(PRWEB) December 21, 2016
On November 17, 2016, FHA hospital lender Armadale Capital (New York, NY) closed a $316 million Section 241/242 FHA-insured mortgage loan for MUSC Medical Center (also known as Medical University Hospital Authority or MUHA), the teaching hospital unit of the Medical University of South Carolina (MUSC), located in Charleston, South Carolina. Loan proceeds will be used to fund construction of the $385 million MUSC Shawn Jenkins Children's Hospital & Pearl Tourville Women's Pavilion. Site preparation began in late 2015 and construction officially commenced pursuant to an “early start” authorization from HUD in late October, 2016.
FHA Section 242 of the National Housing Act provides mortgage insurance on loans for acute care hospital facilities ranging from large urban teaching institutions like MUHA to rural critical-access hospitals.
The MUSC Shawn Jenkins Children’s Hospital & Pearl Tourville Women’s Pavilion will replace the 30 year-old MUSC Children’s Hospital, providing much needed space for the thousands of patients and families served by MUHA each year. The new 225 bed replacement facility will provide a modern, family-centered amenities and expanded services, including an expanded neonatal intensive care unit, an entire floor dedicated to the care of children with cancer and the most comprehensive pediatric heart center in South Carolina.
In 2015, MUSC Health (the clinical enterprise of MUSC comprised of a 700-bed Medical Center, the MUSC College of Medicine and the physician’s practice plan) was ranked by U.S. News & World Report as the top acute care hospital in South Carolina and one of the nation’s top 50 children’s hospitals in six pediatric specialties: cancer, cardiology and heart surgery, diabetes and endocrinology, gastroenterology, nephrology and urology.
“This is a major milestone for our institution and the culmination of the hard work and dedication of not only our staff but also many private and public sector professionals over the past several years. In particular we want to thank the U.S. Department of Housing and Urban Development (HUD) Office of Hospital Facilities (OHF), and the State of South Carolina Treasurer’s Office for their efforts and support” said Dr. Patrick Cawley, CEO of MUHA. “As part of our comprehensive academic health science center, this project significantly improves healthcare for our women and children and solidly aligns with our mission is to preserve and optimize human life in South Carolina and beyond.”
The MUHA Board of Trustees played an active role in this project for the past several years, working closely with MUHA management executives and participating in presentations to and site visits with HUD OHF professionals.
“Our vision is to replace and upgrade our entire campus over time and Ashley River Tower, the first step in that master plan, has been quite successful,” said William H. Bingham, Sr., MUSC Board of Trustees vice chairman. “We achieved a top 50 national ranking for children’s hospitals with a facility built in 1986, so we are excited for this next component of the plan to open so we can further enhance our ability to deliver world class health care to our patients, for decades to come. We are delighted by the financing results, and extend our gratitude for the support and expertise extended to us by HUD, the State Treasurer’s Office and Armadale Capital.”
In addition to the FHA insured loan proceeds, critical to the funding of the new hospital was the state of South Carolina and private philanthropy. The state has contributed $35 million toward the project and the university has received an additional $69 million in gifts and pledges, including a $25 million commitment from Shawn Jenkins, Benefitfocus CEO. “We could not be more gratified by how people throughout South Carolina and beyond, from both the public and private sectors, have supported this project,” said Jim Fisher, vice president for Development and Alumni Affairs. “When it comes to the health of young people in our state, only the best will do. And thanks to these people, that’s exactly what we’re going to build.”
In terms of the financing, an extensive rate lock marketing process was conducted over several months in the capital markets and on October 21, 2016 MUHA was able to secure a fixed interest rate of 3.59% during construction and the 25 year amortization period. This rate is the lowest rate for an FHA insured hospital construction loan in decades.
“Part of our financial strategy was to secure HUD’s mortgage insurance approval in September and position the transaction to lock in historically low interest rates ahead of the November election. In hindsight, given that Treasury market yields have gone up substantially since the election, that strategy saved us millions in interest expense over the next 28 years” said Steve Hargett, Chief Financial Officer of MUHA. “Once again, Armadale Capital successfully and efficiently led our financing team efforts and met or beat our objectives on cost and timing. These federally insured transactions are highly complex, especially when construction is involved. They have earned our trust and confidence and we are very comfortable with them in the financing leadership role.”
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 terms of project planning, MUHA’s objective was to perform some early site preparation in 2015 and also procure steel ahead of the financing in the summer of 2016. After the rate lock on October 21st, MUHA was also desirous of giving its construction manager Robins & Morton the Notice to Proceed on October 31st, several weeks ahead of the loan closing. “This is clearly a substantial project requiring immense planning and collaboration. Coordinating the timing of pre-construction and construction elements with the financing was critical. As our FHA lender Armadale Capital was able to obtain early work approvals from HUD to accommodate all of our construction timelines. Of course our focus is now on delivering a world class facility and opening its doors in mid-2019” said Mr. John Sion, Senior Project Manager at MUHA.
“This is a major financing that shows how large teaching hospitals can benefit from HUD mortgage insurance. MUHA has successfully availed itself of HUD’s refinancing and supplemental loan programs over the past 12 years. It is an honor working with this institution and being asked to lead something so beneficial to South Carolina. They are well positioned for the future because they have great people and a long term vision” said Mr. Stephen Pack, President of Armadale Capital. “Securing HUD’s mortgage insurance commitment has been facilitated by MUHA’s ability to perform financially since over the past several years” added Pack who also led MUHA’s original 2004 FHA financing which funded the new Ashley River Tower Pavilion, located next to the future children’s hospital.
Harris Beach PLLC (New York, NY) served as FHA lender’s counsel to Armadale Capital. Kaufman Hall served as financial advisor to MUHA for this transaction.