MIAMI—Love Funding closed a $361.4 million loan modification for the Medical University Hospital Authority (MUHA) in Charleston, South Carolina. MUHA, a division of the State of South Carolina, owns and operates the Medical Center of the Medical University of South Carolina (MUSC Health).
Secured through the U.S. Department of Housing and Urban Development’s Section 242 loan insurance program, the deal marks the third-largest hospital loan in the agency’s history. Steven Hunt, Love’s senior director of Hospital Finance, secured the financing. Matthew Andrea, vice president and senior underwriter at Love, underwrote the deal.
“Over the past few years, several hospitals in HUD’s portfolio have reduced their interest expense through either a loan modification or by refinancing,” says Hunt. “We are excited that the agency is expected to announce a new refinance program this year—FHA 242/223(f)—that will allow a wide variety of hospitals to obtain long-term, fixed-rate, non-recourse financing at the best interest rate available in the market.”
Love executed the mortgage modification and interest rate reduction by funding a bond defeasance escrow established by MUHA with proceeds from the sale of Ginnie Mae mortgage backed securities and other trustee-held funds. Love worked with Steve Pack, president of New York-based Armadale Capital and MUHA’s financial advisor, who structured the defeasance.
The transaction effectively enabled MUHA to reduce its interest rate by 38% on the mortgage. The debt-service savings generated from the new low-rate financing will help the hospital offset expected reductions in reimbursements from Medicare and Medicaid, and other industry-wide financial pressures.
MUSC Health is one of the nation’s top academic medical centers with a 696-bed teaching hospital. The facility records more than 1 million patient encounters each year, and was recognized in 2012 by U.S. News & World Report as “One of America’s Best Hospitals,” with six specialty areas ranked in the top 50 in the nation.
In a separate transaction announced today, Love closed a $30.5 million loan refinancing for Jack Hughston Memorial Hospital, a 70-bed acute-care hospital located in Phenix City, AL. Hunt secured the financing through HUD’s Section 223(a)(7) loan program.