80% Loan to Cost Bridge Loan for New/Vacant Skilled Nursing Facility in Pacific Southwest

Transaction Description: George Smith Partners arranged the $6,500,000 in bridge financing for a Skilled Nursing Facility in the Pacific Southwest. The bridge loan took out a construction loan GSP had previously placed on the same project and was necessary to provide capital to the sponsor. The sponsor needed capital to begin operations of the facility as well as to secure the required approvals to house Medicare patients. Fixed for 10 years at 6.75%, the bridge loan represented 80% of the property’s cost and is recourse. The loan amortizes over 30 years and holds a 5,4,3,2,1 prepayment penalty.

Challenges: The building had no existing cash flow, and conventional lenders could not get comfortable with the unique use of the property. Additionally, while the sponsor was very experienced as an operator of Skilled Nursing Facilities, this was his first development project. Furthermore, the only way the sponsor could finish the project, start operations, and secure the necessary approvals was if this bridge loan provided all of the required capital to do so. Every aspect of building and opening the facility was not only incredibly capital intensive, but also required government approval.

Solution: With an expertise in financing Senior Housing, George Smith Partners understood the importance of proving the strength of the operator of the Skilled Nursing Facility and carefully demonstrated this particular operator’s track record and abilities to interested lenders. GSP ultimately identified a community development lender that we have a very strong relationship with, who was comfortable with the niche use of the property. By proving the stabilized value of the property to the lender, GSP was able to push leverage to provide the sponsor the necessary capital for finishing construction, for starting operations, and for gaining the necessary approvals.