The COVID-19 pandemic had a significant impact on all facets of nursing home operations across the country. Strains to the labor market are still being felt acutely by skilled nursing facility owners and operators, making it the most difficult operating environment in the industry’s history.
Despite substantial headwinds, our client, an Idaho-based owner/operator of a five-star, 60-bed skilled nursing facility, was able to grow occupancy and NOI year-over-year from the time they took over in late 2018 through the end of last year.
Given the option to purchase the community off-market in 2022, our client needed to close on the acquisition quickly, with as little fresh equity as possible while maintaining the ability to quickly secure long-term, fixed rate financing.
Berkadia Solution & Client Results
To close the acquisition, Berkadia proposed a bridge loan funded by Live Oak Bank & Berkadia in an A/B arrangement. By structuring the bridge loan with the takeout in mind, the client can seamlessly transition into a permanent execution via HUD.
First, we secure the bridge closing with our A lender partner, enabling clients to close quicker than they would through a traditional HUD loan, whose timelines can span from six to eight months. Then, with ownership of the asset secured, Berkadia leverages our HUD expertise to refinance the bridge loan to more favorable terms of a HUD loan.
Our Idaho client closed the bridge loan on the terms which were quoted, obtaining financing at 76.5 percent of value and 81.6 percent of total cost. Within one month, Berkadia submitted the HUD 232/223(f) application, requesting 80 percent loan-to-value and a 35-year fully amortizing term. Berkadia expects the HUD loan to close in the summer of 2023.
The Berkadia Advantage
Berkadia is a coalition of commercial real estate experts. From mortgage banking to investment sales, to our specialty groups and solutions, we are an amalgamation of experience and skill all working together to best serve our clients. Empowered by industry-leading technology and data-driven insights, our advisors are more flexible, creative, and innovative with every deal.