Seniors Housing Business

AUG-SEP 2015

Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.

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Recapitalizations aplenty While the majority of the bridge-to-HUD loans that Capital One Bank provides are for acquisitions, a close second are recapitalizations, not refnancings, says Keith Kodrin, senior director of healthcare real estate at Capital One Bank. "I would defne them more as recapitalizations than refnancings because the borrowers are looking to maximize leverage and then take the long-term money through HUD," explains Kodrin. Under this scenario, the borrower has already acquired a property or portfolio and is in the process of repositioning or turning it around operationally. "Then the borrower comes in and wants to leverage up the property or portfolio and go to HUD," says Kodrin. Capital One's bridge lending program does not operate within a defned box or set of parameters because each deal and each borrower is different, says Kodrin. "We are a regulated institution. Our loan has to stand on its own when we're looking at it, irrespective of whether or not we're going to get the agency/HUD execution on the back end." In late 2014, Capital One Bank provided a $60 million secured term loan to an undisclosed borrower for the acquisition of a portfolio of 19 skilled nursing facilities in Indiana and Iowa. The fve-year, foating-rate loan was structured as a bridge to permanent HUD fnancing. The port- folio included 1,163 licensed beds. Kodrin refers to Capital One as a one-stop shop when it comes to executing bridge-to-HUD loans, which he believes gives the bank an edge in what has become an extremely competitive environment among lenders. "It's a good business to be in," says Kodrin. "Our competitive advantage is the ability to leverage our balance sheet as a top 10 bank (as ranked by total deposits), and our internal capabilities to do the bridge loan and then take ourselves out with the HUD loan." Two buckets of bridge fnancing Douglas Korey, president of Columbus, Ohio-based Lancaster Pol- lard Finance Co., says bridge fnanc- ing can be grouped into two buckets relating to the duration of the bridge. The frst bucket includes cus- tomers who are seeking short-term bridge loans (with a maturity of less than one year) for either an acquisition or a refnancing in advance of an upcom- ing maturity, or to obtain a lower rate for a short interim period. "The loan characteristics include current appraised value and debt-service coverage, among other factors, that will meet an agency's fnancing criteria," says Korey. "The customer will select our bridge loan because of an immediate need that may not be able to be met by going through an agency's process." The second bucket is for those loans that will require some seasoning, but will have a maturity of three years or less, according to Korey. The customer will use this bucket for cash-out fnancing (in order to maximize agency proceeds), or for an acquisition or refnancing where the cash fow exists but may need to season prior to taking it to an agency for longer-term fnancing. "Lancaster Pollard's bridge prod- uct can meet both these needs and terms, and pricing is designed in a fexible way to allow for a relatively seamless process to an agency take- out," says Korey. Lancaster Pollard recently pro- vided the owner of an assisted living facility on the East Coast with $10 million to refnance a maturing loan. The facility was stabilized and had adequate cash fow to cover the debt, but there was a question on what HUD would value the facility based on its age and operat- ing margins. "We provided the customer with a $9 million senior mortgage and a $1 million mezzanine mortgage to ensure that the refnancing could be completed within a very short period of time (30 days) and without having the full HUD underwriting completed," says Korey. "In the end, the loan is about to be repaid by FHA fnancing." In another transaction, Lancaster Pollard Finance Co. recently helped an experienced seniors housing operator acquire Gardens Assisted Living and Guardian Skilled Nurs- ing in Lake Charles, La., by provid- ing a senior mortgage loan and a mezzanine loan totaling $9 million. The fnancing structure is expected to be refnanced using HUD/FHA within 18 to 24 months of the bridge lending. n • Speed • Creativity • Certainty of Execution • Ease of Interface www.berkpoint.com A History of Excellence. A Future of Distinction. Leading the way in Seniors capital solutions. b e r k e l e y p o i n t ® New York • Chicago • Atlanta • Irvine Los Angeles • San Francisco • Dallas Miami • Seattle • Bethesda • St Louis Boston • Columbus • Detroit • Nashville Fannie Mae • Freddie Mac • FHA Life Company • Bridge • Conduit "The customer will select our bridge loan because of an immediate need that may not be able to be met by going through an agency's process," says Douglas Korey, president, Lancaster Pollard Finance Co. 58 www.seniorshousingbusiness.com Seniors Housing Business n August-September 2015 Continues from page 56

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