Delaware Health Corp. Refinances Nursing Homes

LEWES, DE-Delaware Health Care Corp. recently relieved a restrictive cash flow situation by replacing a single tax exempt bond financing for two of its Delaware properties with individual FHA loans for each property. The 35-year fully amortizing loans have a 90% loan-to-value ratio and carry a note rate of 7.3%. Delaware Health Care owns 14 skilled nursing centers around the country. The agency’s two new FHA232-223(f) loans were funded by Arbor Commercial Mortgage LLC. Arbor’s VP of FHA production Joseph Donovan tells GlobeSt.com that the single tax exempt bond structure with subordinate debt that was used to finance the acquisition in 1994 included mandatory deposits to various escrow accounts that kept cash flow out of the nonprofit’s hands. “Under that structure there were two primary and three total restricted escrow accounts that were pulled out of project cash flow and under control of bond trustee instead of owner,” says Donovan. “The only restriction on the project cash flow now is the annual audit process with HUD, so there won’t be these indefinite accruals.”The new loans also have a lower debt service requirement and a longer amortization period, says Donovan. The financings included a $12.7-million loan to refinance the 150-bed Parkview Nursing and Rehabilitation Center in Wilmington, and a $9.4-million loan to refinance the 179-bed Harbor Healthcare and Rehabilitation Center in Lewes. Also included was a 2.5% sub second mortgage, which Donovan says is program standard for a nonprofit.