Herbert J. Sims & Co., Inc. - Jamaica Hospital Nursing Home

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Herbert J. Sims & Co., Inc. - Jamaica Hospital Nursing Home

financing jamaica hospital nursing home, queens, ny with a $41 million fha mortgage

background

Jamaica Hospital Nursing Home is an affiliate of the Jamaica Hospital , a 387-bed acute care and teaching facility located in Queens, NY. The Home enjoys a longstanding reputation as a quality care provider, but its operation is housed in an outmoded physical plant. Since it would be too costly to remodel, the Hospital decided to construct a new facility to replace the existing 206 bed operation. The new Project will be constructed on land donated by the Hospital and will be connected to the Hospital via a tunnel.

Sims Mortgage Funding, Inc. (“SMF”) provided a $41,048,400 FHA-insured loan under the Section 232 program to finance construction of the new Project. After analyzing interest rates and costs of issuance between tax-exempt and taxable structures, SMF recommended a taxable financing with Government National Mortgage Association (GNMA) mortgage backed securities. The taxable deal offered comparable interest rates and saved Jamaica considerable transaction costs. The FHA-insured loan has a 30 year term and can be optionally prepaid one year after completion of construction.

challenge

Because of its affiliation with Jamaica Hospital and formal designation as a “hospital-based” facility, the Home’s current operation is structured much differently than a typical FHA-insured nursing home. For example, the Hospital provides the Home with accounting, administrative, dietary, laboratory, therapy, and human resources services. In turn, the Hospital receives payment from the nursing home for these services based on complex cost-sharing formulas. In contrast, FHA’s model typically requires a “self contained” operation that directly provides all appropriate services. Both the Hospital and Nursing Home’s management and Board of Directors wanted to continue this arrangement after the new Project is completed.

implementation

In order to accommodate both the wishes of our client and the requirements of FHA, which ultimately holds the risk as loan guarantor, SMF helped to create an “Administrative and Clinical Services Agreement”. The Agreement, which required the collective approvals of FHA’s legal and underwriting staffs, the Nursing Home’s and Hospital’s management teams and their respective counsels, was directly negotiated by SMF, which became the de facto “central switchboard” in the discussions among all parties.

result

Through SMF’s efforts in securing an Administrative and Clinical Services Agreement that was acceptable to FHA, the Nursing Home will be able to continue its designation as a “hospital-based” facility once the new Project is completed. This will cause a minimum amount of operational disruption to both the Nursing Home and the Hospital. For more information, please contact Anthony Luzzi.

2002-2009 HERBERT J. SIMS & CO., INC. 3530 Post Road Southport, Connecticut 06890-1169 Call us toll-free 1-800-HJS-1935 Member FINRA/SIPC