Armadale Capital Leads $133 Million FHA Insured Loan Financing for MUSC Health (Charleston, SC)

Thursday, December 19, 2019 Hospital News
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First FHA Insured Hospital Loan Involving Acquisition of Other Hospitals.

NEW YORK, Dec. 19, 2019 /PRNewswire-PRWeb/ -- Loan Will Refinance a Short Term Bridge Financing used to Acquire Four Acute-Care Hospitals and Related Facilities in Chester, Lancaster, Florence and Marion, South Carolina.

On December 12, 2019, FHA multifamily lender Armadale Capital (New York, NY) closed a $133 million Section 223(f)/242 FHA-insured mortgage loan for MUSC Health (also known as MUSC, Medical University Hospital Authority or MUHA), the teaching hospital unit of the Medical University of South Carolina, located in Charleston, South Carolina. FHA insured loan proceeds will be used to refinance a $129 million bridge loan which, in late February 2019, funded the acquisition of four acute care hospitals and ancillary facilities previously owned by a for-profit health system. MUSC Health's 700 bed main facility in downtown Charleston has been re-named MUSC Health University Medical Center. The names, locations and bed count for the newly acquired MUSC Hospitals are listed below:

MUSC Health Florence Medical Center (Florence) – 396 beds MUSC Health Marion Medical Center (Marion) – 124 beds MUSC Health Lancaster Medical Center (Lancaster) – 225 beds MUSC Health Chester Medical Center (Chester) – 82 beds

While based in Charleston, MUSC Health, an agency of the State of South Carolina, has been pursuing strategic initiatives over the past several years to expand its footprint in the State and enhance access to healthcare for South Carolina residents. The acquired facilities added approximately 827 licensed acute-care beds to the MUSC Health system for a total licensed bed count of approximately 1,600 throughout South Carolina. For the fifth year in a row, U.S. News & World Report has named MUSC Health the top hospital in the state in its 2019-2020 "Best Hospitals" rankings, with a number of MUSC Health's specialty programs ranking among the best in the entire country.

"Buying these hospitals is about bringing better connectivity to our world class research and subspecialties, while also doing more to keep patients in their home communities whenever possible; our successful telehealth program, which allows patients around the state to access our physicians and nurses long distance via online technology, is one such application of the cutting-edge care we can provide to achieve these goals of better health and wellness," said Dr. Patrick Cawley, Chief Executive Officer of MUSC Health and Vice President for Health Affairs, University. "We appreciate the hard work and dedication of our staff and financing team as well as our new colleagues in the four newly acquired facilities. We also want to thank the U.S. Department of Housing and Urban Development (HUD) Office of Hospital Facilities, and the State of South Carolina Treasurer's Office for their efforts, partnership and support," added Cawley. "We continue to realize our strategic goals that align with our mission to preserve and optimize human life in South Carolina and beyond."

In terms of the financing, MUHA was able to take advantage of current market conditions and secure a fixed mortgage interest rate of 3.00% for the 25 year amortization period. This rate is one of the lowest rates for a 25 year FHA insured hospital loan in the program's history. FHA Section 242 of the National Housing Act provides mortgage insurance on loans for acute care hospital facilities ranging from large urban teaching institutions to rural critical-access hospitals. The program began in 1968 and has been utilized by hospitals in most states throughout the U.S.

"Once we came to terms and signed an Asset Purchase Agreement with the seller last November, our financing strategy was to first utilize a short term bridge loan to close the acquisition no later than March 1, 2019 and then apply for HUD's mortgage insurance approval for permanent financing," said Lisa Goodlett, Chief Financial Officer of MUSC Health. "As our FHA lender, Armadale Capital was effective in leading the effort to obtain HUD approval, coordinating the financing team and structuring the transaction. As a result, our financing objectives have been achieved and even exceeded in some cases, and we are well positioned for access to capital for future strategic initiatives."

Armadale Capital, based in Manhattan, also served as FHA lender and led MUHA's $361 million FHA Section 242 refinancing in 2012 and $47 million FHA Section 241 refinancing in 2013, saving MUHA over $70 million in interest costs. In 2016, the firm also led the $316 million FHA Section 241 financing of the Shawn Jenkins Children's Hospital and Pearl Tourville Women's Pavilion, slated to open in early 2020.

"This FHA insured loan is a pioneering event for the HUD Hospital Mortgage Insurance Program in that it is the first to be effectively used to acquire other acute care hospitals. While the four acquired hospitals have struggled in recent years under different ownership, MUHA is in the best position to own and operate these facilities going forward and enhance the healthcare provided in these South Carolina markets. This acquisition aligns with HUD's mission to help provide hospitals access to capital in areas where they are most needed," said Stephen Pack, President of Armadale Capital.

"During site visits with HUD at the four hospitals in June 2019, it became abundantly clear the community leaders, physicians, nurses, technicians and employees at these four hospitals are beyond excited to become part of the MUSC Health family. There is a palpable confidence and trust in the MUSC Health brand. Since the original FHA insured financing in 2004, MUSC Health has continued to successfully avail itself of HUD's refinancing and supplemental loan programs. It is an honor working with this major State healthcare institution and being asked to lead something so beneficial to residents in South Carolina and even other states," added Pack. "With this acquisition and its long term FHA financing, in the last 15 years I have witnessed MUSC Health go from a one campus university medical center to a major five campus academic health system improving the lives of increasing numbers of South Carolina residents."

Harris Beach PLLC (New York, NY) served as FHA lender's counsel to Armadale Capital. Kaufman Hall (Chicago, IL) served as financial advisor to MUSC Health for this transaction. Wipfli LLP (Milwaukee, WI) served as feasibility consultant for the study included in the FHA mortgage insurance application.


SOURCE Armadale Capital

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