PARTNERED RIGHT ®
Sims Mortgage Funding recently completed a Bridge-to-HUD transaction when it successfully refinanced Grace Manor at North Park at the end of August. The bridge component of the deal was a unitranche bank loan originally issued in February 2020 jointly by Lakeland Bank and an affiliate of our parent company, HJ Sims. That loan was used by the borrower to purchase the Project, a 52-bed assisted living and memory care center in Allison Park, PA, a suburb of Pittsburgh.
STRUCTURED RIGHT®
The HUD-insured loan is $9,631,400 and has a 35-year amortization. It represented 78.3% of value and was underwritten at a 1.46 debt service coverage ratio. The loan, insured under the Section 232/223(f) program, covered 100% of the cost of the refinancing, including capital reserves, repairs, deferred interest, HUD and lender fees, and transaction costs. SMF used a trailing 6 months of net operating income (NOI) annualized for its loan underwriting on the assumption that the Project’s actual performance would meet that level when HUD commenced its review. The Project hit that mark and was placed in review without delay once a HUD Underwriter was assigned.
EXECUTED RIGHT®
Because the loan was based on the actual cost to refinance and was under HUD’s standard 80% loan-to-value threshold, SMF was able to save the borrower two months of debt service on the prior loan; it was applied towards meeting the tax and insurance escrows required for the HUD closing, improving the borrower’s cash flow in the crucial transition period between the old and new loans.
FINANCED RIGHT®
Grace Manor at North Park is the first HUD-insured loan for two of the principals and a return to HUD after a 10-year hiatus for the third principal. Their company, Magnolia Senior Living, LLC, is a relatively new owner/operator of senior housing communities. The principals have years of experience in the field as investors, financial analysts, and operational consultants.
