Artis Senior Living, a developer/owner/operator of assisted living residences, wanted to leverage the considerable equity it had built up in one of its memory care facilities in the Washington, DC metropolitan area. However, they wanted to transition as quickly as possible to a HUD-insured loan so as to minimize future interest rate and refinancing risk. EagleBank is Artis’s corporate lender and was willing to make a short-term bridge loan for that purpose; but at that time did not have the background in the HUD healthcare mortgage insurance space for the take-out. Eagle brought Sims Mortgage Funding into the deal to secure the “back-end” of the bridge-to-HUD financing.
Recent changes in HUD’s policies have significantly shortened the debt seasoning requirements for bridge loans. This has opened the way for more efficient and expeditious bridge-to-HUD loan executions that involve the take-out of equity. SMF worked closely with EagleBank and HUD to ensure that the goals of Artis and Eagle – to allow for a maximum bridge loan without enduring a lengthy loan seasoning period – were met.
The $22,128,200 loan was insured under the Section 232/223(f) program and was underwritten at 64% of the appraised Market Value. The self-amortizing loan features a 35-year term and a debt service coverage ratio of 1.74. HUD approved the deal in 61 days. EagleBank placed the GNMA securities used to fund the HUD-insured loan, completing the take-out of its bridge loan that was issued about nine months earlier.
SMF successfully helped EagleBank and Artis execute a refinance plan that converted short-term debt into long-term financing at a competitive, fixed interest rate and on better terms than were available through commercial financing options. With HUD’s more liberal bridge loan seasoning guidelines firmly in place, Section 232/223(f) mortgage insurance provides an excellent take-out of short-term debt used to acquire a healthcare/senior housing property or to leverage the additional equity resulting from increases in market value.