Sims Mortgage Funding (SMF) took out a bridge-to-HUD financing for Grace Manor at North Park at the end of August. The bridge component was a unitranche loan originally issued in February 2020 by Lakeland Bank and an affiliate of SMF’s parent company, HJ Sims, which the borrower used to purchase a 52-bed assisted living and memory care community in Allison Park, Pennsylvania.
The new $9.63 million HUD-insured loan has a 35-year amortization and represents 78.3% of the asset’s value, underwritten at a 1.46x debt service coverage ratio. The loan, insured under the Section 232/223(f) program, covered 100% of the cost of refinancing, including capital reserves, repairs, deferred interest, HUD and lender fees, and transaction costs. SMF used the trailing-six months of net operating income annualized for its loan underwriting, assuming the community’s performance would meet that level when HUD commenced its review. It did, and the loan was placed in review without delay when a HUD underwriter was assigned.
Because the loan was based on the actual cost to refinance and was below HUD’s standard 80% loan-to-value threshold, the borrower saved two months of debt service on the prior loan, which was applied toward tax and insurance escrows required for the HUD closing, improving cash flow during the transition period between the old and new loans.
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 an owner/operator of seniors housing communities.
