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FHA Refinancing of 26 Skilled Nursing Facilities in California to Enable Plum’s Unique Capital Structure
Lancaster Pollard recently announced the closing of a $420 million portfolio refinance for Plum Healthcare Group. The transaction refinances debt for 26 independently licensed and operated skilled nursing facilities (SNFs) throughout California using the U.S. Department of Housing and Urban Development/Federal Housing Administration (HUD/FHA) Sec. 232/223(f) program. This was the first HUD transaction for Plum, a best-in-class owner and operator of SNFs based in Carlsbad, California. In addition, it was the largest portfolio refinance closed by HUD/FHA in its fiscal year 2019 and one of the largest ever undertaken by the agency.
In 2018, as a part of its capital structure optimization initiative, Plum engaged Lancaster Pollard to replace its existing corporate credit facility with a property-based bridge loan credit facility that would supply the structure necessary to effectively refinance into individual HUD mortgages. Lancaster Pollard partnered with Credit Suisse to provide the initial $400 million bridge funding as the first step in the overall process and concurrently began the HUD underwriting process.
The entire process from inception to a detailed corporate credit review, required for a transaction this size, to bridge financing and ultimately to HUD closing was completed in 15 months. The timeline is considered fairly efficient for this kind of sizeable, government-insured, multi-step process, which was also impacted by the government shutdown in January 2019 that caused months of delays. In order to accommodate the workload required by HUD for this size of transaction, the 26 loans were funded in three separate tranches over the last five months of 2019.
A testament to Plum’s operational excellence is that approximately 80% of the SNF portfolio was comprised of four- or five-star facilities, according to the Centers for Medicare & Medicaid (CMS) Five-Star Rating System.
“Plum is widely recognized in our sector as a high-quality organization with superior patient results, and we were thrilled to be able to achieve this outcome for them,” said Grant Goodman, managing director with Lancaster Pollard Mortgage Company, a division of ORIX Real Estate Capital. “Transitioning from a short term, corporate-level recourse-based capital structure into fixed-rate, non-recourse debt with an all-in rate of 3.8% was a big win for the company.”
“Redesigning our capital structure is a key component of our strategy, which is focused on further enhancing our industry-leading clinical outcomes and positioning our business to capitalize on the emerging long-term growth opportunities in the health care market,” said Naveed Hakim, Plum’s chief financial officer.
“Thanks to Lancaster Pollard’s efforts, we have completed a major step of our capital enhancement initiative by moving Plum into a unique fixed rate debt structure that locks in historically low rates for decades, eliminates corporate recourse and financial covenant exposure, and creates the capital flexibility that will facilitate the execution of our strategy,” Hakim added.
Grant Goodman, Jason Dopoulos, and Elliot Kaple led the transaction for Lancaster Pollard.
About Lancaster Pollard
Lancaster Pollard Mortgage Company, a division of ORIX Real Estate Capital (OREC), helps seniors housing and health care providers expand and improve their services by delivering financial advice and financing solutions. Lancaster Pollard, together with its affiliates, offers a full range of investment banking, mortgage banking, private equity, balance sheet financing and M&A advisory services. OREC is a Fannie Mae DUS®, Map- and Lean-Approved FHA, and Freddie Mac OptigoSM Small Balance lender. OREC is headquartered in Columbus, Ohio, and is a wholly owned subsidiary of ORIX Corporation USA. The OREC companies have financed approximately $100 billion in total transaction amount and originate $6 billion annually, with a servicing portfolio over $25 billion. Securities, investment banking and advisory services provided through OREC Securities, LLC. Member FINRA/SIPC.
About Plum Healthcare Group
Plum Healthcare Group supports 56 independently licensed and operated facilities, which provide comprehensive skilled nursing services, assisted living services, speech, physical and occupational therapies, and other health care solutions.
Tyler Howard, 614-224-8800
Vice President, Director of Communications
ORIX Real Estate Capital
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