Kaleida Health – John R. Oishei Children’s Hospital
Beginning in 2009, Kaleida started the process of relocating its downtown acute and post-acute facilities to the Buffalo Niagara Medical Campus (“BNMC”). The BNMC included Kaleida’s Buffalo General Medical Center (“BGMC”), Gates Vascular Institute (“GVI”) and HighPointe on Michigan Nursing Home, as well as the Roswell Park Cancer Center, the Buffalo Medical Group and the University at Buffalo School of Medicine.
The final Kaleida facility to be relocated was the 200-bed Women and Children’s Hospital of Buffalo. The new 11-story, 400,000+ square foot facility is linked to BGMC by skybridge, connecting the children’s hospital’s labor and delivery rooms to BGMC’s ORs should a mother in labor require surgical intervention, or access to the GVI for mothers needing neuro services.
Despite the strong State and community support for the new facility, Kaleida faced two challenges when approaching HUD for the financing:
- Kaleida just opened a new hospital and nursing home and closed a hospital and nursing home in the previous two years and the transition period and staffing changes caused their financial performance to deteriorate and not meet HUD’s eligibility requirements.
Our firm worked with the Hospital and HUD to demonstrate the importance of the new Children’s facility for Kaleida’s future success to obtain a waiver for the operating margin requirement, which saved the Hospital from waiting a year to demonstrate operations had stabilized.
- The proposed funding of the new facility included a HUD-insured mortgage loan, two State grants, a $45MM fundraising campaign, $50MM of equipment financing and operating cash that Kaleida had set aside.
Because each of the funding sources had different requirements for use of proceeds and timing issues for when they could be accessed, we coordinated each source to ensure that costs were appropriately allocated and funds were available timely to pay the contractors and other project related costs without impacting the project’s schedule.
Finally, after construction was underway, management decided to add a number of project betterments at a cost of over $8MM. Our firm successfully obtained a mortgage increase from HUD to pay for those costs and ensure that the timing of the project remained on its original schedule, so as to not impact final endorsement.
NewYork-Presbyterian – David H. Koch Ambulatory Care Center
NewYork–Presbyterian (“NYP”) has been using the HUD Hospital insurance program to fund capital projects since the early 1980s. But in 2013 when they wanted to take advantage of the low interest rate environment to fund a portion of their $895 million Ambulatory Care Center, they were met with two challenges:
- HUD typically doesn’t issue a commitment for mortgage insurance until a project is fully-designed and the construction price is guaranteed, and NYP had only just started design of this project; and
- The proposed construction was scheduled to take nearly five years, and the Ginnie Mae securities used to fund the loan price significantly higher when funds are drawn over an extended construction period.
NYP’s CFO did not want to miss the attractive interest rate environment and challenged us to find a solution. Working with NYP’s finance team, construction team and HUD, we structured the loan so that it was initially and finally endorsed on the same day – a first for the HUD Hospital program. Using this unique structure, all of the loan funds were disbursed to the Hospital at the closing, and held in escrow to pay project costs as design and construction of the facility progressed. This structure required the development of a complex Building Loan Agreement, the procurement of a number of waivers of HUD’s policies and regulations, and extraordinary collaboration. But it was successful, and allowed NYP to get to market more than a year earlier than they would have in a “typical” HUD-insured transaction, and because the loan funds were disbursed at closing instead of over a prolonged construction period, the Hospital saved more than 100 basis points in interest rate.
After the loan closed and the project was underway, the Hospital decided to expand the scope of the project as a result of Hurricane Sandy and to add a Women’s Hospital above the Ambulatory Care Center. The additional project costs of over $500 million would be funded from the Hospital’s own equity, but the addition of six new floors and 250,000 square feet to the project would add years to the construction timeline. Since the loan was structured as a permanent loan and not a construction loan, there was no impact to the financing or the ability to finally endorse the loan.
University of New Mexico Hospital – Patient Tower
The University of New Mexico Hospital is a 537-bed academic teaching hospital located in Albuquerque, New Mexico, north of The University of New Mexico’s main campus. As the primary teaching hospital for the UNM School of Medicine, it is New Mexico’s only Academic Medical Center and houses the State’s only Level One Trauma Center, Children’s Hospital and Burn Unit. In addition to being the state’s primary source of tertiary care, UNMH cares for a disproportionate share of New Mexico’s uninsured and under-insured population as the region’s primary safety-net hospital.
With the lender, our firm originated a $320MM Section 241 Loan, the proceeds of which will be used to fund the construction of an 8-story, 570,000 sq. ft. tower which will house 96 intensive care unit beds, an interventional platform, imaging suite, adult emergency department and support services. The total Project costs are estimated at over $600MM.