Armadale Capital Inc. Leads $42 Million FHA Insured Hospital Loan Refinancing for Onslow County Hospital Authority

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Savings of Over $6.2 Million Achieved

Armadale Capital Inc. (New York, NY), a FHA multifamily mortgage lender specializing in healthcare finance, recently closed a $42.4 million FHA-insured loan modification refinancing for Onslow County Hospital Authority (“OCHA”) which operates the 161 bed Onslow Memorial Hospital in Jacksonville, North Carolina. The transaction created net present value savings in excess of $6.2 million for OCHA. The FHA loan is insured under the U.S. Department of Housing and Urban Development (HUD) Section 242 Hospital Mortgage Insurance Program, managed by HUD’s Office of Hospital Facilities. The transaction was funded from the issuance of GNMA mortgage backed securities, which are backed by the full faith and credit of the U.S. Government.

The original 2006 FHA insured loan financing, which funded the construction of a new surgical pavilion, emergency department, and central sterile facility, carried an interest rate of 4.55% until maturity in 2033. Taking advantage of a favorable interest rate environment, OCHA was able to lower the rate to 3.10%.

Creative refinancing techniques were employed to capture a portion of the $6.2 million present value savings upfront for a $2.3 million replacement magnetic resonance imaging project on the main OCHA campus. Another $1.7 million of savings was used to reduce OCHA’s FHA loan principal balance from $44.1 million to $42.4 million. The balance of the savings was in the form of lower interest costs over the next 17 years.

“We started this refinancing process hoping to achieve at least $2-3 million in present value savings, and we realized more than double that. We were able to secure all state and federal approvals quickly after making the decision to move forward with the refinancing. Armadale Capital helped us build out the professional deal team and put us in a position to take advantage of this opportunity. They made it easy for us” said Roy Smith, Chief Financial Officer for OCHA.

Armadale Capital has been working with OCHA for many years with its capital planning, and Mr. Pack led and closed the original 2006 FHA Section 242 loan financing.

“We have been working closely with OCHA management regarding this opportunity for some time now. We are honored to work with this community hospital and to create a refinancing structure that best achieves their objectives,” said Stephen Pack, President of Armadale Capital Inc.

“Steve has been a leader for us, starting with the original 2006 transaction and now, the refinancing. His idea to capture some savings upfront for an important capital project on campus was insightful and beneficial to our organization. His financial engineering and deal navigation made this deal possible, and he was able to lead a team of professionals through the capital markets process. This mortgage refinancing, which also involved the defeasance and advance refunding of a series of tax-exempt bonds, was very complicated, making Steve’s deal leadership and attention to detail so critical. He has earned our trust,” added Mr. Smith.

Armadale Capital led the execution of the refinancing, serving as FHA mortgage lender, securing HUD’s approvals and structuring the transaction. Harris Beach PLLC, out of New York City, served as FHA mortgage lender counsel and GNMA lender counsel.

“We are very grateful for the efforts of the HUD Office of Hospital Facilities and the North Carolina Local Government Commission in making this refinancing a reality. This directly enhances our ability to provide healthcare to our community,” said Dr. Penney Burlingame Deal, Chief Executive Officer of OCHA. “The savings from this transaction far exceeded our best expectations. This ultimately helps not only our hospital but also most importantly the residents of Onslow County and beyond. We are delighted,” added Pat Alford, Chairman of the OCHA Board of Directors.

In addition to being an FHA multifamily lender, Armadale Capital Inc. is registered as a municipal advisor with the U.S. Securities and Exchange Commission and the Municipal Securities Rulemaking Board.

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sherry seeram