(#7210) Texas, $28m, debt: Substance abuse hospital seeking $28m loan (72% LTV)

About the Hospital:

The hospital is located in a major city in Texas. The hospital is licensed in both behavioral health and chemical dependency. It offers fully accredited services to two very underserved populations: behavioral health patients and those with addiction problems.

In many cases, patients are afflicted with both conditions. These two segments of the healthcare market allow for multiple revenue sources (both inpatient and outpatient) and are arguably among the most underserved in all of healthcare.

The property is 4.319 acres. The building is 45,760 sq ft and upon completion of Phase 3 will be 69,0000 sq ft.

PHASE 1 – Start with 20 beds – the minimum number of beds needed to obtain licensing and accreditation. (Completed)

PHASE 2 – To add an additional 24 beds – this would take the total of beds to 44 – this is the point in the projections that the hospital becomes profitable. (75% completed)

PHASE 3 – Already approved by the state to add on to the building and add an additional 36 beds that will take the hospital to a final total of 80 beds and completes the hospital.

The Opportunity:
● The hospital is paid $800 per day per bed.
● The hospital receives over 10 referrals per day from Emergency rooms in the local area, but can take only 2 now.
● There are over 200 hospitals in the greater city area but only 11 of them have behavioral health and chemical dependency beds.
● It is estimated that the county has a shortage of approximately 1,200 behavioral health beds today.

Exit Strategy:

There are two publicly held companies that would take the facility tomorrow. One of which contacted them when they became accredited to see if they had an interest in selling the facility. They have over 500 locations and just a few in Texas and none of those in that specific city. They are very interested in entering that market.

The Numbers

Real Estate Value:
Current Value - $28 Million
Upon completion of Phase 2 - $31 Million
Upon completion of Phase 3 - $38 Million

The purpose of the refinance is:
● Payoff the current mortgages ($18.19 Million)
● Pay closing costs
● Complete Phase II renovations (currently 75% completed, needs $2,000,000)
● Fund Phase III renovations ($6,000,000 to complete)

Hospital Financing
● The building started with a $6.3 million 1st lien.
● $12 million of equity was spent completing Phase I.
● $12 million 2nd lien loan was put in place to complete Phase II.
● Existing 2nd lien will then lend $8.5 million to complete Phase III.

In the process of refinancing 1st and 2nd liens to senior debt of $18.5 million.

In addition to $12 million invested in real property, owner has $25.5 million invested in operations. Total current investment $37.5 million.