Cambridge Realty Capital Companies reports arranging a $26,625,000 loan to finance ten skilled care nursing facilities in Indiana and Iowa. The properties are part of a 14-facility portfolio which the Ide Management Group of Indiana currently operates.
Ide was acting on a purchase option agreement it held with the owners to purchase the 14 properties it operated on the owner’s behalf. The Cambridge Signature Bridge Loan for $26,625,000 will allow Ide Management Group to purchase ten of the 14 properties.
The borrower desired a mortgage structure over an operating lease due to the high costs and annual escalators of the operating lease. Because the borrower had minimal equity, it required a loan structure with high loan to cost. Additionally, the borrower required a term that was longer than the typical bridge loan term.
Yorktown Manor
Complicating the deal was a complex structure due to a majority of the facilities being located in a state with a supplemental payment program involving a sub-lease to an unrelated party. The underwriting of the loan needed to include a significant amount of the supplemental payment program revenue
“Very few lenders in the market are able to understand and underwrite transactions involving skilled nursing facilities receiving such a high degree of supplemental payment program revenue,” said Cambridge Assistant Vice President Zach Scardina, who worked with Ide on the structure and terms of the deal.
Adding to these challenges was the difficulty in obtaining a correct valuation given complex structure. Not only that, but the borrower was facing a time constraint. The borrower was on a strict timeline with its landlord, a public company. Scardina points out, “If the deadline to exercise the purchase option was missed, the borrower would have had to relinquish this attractive opportunity.”
Cambridge is well-known in the industry for its ability to secure funding for borrowers with complex loan needs and complicated structures. Cambridge was able to arrange a loan for Ide with one of its Signature Bridge Lenders through the lender’s bank syndication program.
Not only was the borrower able to close the purchase before the deadline, it was able to do so with minimal cash equity. The interest rate it received was competitive, and the borrower saved money by eliminating its expensive operating lease and replacing it with a lower cost mortgage. It also received a longer bridge loan term that also included extension options.
