.  It was a seven-year fixed rate loan.

On the balance sheet side of the business, Capital One Bank closed on its first big transaction in the senior care market.  The $58.25 million loan was completed for Mariner Healthcare and was secured by 800 skilled nursing beds located in California.  It was a floating rate loan with a three-year term and a 20-year amortization, and comes in at about $73,000 per bed.  The portfolio has a 93% occupancy rate, and the debt service coverage is a healthy 1.63x after taking into account Medicare cuts and Medicaid holdbacks in California... Want to read more? Click here for a free trial to The SeniorCare Investor and download the current issue today