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SMF Uses Note Modification to Reduce California Hospital’s Interest Rate by 60%

Sims Mortgage Funding (SMF) and Parkview Community Hospital made history in 2011 when we closed the first-ever HUD-insured hospital refinancing loan under the Section 242/223(f) program.  That loan refinanced Parkview’s high-interest rate and very short-term bridge debt, providing the hospital with a stable capital platform for the future.  

In 2017 we closed a supplemental HUD-insured loan for Parkview that financed construction of a new, and much-needed emergency department.  Two years ago, Parkview was sold to AHMC Healthcare, an organization that specializes in operating community-based hospitals in southern California.  We served as consultant to AHMC in connection with their assumption of the two HUD-insured loans

Interest rates had declined since the original refinancing, providing AHMC with the opportunity to generate additional debt service savings.  We advised them of this positive development in the market and recommended a refinancing structured under HUD’s Mortgage Note Modification/Interest Rate Reduction (IRR) protocol.

Acting as Financial Advisor, we developed the initial financial modeling of the transaction and coordinated the development of the formal IRR proposal with the loan servicer.  HUD approved the IRR proposal in 10 days and the loan closed 63 days later. 

The IRR reduced the interest rate by 60% and will generate total debt service savings of $2.6 million through the remaining term of the loan.  The net present value of debt service savings was 13% of the unpaid principal balance of the existing loan.  The IRR, completed 10 years after our initial refinancing, is another example of SMF maintaining long-term relationships with our clients and delivering to them ongoing value.

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